THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING THE BUDGET EXECUTION REPORT FOR THE FOURTH QUARTER AND FISCAL YEAR 2017/18

Transcription

1 THE UNITED REPUBLIC OF TANZANIA MINISTRY OF FINANCE AND PLANNING THE BUDGET EXECUTION REPORT FOR THE FOURTH QUARTER AND FISCAL YEAR 2017/18 Ministry of Finance and Planning, 18 Jakaya Kikwete Road, Treasury Square Building, P.O.Box 2802, DODOMA. SEPTEMBER,

2 LIST OF ABBREVIATIONS NBS National Bureau of Statistics ATCL Air Tanzania Corporation Limited BoT Bank of Tanzania ENCB External Non Concessional Borrowing GePG Government Electronic Payment Gateway System GBS General Budget Support GDP Gross Domestic Product LGA Local Government Authorities MDAs Ministries Departments and Agencies NPL Non-Performing Loan OC Other Charges PAYE Pay as You Earn REA Rural Electrification Agency RAS Regional Administrative Secretary SGR Standard Gauge Railway TACAIDS Tanzania Commission for AIDS TRA Tanzania Revenue Authority USD United State Dollar VAT Value Added Tax 2

3 Table of Contents Executive Summary RECENT MACROECONOMIC PERFOMANCE GDP Performance Inflation Development Monetary and Credit Developments Exchange Rate Developments External Sector Developments GOVERNMENT OPERATIONS Revenue Revenue by Source Taxes on Imports Taxes on Domestic Sales Income Tax Other taxes Non tax revenue Expenditure Policies and Performance Overall Expenditure Performance Expenditure by Economic Classification Expenditure by Administrative Classification Expenditure by Major Priorities of the Government Grants Financing Domestic Financing Foreign Financing PUBLIC DEBT DEVELOPMENT Public Debt Stock External Debt Domestic Debt Debt Sustainability Analysis

4 Executive Summary In 2018, the National Bureau of Statistics (NBS) of Tanzania conducted an exercise to rebase GDP by updating the national accounts base year from 2007 to Based on the revised dataset, GDP in the first quarter (January to March) of 2018 expanded by 8.4 percent compared to a growth rate of 5.7 percent observed in the corresponding period in Headline inflation remained at single digit throughout 2017/18 consistent with contractionary fiscal policy, general slowdown in global commodity prices, particularly oil prices, and slower pace in the increase of domestic food prices in the domestic and neighbouring country markets, on account of improved weather condition. In the year ending June 2018, headline inflation eased to an average of 4.3 percent from 5.3 percent recorded in the year ending June In 2017/18, total revenue was Shillings 17,971.0 billion being 90 percent of the estimated target of Shillings 19,977.0 billion. Tax revenue collection was Shillings 15,191.4 billion equivalent to 89 percent of estimates and 8 percent higher, when compared with the similar period in 2016/17. Collection from non-tax revenue was Shillings 2,238.1 billion against the estimates of Shillings 2,183.4 billion, equivalent to 103 percent and 12 percent higher when compared to the year 2016/17. Details of revenue in major components are presented in Annex A. Expenditure policies during the year focused on aligning expenditure with expected revenues, strengthening the control and management of public expenditure through enforcement of the Budget Act No. 11 of Total expenditure during the period under review amounted to Shillings 25,321.7, 1 equivalent to 79.8 percent of the revised annual budget of Shillings 31,711.9 billion. Out of this amount, Shillings 18,778.5 billion was for recurrent expenditure and Shillings 6,543.2 billion was for development expenditure. Details of expenditure by Votes are presented in Annex C and Annex D. As at June 2018, public debt stock amounted to Shillings 51, billion, which is 10.9 percent higher compared with Shillings 46, billion as at end June Out of this, domestic debt stock amounted to Shillings 14, billion and external debt stock amounted to Shillings 36, billion. The increase was on account of new disbursements for funding development projects, accumulation of interest arrears and depreciation of Tanzania s Shilling against USD. 1 Revenue and expenditure numbers contained in this document are tentative numbers. Final numbers will be reflected in the audited Consolidated Financial Statement. 4

5 1.0 RECENT MACROECONOMIC PERFOMANCE 1.1 GDP Performance In 2018, the National Bureau of Statistics (NBS) of Tanzania conducted an exercise to rebase GDP by updating the national accounts base year from 2007 to Based on the revised dataset, real GDP grew by 8.4 percent in the first quarter of 2018 compared to 5.7 percent recorded in the corresponding quarter of The growth was supported mainly by increased crop production; stability in transport services; and increase in enrolment for standard one pupils and form one students as a result of Government free basic education policy. Economic activities which recorded highest growth include: construction (20 percent); information and communication (18.3 percent); transport and storage (9.2 percent); and agriculture (7.1 percent). The GDP development for the past five years and the first quarter of 2018 is shown in Chart 1.1 below. Chart 1.1: First Quarter GDP Growth (at 2015 Constant Prices) 1.2 Inflation Development In the year ending June 2018, headline inflation eased to an average of 4.3 percent from 5.3 percent recorded in the year ending June 2017 (Chart 1.2). During the fourth quarter of 2017/18 (April June, 2018) headline inflation continued to decelerate, recording an average inflation rate of 3.6 percent compared to 6.0 percent 5

