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Speech by the Minister for Finance Hon SPEECH BY THE MINISTER FOR FINANCE HON. BASIL P. MRAMBA (MP.), INTRODUCING TO THE NATIONAL ASSEMBLY THE ESTIMATES OF GOVERNMENT REVENUE AND EXPENDITURE FOR THE FINANCIAL YEAR 2003/2004 ON 12TH JUNE, 2003 INTRODUCTION: 1. Mr. Speaker, I beg to move that this esteemed House now resolves to debate and approve Government proposals for Revenue and Expenditure estimates for the Financial Year 2003/04. The Government budget has been consolidated into four volumes. Volume one presents revenue estimates, volumes two and three contain recurrent expenditure estimates for ministries, government departments, and regions, including urban and district councils. The fourth volume contains the development expenditure estimates for the ministries, government departments, regions, and councils. In addition, there is the 2003/04 Finance Bill. 2. Mr. Speaker, before I table the 2003/04 budget, allow me to express my appreciation to all those who participated in the preparation and finalization of this 1 budget in various ways. In particular, I would like to thank the Finance and Economic Committee of the Parliament and all other Committees, for keenly scrutinizing the budget estimates with a high standard of professionalism. The invaluable advice offered by these committees greatly assisted in finalizing the budget proposal being presented today. 3. Mr. Speaker, the budget preparation process involved consultations with a broad range of stakeholders, both within and outside the Government. Let me take this opportunity to thank the staff of various ministries, independent government departments, regions, councils, non-governmental organizations, the private sector, national and international organizations for their invaluable contributions to the preparation and finalisation of this budget. Furthermore, I would like to thank the Office of the Attorney General for preparing the bills and legal notices for this budget. I would also like to express my gratitude to my colleagues from the Ministry of Finance, in particular, the Deputy Ministers for Finance, Hon. Abdisalaam Issa Khatib (MP) and Hon. Dr. Festus Limbu (MP); the Permanent Secretaries, Mr. 2 Gray Mgonja and Mr. Peniel Lyimo; and Deputy Permanent Secretaries, Mr. Ramadhani Khijjah and Mr. Wilfred Nyachia; and all Heads of Department and staff of the Ministry of Finance including all institutions under this Ministry. Let me also thank the Government Printer for the timely publication of this budget speech, the budget books and Bills related to this budget. Finally, my thanks go to the various experts and all who shared their insights and recommendations regarding policies in particular tax measures. Their views and comments have been taken into account in this budget. 4. Mr. Speaker, the Government has continued to use the budget as an instrument for implementing macroeconomic and fiscal policies, as well as community development policies in line with the Manifesto of the Ruling Party - CCM. In the fiscal year ending this month, there have been great achievements in economic growth and macroeconomic stability, as well as interventions for poverty reduction as noted by Hon. Dr. Abdallah Kigoda (MP) Minister of State, President’s Office-Planning and Privatisation, who comprehensively explained the economic policies, goals, achievements, and 3 shortcomings in his speech to the National Assembly this morning. 5. Mr. Speaker, in this fiscal year we have witnessed the formation of a Joint Finance Commission for the Union Government, under Article 134 of the Constitution of the United Republic of Tanzania. This Commission comprises members from Tanzania Mainland and Zanzibar. Let me take this opportunity to congratulate Hon. William Shelukindo, the Member of Parliament for Bumbuli, for being appointed as the first chairman of this Commission. I would also like to congratulate the seven members appointed to the Commission. It is my expectation that this Commission will work with both Governments of the Mainland and of Zanzibar, in implementing its responsibilities in line with the Constitution of the United Republic of Tanzania and that all financial issues relating to the Union will be addressed accordingly. 