Tanzania: Sensible budget strategies and sound decision-making are vital for economic growth

PRESIDENT Samia Suluhu Hassan, for those who followed her pursuit and call to cut lending rates, once again, while in Misenyi district of Kagera region, pleaded with banks to have a low interest rate to attract investment (see Daily News 10th June 2022 front p.).

The mechanisms, direction and extent to which interest rates can affect economic growth are not well known to many, but the truth is that higher interest rates increase the cost of borrowing, reduce income available and therefore limit the growth of consumer spending. Interest rates are a key indicator for financial markets, which has a significant effect on the economy.

Economic growth is the extent of increase in production, services and value production of anything that has quantifiable indicators. It is heavily influenced by focused decision-making that achieves growth.

It does not exist in a vacuum; it must be intentional or at least pushed in the direction of upward mobility.

This bottom-up growth can be felt through increased corporate profits, increased local investment and adoption of hiring decisions, increased consumer purchases, thereby further driving growth, it becomes a self-prophecy. director, especially when government austerity measures are in full swing to redouble efforts in this area.

Economic growth requires expert minds to lead this process; nevertheless, it must be balanced by prudent and objective fiscal policy and aggressive interventionist decision-making strategies.

Essentially, growth must be planned, must be targeted, and guided throughout to achieve the desired results. Real gross domestic product is perhaps the best way to measure true economic growth. It encompasses the entire economic output of the country and reflects the true measure of its value, including goods and services.

Keep this in mind, however, the higher the country’s imports, the lower the economic growth, hence the lower the GDP. It should be noted that the total GPD is generally not exhaustive; it only includes things that society measures and values ​​at any given time.

The detrimental effect of environmental costs, the psychological costs of poor governance, the impact of family separation due to the lack of local jobs seeking greener pastures elsewhere, etc., are not taken into account and, in most cases negatively affect overall growth.

A fundamental part of growing a strong budget is to first achieve the metrics that drive the budget down from the get-go. The budget does not accumulate in isolation; several mitigating aspects affect the budget that a country will generate.

These aspects involve the ratio of national debt to GDP, national exports and local production, local consumption, the tax base and the strength with which the government tries to broaden this base, and to what extent the conditions are encouraging for investments. Macroeconomic poverty outlook indicators are a good indicator of future budget determinations and accumulations.

Economic growth, to be functional, needs a budget designed and targeted at the drivers of economic growth such as human capital, specialization, trade, local productivity, financial capital, entrepreneurship, etc. ?

This involves a few questions. Do our tax policies and strategies target local job creators such as small businesses, farmers and, in our case, a program to attract diaspora money to incorporate to help build the local economy?

Are we designing the framework to keep our most qualified voters or are they selling their labor elsewhere? Is the government ready to hire the best prepared, best and brightest the country has to offer?

Have we amplified all the potential sources of revenue generation prevalent in Tanzania’s geographical position? What is the government’s long-term strategy for revenue collection?

Make it public and let it be reviewed by those who could help identify where the revenue loss loopholes are. Having listened to the Minister of Finance and Planning Dr Mwigulu Nchemba during his presentation for the next financial year (see diary of June 8, 2022, pg.2), it is essential to emphasize that debt is not necessarily a bad thing. On the contrary, the national debt can be beneficial in the long term if, in my opinion, the following elements are taken into account.

Is this an expansionary fiscal policy tool for long-term benefits or is it for job creation purposes?

Does it reduce taxes and broaden the tax base or is it not seen as a source of payment of wages but rather as an economic tool that creates bases to increase government revenue?

What is the cost/benefit analysis of debt? In my view, the key question is why does a country incur this debt?

Practically, a country can have good debt when the debt amortizes in the short term while continuing to increase government revenue in the long term.

What is clear is that when debt is used correctly, it inspires a nation’s long-term growth and prosperity and creates an environment that continues to generate sustained and higher incomes.

Likewise, many fail to realize that when debt is moderate, it can increase GDP enough to reduce the debt-to-GDP ratio, thereby increasing county GDP and thereby reducing our debt burden.

Echoing what happened in various presentations during the national budget of the financial year 2022/23, there are some targeted measures which, if executed, could significantly increase revenues and increase public expenditure for development. national, which could make debt optional.

There is a need to start by restructuring the budget, with the lion’s share going directly to the growth drivers discussed above.

The fundamental basis for attracting and sustaining anything of value is to first protect capabilities at or above the value to be protected that a state cannot protect something more valuable than itself. A reliable judicial system guarantees security. This sentence in my opinion is common but it is completely true.

Any serious investor will tell you that good money is afraid of a bad environment. To attract the kind of resources and investments that Tanzania needs to grow its budget, the government must provide legal certainty that protects this money.

The executive should direct its anti-corruption institutions to set up a special judicial oversight task force to not only monitor but also report in a timely manner on what is likely to be a stable.

There is a need to aggressively enforce all court orders while building trust in the system and giving investors comfort in bringing their money to invest in Tanzania.

The government must protect investors’ investment as if it were its own. It is possible to attract more foreign direct investment to Tanzania if the judicial system is strengthened in a transparent manner. Many might disagree with my proposition, but I believe that the greatest output of a developing country will not come from insignificant degrees awarded by glorified high schools mimicking universities.

Now we need a paradigm shift. Especially to shift most of our national resources from these so-called universities from just issuing certificates to developing business and entrepreneurial skills. Universities’ high GPAs alone will not guarantee building a solid foundation for economic growth in the future. Tanzania needs to move towards the skills the market needs.

There is a need to tighten our academic standards and weed out those who do not deserve it and who are wasting limited national resources through student loans.

We need to stop pushing this unreasonable narrative that everyone needs to go to college. Instead, change the message that everyone needs to specialize and learn a trade or skill that the market needs. This will give Tanzania the best return and accelerate our development efforts.

As our trade people apply their skills and entrepreneurial spirit, especially in value addition, opportunities for expansion will be created and there will be new windows for tax collection. Imagine a rising tide lifting all boat scenarios.

There is no better way to improve our Human Capital Index in Tanzania than to get people to put what they have learned into practice, and as they grow and hone their skills, our economy will also develop.

At all times, at all levels, it is essential to remember that the economy is a living body. We must constantly breathe life into it to keep it alive and vibrant.

Thus, it is crucial to have a leadership team in place to help unravel Tanzania and its potential resources by having people in place who have the right skills, experience and commitment to instilling succession plans for help realize Tanzania’s national vision.

To increase economic opportunities, it is necessary for the government to provide an enabling environment for businesses and the lives of voters and by default, this will grow the economy and incomes.

The dilemma faced by policymakers when faced with very high inflation is that no matter how they react, they will have to hurt certain sectors.

Fundamental to this is the Phillips curve, which measures that as unemployment falls, inflation will rise, with the converse also spread out.

I call for a sensible budget strategy and warm decision-making strategies for economic growth, because in this case and in our situation, policy makers must effectively choose between lowering the high cost of living and increasing unemployment, or acknowledging an increase to linger above the manageable level, while unemployment declines.

About Catriona

Check Also

The mythical soft landing seems slightly more achievable

Comment this story Comment Financial markets’ sudden reaction to Friday’s payroll data was a classic …