6 Jun/16 Aug/16 Oct/16 Dec/16 Feb/17 Apr/17 Jun/17 Aug/17 Oct/17 Dec/17 Feb/18 Apr/18 Jun/18 recorded in the corresponding quarter in The slowdown was driven by a decrease in food inflation as well as implementation of prudent fiscal and monetary policy. In the same reference period, food inflation rate was 6.6 percent lower than 8.5 percent recorded in the year ending June 2017 while core inflation rate declined to 1.6 percent in the year ending June 2018 compared to 2.4 percent attained in the corresponding period of Chart 1.2: Inflation Developments 25 Headline Food Non-food Non-food non-energy Energy and fuels Monetary and Credit Developments Growth of Credit to the Private Sector During the year ending June 2018, credit to the private sector recorded growth of 4.0 percent, a recovery from 1.3 percent recorded in the year ending June This growth represents an annual increase of Shillings billion, an improvement from an increase of Shillings billion recorded in the year ending June The trend of growth of credit to private sector is as indicated in Chart 1.3 6

7 Chart 1.3: Annual Change in Credit to the Private Sector (Billions of shillings) 12- months Change 2, , , / / / / /18 Source: Bank of Tanzania The observed recovery in credit to private sector was exhibited in personal activities; mining and quarrying and building and construction which recorded the highest average growth rates. Nevertheless, there was an improvement in credit growth in some activities that registered negative growth rates in the first half of 2017 including transport and communication and Agriculture activities. Likewise, Bank of Tanzania sustained accommodative monetary policy stance that was adopted since the first half of 2017 is expected to continue stimulating growth of credit to the private sector by broadening the lending base of banks and reduce cost of liquidity among banks in the remaining period of Currency in circulation During the year ending June 2018, currency in circulation increased by Shillings billion compared to a decrease of Shillings billion recorded in the year ending June The increase in currency in circulation is consistent with the Bank of Tanzania accommodative monetary policy stance and the recovery in credit to private sector. However, the increased use of digital financial services in the country has partly dampened the impact of increase in currency in circulation on growth of economic activities. 7

8 Chart 1.4: Annual Change in Currency in Circulation (In Billions of shillings) 12-Month Change / / / / /18 Source: Bank of Tanzania 1.4 Exchange Rate Developments The value of Tanzanian Shilling remained stable against the US dollar from an overall weighted average rate of Shillings 2, per USD in June 2018 to Shillings 2, per USD in June During the quarter ending June 2018, the Shilling remained fairly stable and trading at an average of Shillings 2,274.1 per US dollar compared with Shillings 2,239.1 per US dollar in the quarter ending June 2017, equivalent to an annual depreciation of 1,54 percent. 1.5 External Sector Developments Current Account Balance During the year ending June 2018, the current account balance recorded a deficit of USD 2,131.6 million compared to a deficit of USD 1,611.2 million reported in the year ending June The value of exports of goods and services increased by 2.8 percent to USD 8,949.4 million during the year ending June 2018 compared to USD 8,701.7 million recorded during the corresponding period The value of traditional exports increased by 33.0 percent to 1,152.4 million in the year ending June 2018 compared to USD million recorded in June Likewise, the value of non-traditional exports recorded a decrease of 3.3 percent to USD 3,478.3 million compared to USD 3,617.6 million recorded in June During the period, the value of import of goods and services increased by 4.7 percent to USD 10,157.6 million compared to USD 9,701.1 million recorded in the corresponding period in

9 2.0 GOVERNMENT OPERATIONS 2.1 Revenue From April to June 2018, total revenue collection was Shillings 4,365.1 billion, which was 87 percent of the estimate of Shillings 5,007.4 billion. Tax revenue collections amounted to Shillings 3,644.5 billion equivalent to 89 percent of estimated Shillings 4,113.4 billion. Collections from non tax revenue were Shillings billion equivalent to 79 percent of estimated Shillings billion. LGAs own source was Shillings billion against the target of Shillings billion, equivalent to 87 percent of the target. On cumulative basis (July June 2018) total revenue collections were Shillings 17,971.0 billion being 90 percent of the estimated target of Shillings 19,977.0 billion. Tax revenue collection was Shillings 15,191.4 billion equivalent to 89 percent of estimates of Shillings 17,106.3 billion and 8 percent higher when compared to the year 2016/17. Non-tax revenue performed above the estimates during the year under review whereas the actual revenue collection from this category was Shillings 2,238.1 billion against the estimates of Shillings 2,183.4 billion, equivalent to 103 percent and 12 percent higher when compared to the year 2016/17. LGAs own source was Shillings billion against the target of Shillings billion equivalent to 79 percent and 6 percent higher when compared to the year 2016/17. (See, Annex A for details). 2.2 Revenue by Source Taxes on Imports During the fourth quarter of 2017/18, collections on imports taxes and duties were Shillings 1,127.5 billion reflecting a performance of 100 percent of estimated Shillings 1,128.0 billion. The collection for the fourth quarter was 20 percent higher compared to the collection in the similar period in 2016/17. On cumulative basis, collections on imports taxes and duties for the year 2017/18 were Shillings 4,308.8 billion against the target of Shillings 4,916.8 billion, equivalent to 88 percent of the target and 26 percent of total domestic revenue. All import taxes and duties performed below the target, whereby import duty collection was Shillings 1,113.8 billion being 90 percent of the 9