6. Mr. Speaker, other important events that occurred during this fiscal year include Tanzania’s participation in the High-Level Forum on Harmonization 4 of development assistance (ODA) that took place in Rome, Italy in February 2003. In that important gathering, His Excellency President Benjamin W. Mkapa who was the guest of honour, officially inaugurated the forum and participated in the discussions. Tanzania has been in the forefront in harmonization of processes related to aid delivery as detailed in the Tanzania Assistance Strategy (TAS). In October 2002, the International Monetary Fund (IMF) opened its first regional capacity building centre in Africa, the East African Regional Technical Assistance Centre (East AFRITAC) to provide technical assistance on financial and economic matters. The Centre with its headquarters in Dar es Salaam provides technical assistance to Eritrea, Ethiopia, Kenya, Rwanda, Uganda, and Tanzania. For the first time, our country has had an opportunity to host the International Investors Round Table Conference. The first international investors conference was held in Dar es Salaam on 17th July 2002 and the second one was held in Zanzibar on 27th May, 2003. We also hosted the Commonwealth HIPC Ministerial Forum in Dar es Salaam between 26 – 28 February, 2003. Currently, Tanzania is in the chair for this forum. These are important events 5 for Tanzania’s economic development as they attract investments, increase revenue from tourist activities, increase employment opportunities, reduce poverty, and ultimately expand the tax base for Government revenue. 7. Mr. Speaker, we can recall that in May 2003, by- elections were held for Members of Parliament and Representatives for seventeen Electoral Constituencies in Zanzibar and four Electoral Constituencies in Tanzania mainland. I would like to take this opportunity to congratulate all those elected as Members of Parliament and to welcome them to this Budget Parliamentary session. In addition, I would like to congratulate the four nominated members of Parliament for special seats from the ‘Civic United Front’ (CUF), namely Honourable Asha Ngede, Hon. Adelastela Mkilindi, Hon. Aisha Magina and Hon. Zamda S. Bozzen for being reinstated to the Parliament. 6 REVIEW OF IMPLEMENTATION OF BUDGETARY POLICIES FOR 2002/2003 Economic Situation 8. Mr. Speaker, the review of the implementation of the fiscal and macro-economic policy targets for 2002/03 reveals that Tanzania has continued to attain significant achievements. During the period under review, the economy grew by 6.2 percent in real terms compared with 5.7 percent in year 2001. The inflation rate fell from 5.2 percent in year 2001, to 4.5 percent in June 2002 and 4.2 percent by end-March, 2003. Official foreign exchange reserves increased from USD 1.3 billion at the end of March 2002 to USD 1.5 billion at the end of March 2003, equivalent to about seven and a half months of imports of goods and services. Regarding tax revenues, the improvements in the tax structure has led to an increase of revenue collection to about Shs. 100 billion per month at present, which is four times greater than that in the 1990’s. 9. Mr. Speaker, the main thrust of the fiscal policies for the year ending June 2002/03 included policies 7 related to revenue and expenditure as well as foreign loans and grants. The objectives of these policies were to enable the Government to collect domestic revenue of 12.3 percent of GDP; allocate adequate resources to priority sectors; increase productivity; increase the per capita income; improve social and economic services; and to improve financial management systems including management of foreign and domestic debts. These policies aim at empowering individuals to participate in economic activities; providing support to the Private Sector through the Export Credit Guarantee Scheme (ECGS); specifically for non-traditional crops; and enhancing foreign reserves. REVENUE 10. Mr. Speaker, on the revenue side, the Government focused on increasing domestic revenue so as to gradually reduce dependence on foreign grants and loans. In order to enhance efficiency in revenue collection and to create a conducive environment for economic growth, the Government undertook several measures, namely: strengthening the administration of VAT; controlling tax exemptions issued to various 8 beneficiaries; curbing tax evasion on imports, especially of petroleum products; improving the tax structure by introducing fiscal incentives for priority sectors and eliminating nuisance taxes; and reviewing suspended duty on imports with a view to enhancing the business environment. 11. Mr. Speaker, as regards non-tax revenue, the Government undertook specific measures to strengthen revenue collection by the Ministries and Government Departments under the retention scheme, with the objective of removing the current impediments. Other measures included preparing and implementing a strategy for harmonization and rationalization of local government taxes and levies so as to create a conducive environment, particularly in rural areas, for people to engage in productive activities as well as putting in place a predictable tax system so as to reduce transaction costs to both tax collectors and taxpayers. Further, in accordance with the EAC Treaty, the EAC Partner States have agreed to complete
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