10 target of Shillings 1,231.1 billion; excise on petroleum imports was Shillings 2,308.3 billion against the target of Shillings 2,544.7 billion equivalent to 87 percent. Other taxes on imports were Shillings 2,208.3 equivalent to 87 percent of the estimates of Shillings 2,544.7 billion Taxes on Domestic Sales Actual tax collection from domestic sales increased by 7 percent during the fourth quarter of 2017/18 to Shillings billion from Shillings billion collected in the corresponding period in 2016/17. This collection was equivalent to 84 percent of the target of collecting Shillings billion. On cumulative basis, actual tax collection from domestic sales increased by 12 percent to Shillings 3,483.8 billion from Shillings 3,107.9 billion collected in the year 2016/17 and 86 percent of the target of collecting Shillings 4,069.4 billion. Out of the total domestic sales tax, the excise duty was Shillings 1,059.6 billion, equivalent to 92 percent of the target of collecting Shillings 1,150.9 billion and VAT on domestic sales amounted to Shillings 2,424.2 billion which was 83 percent of the target of collecting Shillings 2,918.5 billion, and 11 percent higher compared to the year 2016/17. Under performance was due to decrease in production by the manufacturing companies of beer and soft drinks. Chart 2.1: Trend of Tax on Domestic Sales from July 2017 June 2018 Taxes on Domestic Sales Taxes on Domestic Sales July - June 2012/13 July - June 2013/14 July - June 2014/15 July - June 2015/16 July - June 2016/17 July - June 2017/18 10

11 In Billion Tshs Income Tax The total income tax collection during the fourth quarter of 2017/18 was Shillings 1,248.2 billion which was 83 percent of the target of collecting Shillings 1,512.3 billion. This was 6 percent decrease when compared with the collection registered in the fourth quarter of 2016/17. On cumulative basis, for the year 2017/18, collections of income tax were Shillings 5,157.9 billion which was 89 percent of the target of collecting Shillings 5,817.9 billion and an increase of 7 percent when compared to the year 2016/17. Income tax for the year 2017/18 constitutes 34.0 percent of total tax revenue and 28.7 percent of total domestic revenue. Under performance were observed in PAYE, individual and withholding taxes which performed at 78, 76 and 83 percent respectively. Under performance was largely due to retrenchment of employees by some big employers particularly in the Mining sector, in view of the need for reducing operational costs. Chart 2.2: Revenue Performance by Major Tax Item July June, 2017/ Estimates Actual Tax Types Other taxes During the fourth quarter April June 2018, actual collections from this category 11

12 In Billion Shillings amounted to Shillings billion, which was 85 percent of the period estimate and the same as what was collected in the similar period in 2016/17. On cumulative basis, Shillings 2,299.2 billion was collected, equivalent to 91 percent of the target of Shillings 2,538.7 billion, and 1.0 percent higher compared to the amount collected in the year 2016/17. Out of that, fuel Levy & transit fee was Shillings billion equivalent of 86 percent of the period target of Shillings billion; Transfer to REA was Shillings billion, which was 82 percent of the target of collecting Shillings 408.7; while Railway Development Fund was Shillings billion or 99 percent of the estimates of shillings billion. The Skills Development Levy was Shillings billion against the target of Shillings billion which was 211 percent and National Water Development Fund was Shillings billion, equivalent to 95 percent of the estimates of Shillings billion. Chart 2.3: Domestic Revenue Performance July June, 2017/18 Compared to July June, 2016/17 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Taxes on Imports Taxes on Domestic Sales Income Tax Other Taxes Non Tax Revenue LGAs Own Source Total Revenue Actual July-June 2017/18 Actual July-June 2016/ Non tax revenue Collections of non-tax revenue in the fourth quarter of 2017/18 was Shillings billion being 79 percent of the targeted collection of Shillings billion, and 12 percent higher when compared to the same quarter in 2016/17. On cumulative basis, total non tax collection for the period from July 2017 to June 2018 was Shillings 2,

13 In Billion Shillings billion being 103 percent of the target of Shillings 2,183.4 billion, reflecting 12 percent increase compared to the year 2016/17. The impressive performance in this category was mainly contributed by increased use of Electronic Fiscal Devices (EFDs) and the Government Electronic Payment Gateway System (GePG) in revenue collection. Collections from LGAs own source for the year 2017/18 was Shillings billion equivalent to 79 percent of the target of collecting Shillings billion. Chart 2.4: Domestic Revenue Performance July June, 2017/18 Compared to Estimates 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 - Taxes on Imports Taxes on Domestic Sales Income Tax Other Taxes Non Tax Revenue LGAs Own Source Total Revenue Estimates July - June 2017/18 Actual July-June 2017/ Expenditure Policies and Performance Overall Expenditure Performance In 2017/18, total Government spending amounted to Shillings 25,321.7 billion, reflecting an overall execution of 79.8 percent against the estimated annual target of Shillings 31,711.9 billion. This performance is higher compared to the overall expenditure of Shillings 23,417.8 billion (or 79.3 of the annual target) recorded in the same period in 2016/17. Out of the total spending, Shillings 18,778.5 billion were recurrent expenditure which is equivalent to 92.6 percent of the annual revised budget of Shillings 20,279.3 billion and Shillings 6,543.2 billion were development expenditure, which is 57.2 percent of the annual revised budget of Shillings 11,432.7 billion. 13

14 The recurrent budget which is composed of salaries and wages, debt service and other charges recorded the highest execution due to the fact that their expenditure depend largely on revenues from domestic sources. The wages and salaries expenditure were Shillings 6,338.1 billion (88.0 percent of the annual target of Shillings 7,205.8 billion), debt service spending were Shillings 8,133.1 billion (99.9 percent of the revised budget of Shillings 8,140.4) while other charges registered an overall spending of Shillings 4,307.3 billion (92.1 percent of the annual target of Shillings 4,676.6 billion). On the other hand, the development budget which is composed of locally and externally financed expenditure registered the lowest performance, with the total spending amounted to Shillings 6,543.2 billion or 57.2 percent of the annual revised budget of Shillings 11,432.7 billion. The locally financed development budget performed reasonably better than the externally financed component, whereby the total expenditure amounted to Shillings 5,068.8 billion, equivalent to 62.0 percent of the revised budget of Shillings 8,179.1 billion. The externally financed component continued to perform significantly below the target, though there was slight improvement when compared with the performance recorded in the corresponding period in 2016/17. The total expenditure on this component was Shillings 1,474.4 billion, being 45.3 percent of the annual revised budget of Shillings 3,253.5 billion. This performance was 1.4 percent higher when compared with the execution rate achieved in the similar period last year. The underperformance in development budget had mainly been caused by low disbursement of grants and under realization of borrowings especially the nonconcessional component. The Central Government transfers to Local Government Authorities for the period ending June, 2018 were Shillings 4,734.8 billion or 81.1 percent of the annual revised budget of Shillings 5,831.8 billion. Out of this amount, wages and salaries were Shillings 4,075.7 billion; development funds Shillings billion; own revenue sources Shillings billion and other charges Shillings billion. The overall performance of the budget by major expenditure items is presented in Chart

15 In Billion Shillings Chart 2.5: Budget Execution Performance by Major Expenditure Items 9, , , , , , , , , Wages and Salaries Expenditure Debt Service Expenditure Foreign Financed Development Expenditure Targets July June, 2018 Actual Exp. July June, 2018 Major Expenditure Items Expenditure by Economic Classification The analysis of budget execution by economic classification showed that interest payment and debt repayment continued to rank higher than other items, with both registering absorption rates of 99.9 percent. This is a common performance trend given the fact that the Government is committed to ensure all contractual obligations are fully financed. Other components with impressive performance following the debt service are the social security benefits and compensation of employees which enjoyed absorption rates of 99.3 and 94.3 of the revised budgets respectively. Nevertheless, the subsidies performance was 23.4 percent of the revised budget, which is the lowest absorption rate when compared with other items. The below target performance was mainly due to revenue shortfalls caused by underperformance in some of revenue sources especially grants and non-concessional borrowing. The budget performance by economic classification is presented in Table 1 and Chart 2.6. Table 1: Expenditure by Economic Classification Economic Description Annual Revised Budget Total Expenditure Percentage Compensation of Employees 4,152,428,964,704 3,914,240,541, Use of Goods and Services 2,196,634,176,374 1,588,903,406, Interest Payments 1,991,916,336,300 1,989,945,793, Subsidies 465,705,834, ,858,135, Grants 14,467,960,215,583 9,989,693,246, Social Security Benefits 425,976,301, ,176,745, Other Expenses 684,885,296, ,283,156, Debt Repayment 6,148,522,406,610 6,143,130,427, Net/Gross Investment in Nonfinancial Asset 1,177,956,350, ,443,060, Grand Total 31,711,985,882,000 25,321,674,513,

16 In Billion Shillings Chart 2.6: Expenditure by Economic Classification (July 2017 June, 2018) 16,000,000,000,000 14,000,000,000,000 12,000,000,000,000 10,000,000,000,000 8,000,000,000,000 6,000,000,000,000 4,000,000,000,000 2,000,000,000,000 - Revised Budget 2017/18 Total Expenditure 2017/18 Economic Classes Expenditure by Administrative Classification The budget execution by administrative classification reviews the budget performance at individual Vote level. The analysis of the recurrent budget (wages and salaries, debt service and other charges) depicted a mixed performance, with some Votes enjoying the highest absorption close to 100 percent while others are well below the target. The Public Debt and General Service and the National Assembly Fund enjoyed the highest absorption rate of 99.6 percent each, followed by the Defense, the National Service, the Treasury and the Ministry of Works, Transport and Communication with absorption rates of 99.3, 98.9, 98.2 and 97.7 percents respectively. These top six (6) performers also performed well in 2016/17. The similarity among the six (6) MDAs is that their budgets comprised of key national priorities that had to be fully funded. On the development budget, a large number of Votes continued to struggle to absorb their budgets. While the overall performance on development budget improved from 56.5 percent in 2016/17 to 57.2 percent in 2017/18, only five (5) Votes managed to absorb all their budgets. Those Votes were the Defense, the Ministry of Home Affairs, 16

17 the Ministry of Defense and National Service, the Ministry of Land, Housing and Human Settlement and the Ministry of Agriculture, Livestock and Fisheries Fisheries Section. The other Votes absorption rates remained significantly below the target. The below target absorption in these Votes is partly caused by under realization of grants and nonconcessional borrowing and underperformance of some domestic revenue source. The absorption of the budget at individual Vote for recurrent and development is attached in Annex C and D Expenditure by Major Priorities of the Government The key expenditure priorities of the Government in 2017/18 included: Standard Gauge Railway (SGR): expenditure amounted to Shillings billion which is 100 percent of the amount projected for the period. This performance is consistent with the submitted certificates of work completion by Contractors, and therefore the project implementation was well within the planned schedule. Reviving of the National Carrier Air Tanzania Company Ltd: spending was Shillings billion, out of the annual projection of Shillings billion. In spite of the low absorption of the planned target, there were notable achievements recorded including acquisition of the Boeing Dream Liner aircraft which started operation in July, Julius Nyerere International Airport Terminal III: outlays stood at Shillings billion against the annual budget of Shillings 35.0 billion, which is Shillings billion higher than the annual target. The overspending was mainly caused by the fact that the project implementation in 2017/18 was ahead of the planned schedule. Higher Education Students Loans: expenditure amounted to Shillings billion, and were Shillings 15.5 billion higher than projections. The over spending was mainly caused by higher than projected enrollment of students in the higher learning institutions. Free Basic Education: expenditure was Shillings billion, slightly higher than the projection of Shillings billion, mainly driven by higher than projected enrolment of pupils in both primary and secondary schools. 17

18 In Billion Shillings 2.4 Grants Projections of grants and external concessional loans in 2017/18 amounted to Shillings 3,971.1 billion, of which Shillings billion were for General Budget Support (GBS); Shillings billion were for Basket Funds; and Projects Funds amounted to Shillings 2,473.7 billion. Grants received for the fourth quarter of 2017/18 was Shillings billion equivalent to 77.3 percent of the estimated amount of Shillings billion and a decrease of 7 percent compared to the same period in 2016/17. On cumulative basis, total disbursement of grants amounted to Shillings billion, equivalent to 63.6 percent of the estimate of Shillings 1,462.9 billion and a decrease of 7 percent compared to grants disbursed in the same period of 2016/17. Out of the total grants, General budget support was Shillings being percent of the estimates of Shillings billion. The amount received for project grants were Shillings billion being 52.8 percent of the estimates of Shillings 1,071.9 billion and basket funds amounted to Shillings billion, equivalent to 58.4 percent of the estimates of Shillings billion. Chart 2.7: Foreign Grants July June 2017/18 and July June 2016/ Programme Grants Project Grants Basket Support Grants Actual July - June 2017/18 July - June 2016/17 18

19 In Billion Shillings Chart 2.8: Foreign Grants July June 2017/18 Estimates Vs Actual Programme Grants Project Grants Basket Support Grants Estimates July - June 2017/18 Actual July -June 2017/ Financing Total financing during the year 2017/18 was Shillings billion against the target of borrowing Shillings 4,141.5 billion equivalent to 62.1 percent. Total foreign financing was Shillings 1,702.1 against the target of Shillings 2,920.9 billion equivalent to 58.3 percent. Total domestic financing was Shillings billion equivalent to 71.2 percent of estimated domestic financing of Shillings 1,220.7 billion Domestic Financing In the 2017/18 budget, the Government envisages to borrow Shillings 6,168.9 billion from domestic markets through treasury bills and bonds. Out of which, Shillings 4,948.2 billion was for rollover of maturing Government securities and Shillings 1,220.7 billion being new loans for financing development expenditure. As at 30 th June, 2018 the Government raised a total amount of Shillings 5,704 billion from domestic market which was 92 percent of the target. Out of that, Shillings 4,835.2 billion were used to rollover matured Government securities and Shillings billion were new loans for financing development projects. In addition, the loans from this source were directed to finance 19

20 In Billion Shillings development projects as well as clearance of contractors arrears. Chart 2.9: Domestic Financing July June 2017/18 Estimates Vs Actual Net Domestic Financing Estimates July - June 2017/18 Actuals July -June 2017/ Foreign Financing Total foreign financing during the period of July 2017 to June 2018 were Shillings 1,702.1 billion being 58.3 percent of the budget estimate. Disbursements were Shillings 1,401.9 billion for project; Shillings 71.1 billion for basket loans being percent and 20 percent respectively. The Government planned to borrow Shillings 1,595.0 billion from external non concessional sources to finance development projects. Up to June, 2018 a total of Shillings 1,474.3 billion was raised which was 92 percent of the target. In additional, amortization of foreign loans was Shillings 1,307.6 billion equivalent to percent of the target of Shillings billion. 20

21 In Billion Shillings Chart 2.10: Foreign Financing July June 2017/18 (Estimates Vs Actual) Programme Loans Project Loans Basket Support Loans Estimates July - June 2017/18 Actuals July -June 2017/18 Non Concessional Borrowing 3.0 PUBLIC DEBT DEVELOPMENT 3.1 Public Debt Stock As at June 2018, public debt stock amounted to Shillings 51, billion equivalent to an increase of 10.9 percent compared to Shillings 46, billion as at end June Out of which, domestic debt stock amounted to Shillings 14, billion and external debt stock amounted to Shillings 36, billion. The increase was due to new disbursement for funding development projects, accumulation of interest arreas and depreciation of Tanzania s Shilling against USD on external side. Chart 3.1: Trend of Public Debt Stock for the Period Ending June June, 2018 (Tsh. Billion) 21

22 3.1.1 External Debt As at end June 2018, external debt stock amounted to USD 15, million compared to USD 14, million as at end June 2018, equivalent to an increase of 9.5 percent. The increase was attributed to new disbursement and accumulation of interest arrears notably from non Paris club countries which have not yet provided the relief in accordance to Paris Club terms. The analysis of external debt stock by creditor category shows that, multilateral organisations are major creditors accounting 57.8 percent of total external debt, commercial terms creditors accounts 30.8 per cent and bilateral creditors accounts 11.4 percent. The Government has been borrowing from major multilateral organisations which offers affordable terms and conditions and use the same to finance infrastructure development projects which contribute to the growth of economy. Table 2:- External Debt by Creditor Category Institutions June 2015 Share in % June 2016 Share in % June 2017 Share in % June 2018 Share in % Multilateral , , , Bilateral , , , Commercial Banks/ECA , , , Domestic Debt As at June 2018, domestic debt stock amounted to Shillings 14, billion compared to Shillings 14, billion as at June 2017, equivalent to an increase of 4.1 percent. This was due to the increase in the Government needs to finance infrastructure development projects and borrowing for refinancing purpose. Large share of domestic debt was dominated by treasury bond which was 59.5 percent followed by treasury bills 18.0 percent; over draft 13.2 percent, special bond and stocks 9.2 percent and other debt 0.1 percent. 22

23 Chart 3.2: Share of Domestic Debt by Instrument Category other debt 0.1% Overdraft 13.2% Special bond &stocks 9.2% Trearurly bills 18.0% Treasurly bonds 59.5% Debt Sustainability Analysis The recent Debt Sustainability Analysis conducted in November 2017 indicates that, debt burden indicators in 2017/18:- present value of external debt to GDP was projected at 19.7 percent compared to 40 percent threshold; Present value of external debt to Export was projected at 81.8 compared to 150 percent threshold; present value of External debt to domestic revenue was projected at compared to 250 percent threshold; External debt service to export earning was projected at 9.3 percent compared to 20 percent threshold; and External debt service to domestic revenue was projected at 13.3 compared to 20 percent threshold. Basing on the assessment of debt distress, the Country has capacity to carry more debt by borrowing to finance development projects while meeting future financial obligations without sharp adjustment to revenue and expenditure. However, Government priorities are on concessional loans and all loans are managed prudently. 23

24 Table 3: Result of Debt Sustainability Analysis External debt Indicator Threshold 2017/ / / / / / /38 Present value of Debt /GDP Present value of Debt / Export Present value of Debt / Domestic revenue Debt Service/Export Earning Debt Service / Domestic Revenur Public debt indicator Threshold 2017/ / / / / / /38 Present value debt /GDP Present value debt/revenue N/A Debt Service/ Domestic Revenue N/A

25 Budget Estimates Revenue Performance July - June 2017/18 Estimates April - June 2018 Actual Percent of estimate April - June 2016/17 Actual Year on year % change Estimates July June 2018 Actual Percent of estimate July-June 2016/17 Actual ANNEX A Billion Shillings Year on year % change Revenue ( Including LGAs own sources) 19, , , % 4, % 19, , % 16, % Revenue (Excluding LGAs own sources) 19, , , % 4, % 19, , % 16, % Tax Revenue 17, , , % 3, % 17, , % 14, % Taxes on Imports 4, , , % % 4, , % 3, % Import Duty 1, % % 1, , % 1, % Petroleum 1, % % 1, % % Excise 1, % % 1, % % Others 2, % % 2, , % 2, % Excise % % % % VAT on Non-Petroleum imports 2, % % 2, , % 1, % Taxes on Domestic Sales 4, % % 4, , % 3, % Excise 1, % % 1, , % % Value Added Tax (VAT) 2, % % 2, , % 2, % Income Tax 5, , , % 1, % 5, , % 4, % PAYE 2, % % 2, , % 2, % Corporate and Parastatals 1, % % 1, , % 1, % Individuals % % % % Withholding Taxes % % % % Rental Tax % % % % Other Income % % % % Other Taxes 2, % % 2, , % 2, % Business Skill Development Levy % % % % Fuel Levy and transit fee % % % % Stamp Duty % % % % Departure Service Charges % % % % Processing Fee-dry cargo-tra % % % Export Duty % % % % Railway Development Fund % % % % National Water Development Fund % % % % Motor vehicle taxes % % % % Treasury Voucher Cheque % % % % Transer to REA % % % % TRA Non Tax % % % % Refunds % % % % Refunds - VAT % % % Refunds - other % % % % Non Tax Revenue 2, % % 2, , % 2, % Parastatal Dividends % % % % Ministries and Regions 1, % % 1, , % 1, % LGAs own source % % % % 25

26 Foreign Grants and Financing July - June 2017/18 April June 2018 July June 2018 April - Year on Budget June Percent of year % Percent of Estimates Estimate Actual 2016/17 Estimate Actual estimate change estimate Actual July -June 2016/17 Actual Annex B Billion Shillings Year on year % change Overall deficit before grants (5,604.1) 11.4 (2,066.3) % (1,075.8) 92.1% (5,604.1) (2,497.0) 44.6% (1,183.0) 111.1% Grants 1, % % 1, % % Programme % % Project 1, % % 1, % % Basket Support % % Overall deficit after grants (4,141.5) (1,859.1) % (853.1) 117.9% (4,141.5) (1,566.4) 37.8% (313.2) 400% Expenditure Float % Overall Balance (4,141.5) (1,859.1) % (853.1) 117.9% (4,141.5) (1,566.4) 37.8% (372.9) 320% Financing 4, , % 1, % 4, , % % Foreign (net) 2, , , % % 2, , % % Programme (Loans) % % % 75.3 Project (Loans) 1, % % 1, , % 1, % Basket Support % % % % Non-Concessinal Borrowing 1, , % 1, , % % Amortisation Foreign (outflow) -1, % % -1, , % % Domestic (net) 1, , % % 1, % % Bank Borrowing 1, , % % 1, % -1, % Non-Bank Borrowing % % % % Borrowing/Roll over 4, , , % % 4, , % 3, % Amortisation of contingent debt % Domestic amortisation/rollover -4, , , % % -4, , % -3, % 26

27 The 2017/18 BUDGET EXECUTION PERFORMANCE BY ADMNINISTRATIVE CLASSIFICATION (RECURRENT EXPENDITURE) Vote Code Vote Description Revised Budget Annual Expenditure Targets Total Actual Expenditure ANNEX C Actual Exp. As A % Of Annual Targets 002 Teachers Service Commission 12,506,678,758 12,506,678,758 9,426,463, National Land Use and Planning Commission 2,356,178,301 2,356,178,301 1,854,584, Records and Archives Management Department 3,202,349,180 3,202,349,180 2,242,470, National Irrigation Commission 4,055,481,000 4,055,481,000 3,869,888, The Treasury Registrar 29,651,900,087 29,651,900,087 14,474,469, Secretariat of Public Remunaration 1,721,987,000 1,721,987,000 1,414,288, Joint Finance Commision 1,452,741,955 1,452,741,955 1,183,247, Oil and Gas Bureau 711,073, ,073, Judicial Service Commission 1,124,528,995 1,124,528, ,729, Financial Intelligence Unit 1,515,586,000 1,515,586,000 1,471,962, Fire and Rescue Force 32,946,692,000 32,946,692,000 28,696,358, Commission for Mediation and Arbitration 3,412,791,000 3,412,791,000 2,639,608, Attorney General's Office 15,174,609,480 15,174,609,480 14,171,173, UNESCO Commission 663,123, ,123, ,355, State House 17,548,548,613 17,548,548,613 14,202,170, The Treasury 551,948,114, ,948,114, ,858,817, Public Debt and General Services 9,572,208,362,000 9,572,208,362,000 9,532,793,655, Accountant General's Department 69,103,595,951 69,103,595,951 65,323,614, The Cooperative Development Commission 6,578,412,249 6,578,412,249 5,498,916, Prime Minister 6,036,351,537 6,036,351,537 5,567,490, Vice President 8,261,628,114 8,261,628,114 7,817,467, Registrar of Political Parties 21,476,055,816 21,476,055,816 20,052,573, Ministry of Home Affairs - Police Force 631,664,450, ,664,450, ,574,529, Ministry of Home Affairs - Prisons Services 226,850,313, ,850,313, ,724,232, President's Office and Cabinet Secretariat 465,709,999, ,709,999, ,940,407, Vice President's Office 14,071,978,503 14,071,978,503 12,820,022, President's Office - Public Service Management and Good Governance 30,757,741,982 30,757,741,982 29,914,254, Ethics Secretariat 7,707,984,059 7,707,984,059 6,411,158, Ministry of Foreign Affairs and International Co-operation 154,239,589, ,239,589, ,901,848, Public Prosecution Division 16,391,089,042 16,391,089,042 14,592,869, RAS Katavi 57,472,286,780 57,472,286,780 42,379,380, Prime Minister's Office 24,299,938,821 24,299,938,821 17,515,547, Defence 1,294,059,869,835 1,294,059,869,835 1,285,083,033, National Service 331,104,874, ,104,874, ,367,070, The Judiciary Fund 107,048,053, ,048,053,522 85,697,609, Ministry of Constitutional Affairs and Justice 9,747,572,729 9,747,572,729 9,253,495, The National Assembly Fund 120,020,533, ,020,533, ,515,625, Ministry of Agriculture, Livestock Development and Fisheries - Agriculture Sector 65,779,147,982 65,779,147,982 54,236,814, Ministry of Industry, Trade and Investment 25,427,195,435 25,427,195,435 18,886,290, National Audit Office 63,312,666,876 63,312,666,876 50,483,624, Ministry of Education, Science and Tehcnology 435,207,798, ,207,798, ,383,712, RAS Simiyu 133,776,347, ,776,347, ,775,644, Ministry of Lands,Housing and Human Settlements Development 50,596,223,209 50,596,223,209 29,753,194, Ministry of Water and Irrigation 44,600,001,615 44,600,001,615 39,842,104,

28 The 2017/18 BUDGET EXECUTION PERFORMANCE BY ADMNINISTRATIVE CLASSIFICATION (RECURRENT EXPENDITURE) Vote Code Vote Description Revised Budget Annual Expenditure Targets Total Actual Expenditure Actual Exp. As A % Of Annual Targets 050 Ministry of Finance and Planning 71,931,122,975 71,931,122,975 62,557,194, Ministry of Home Affairs 24,243,774,566 24,243,774,566 22,887,245, Ministry of Health, Community Development, Gender, Elderly and Children - Health 324,984,273, ,984,273, ,852,535, Ministry of Health, Community Development, Gender, Elderly and Children 35,827,310,567 35,827,310,567 21,031,650, RAS Njombe 120,617,972, ,617,972,400 97,698,438, Commission for Human Rights and Good Governance 4,171,838,695 4,171,838,695 3,963,129, President's Office - Regional Administration and Local Government Authorities 42,157,582,286 42,157,582,286 39,005,405, Ministry of Defence and National Service 19,427,724,579 19,427,724,579 15,770,989, Ministry of Energy and Minerals 60,279,081,238 60,279,081,238 46,818,643, Law Reform Commission 2,234,264,006 2,234,264,006 1,943,135, Trade and Investment 19,257,539,750 19,257,539,750 12,543,137, Electoral Commission 10,124,133,690 10,124,133,690 8,860,029, Ministry of Works, Transport and Communication - Tansport 120,005,758, ,005,758, ,685,724, RAS Geita 164,854,566, ,854,566, ,904,618, Ministry of Agriculture, Livestock Development and Fisheries - Fisheries Sector 16,417,171,549 16,417,171,549 12,945,832, Prime Minister's Office - Labour, Youth Development, Employment and Dissabilities 15,627,581,654 15,627,581,654 14,575,160, Planning Commission 4,936,364,000 4,936,364,000 3,913,426, Public Service Recruitment Secretariat 2,481,424,144 2,481,424,144 2,224,179, Ministry of Works, Transport and Communication - Communication 4,517,800,600 4,517,800,600 3,689,334, Ministry of Natural Resources and Tourism 97,211,868,209 97,211,868,209 61,039,688, RAS Arusha 216,025,379, ,025,379, ,092,090, RAS Pwani 170,948,948, ,948,948, ,226,628, RAS Dodoma 208,324,876, ,324,876, ,467,292, RAS Iringa 152,999,339, ,999,339, ,466,864, RAS Kigoma 159,941,718, ,941,718, ,606,917, RAS Kilimanjaro 245,171,873, ,171,873, ,009,356, RAS Lindi 112,158,640, ,158,640,220 85,652,405, RAS Mara 214,760,967, ,760,967, ,826,406, RAS Mbeya 228,241,768, ,241,768, ,510,305, RAS Morogoro 264,229,004, ,229,004, ,576,271, RAS Mtwara 150,980,231, ,980,231, ,017,230, RAS Mwanza 289,295,772, ,295,772, ,761,340, RAS Ruvuma 174,151,342, ,151,342, ,448,578, RAS Shinyanga 142,118,591, ,118,591, ,360,402, RAS Singida 138,787,598, ,787,598, ,381,556, RAS Tabora 182,025,741, ,025,741, ,529,018, RAS Tanga 261,578,463, ,578,463, ,727,352, RAS Kagera 215,588,783, ,588,783, ,391,523, RAS Dar Es Salaam 418,753,128, ,753,128, ,018,424, RAS Rukwa 96,270,500,574 96,270,500,574 80,028,961, RAS Songwe 89,777,316,000 89,777,316,000 69,622,747, Drug Control and Enforcement Authority 4,269,245,230 4,269,245,230 3,993,891, Tanzania Commission for AIDS (TACAIDS) 2,556,974,050 2,556,974,050 2,205,317, Immigration Department 50,979,329,600 50,979,329,600 43,407,401, Public Service Commission 6,280,902,348 6,280,902,348 5,546,059, RAS Manyara 151,470,794, ,470,794, ,734,310, Ministry of Information, Culture, Arts and Sports 27,803,352,312 27,803,352,312 23,005,580, Ministry of Works, Transport and Communication - Works 35,565,163,331 35,565,163,331 34,756,637, Ministry of Agriculture - Livestock Development 33,448,698,384 33,448,698,384 30,443,617, TOTAL 20,279,316,043,552 20,279,316,043,552 18,778,474,769,

29 ANNEX D THE 2017/18 BUDGET EXECUTION PERFORMANCE BY ADMNINISTRATIVE CLASSIFICATION (DEVELOPMENT EXPENDITURE) Vote Code Vote Description Revised Budget Annual Expenditure Targets Total Actual Expenditure Actual Exp. As A % Of Annual Exp. Targets Development Local 004 Archives Management Department 2,000,000,000 2,000,000,000 1,844,832, National Irrigation Commission 5,600,000,000 5,600,000,000 1,539,466, Treasury Registrar 1,000,000,000 1,000,000, Fire and Rescue 3,500,000,000 3,500,000,000 12,754, The Treasury 266,225,423, ,225,423, ,700,000, Accountant General's Department 2,000,000,000 2,000,000, ,280, Ministry of Home Affairs - Police Force 5,000,000,000 5,000,000, Ministry of Home Affairs - Prisons Services 7,200,000,000 7,200,000,000 5,000,000, President's Office and Cabinet Secretariat 54,987,317,517 54,987,317,517 2,184,728, Vice President's Office 2,665,546,000 2,665,546,000 1,325,796, President's Office - Public Service Management and Good Governance 7,000,000,000 7,000,000,000 6,755,792, Ethics Secretariat 2,300,000 2,300, Ministry of Foreign Affairs 8,000,000,000 8,000,000,000 3,420,195, RAS Katavi 19,053,248,000 19,053,248,000 9,178,845, Prime Minister's Office 6,000,000,000 6,000,000,000 4,023,623, Defence 10,000,000,000 10,000,000,000 10,000,000, National Service 6,000,000,000 6,000,000,000 1,000,000, Judiciary Fund 18,358,131,000 18,358,131,000 10,779,003, Ministry of Constitutional Affairs and Justice 994,115, ,115, ,999, The National Assembly Fund 7,000,000,000 7,000,000,000 3,681,424, Ministry of Agriculture,Livestock and Fisheries-Agriculture Sector 50,672,368,373 50,672,368,373 25,717,400, Ministry of Industry, Trade and Investment 73,575,068,000 73,575,068,000 13,600,347, National Audit Office 8,130,000,000 8,130,000,000 1,029,097, Ministry of Education, Science and Tehcnology 622,519,172, ,519,172, ,541,529, RAS Simiyu 27,999,074,000 27,999,074,000 11,551,994, Ministry of Lands,Housing and Human Settlements Development 16,400,000,000 16,400,000,000 4,043,608, Ministry of Water and Irrigation 404,678,686, ,678,686, ,759,332, Ministry of Finance and Planning 3,500,000,000 3,500,000, ,512, Ministry of Home Affairs 20,000,000,000 20,000,000,000 20,000,000, Ministry of Health, Community Development, Gender, Elderly and Children - Health 176,300,000, ,300,000, ,746,079, Ministry of Health, Community Development, Gender, Elderly and Children 2,000,000,000 2,000,000, RAS Njombe 20,939,290,000 20,939,290,000 10,722,690,