Financing the Plan

In this section we look first at the government's financial and budgeting situation and review recent trends in how the money was spent. This leads to thoughts about how the plan might be costed and funded, and to an outline of the strategy that will be used to finance the plan.

A review of Zanzibar Government Finances How the Zanzibar budget is made The changing pattern of government spending Estimating the cost of the plan Working with partners Possible external support How the plan will be paid for

This revenue, however, has not kept pace with expenditure. The overall balance (after taking grants in to account) has been negative in all years apart from 1997/98. The gap (the budget deficit) has been filled mainly by borrowing from domestic banks (and thus increasing the national debt).

The government has been working towards the long term policies laid out in the Zanzibar Vision 2020 which are translated into short term policies for each annual budget. The major objectives in the 2000/01 budget, for example, included the following:   expenditure limited to available resources Gross Domestic Product (GDP) growth rate up from 4.5% to 5% revenue levels to reach 30% of GDP reduction in the national debt greater participation of the private sector in the provision of social services The savings that were thus made were to be used to improve education, health and the environment.

Government Revenue is the government’s annual income from which it meets all the public expenses. A large part of the revenue comes from import tax but there is also non-tax revenue from licences and fees and the possibility of loans and grants. Public Expenditure is what the government spends its money on. The Government very rarely has as much money as it needs and it therefore has to decide how much to spend on different Ministries eg Education OR Health OR Roads. There is also the problem of deciding how much to spend to support issues that cut across several different ministries eg gender, environment etc.

A budget frame is a planning tool which helps to calculate totals for revenue and expenditure. The problem in Zanzibar is that the revenue comes mainly from import tax and it is not enough to meet all the expenditure needs. There are only two ways to solve this problem - increase government revenue and/or decrease government expenditure. Neither of these are popular moves and it is therefore useful to review recurrent and development expenditure for two main reasons:

to make sure that money is being spent in the most appropriate way and on the sectors which can have the most influence on poverty reduction to help streamline the public sector, reform the civil service and reduce unnecessary and sometimes wasteful patterns of expenditure

Table: Recurrent Expenditure by category Category 1999/00 millions of shillings Personal emoluments 12146 Allowances 9492 Miscellaneous 5114 Subventions 4509 Public Debt 1568 Maintenance 960 Services 897 Seminars and Training 628 Students welfare 201 Office Supplies 143 Total 35658 Notes: Personal emoluments and allowances take up 60% of the budget Repayment of debt takes up 4.4% of the budget Services (ie education, health, water and agriculture) take up only 2.5% of the budget

There are two types of expenditure - recurrent and development. Recurrent expenditure includes things like salaries and electricity bills which have to be paid on a regular basis. Development expenditure includes one-off items such as a new bridge or sewerage system. Two major items in recurrent expenditure are personal emoluments (salaries, allowances for staff travel, and general training) and other charges (eg maintenance, utilities, services and supplies).  It is important to make sure that these different kinds of expenditure are well controlled. The table shows how the recurrent expenditure was framed in 1999/00.   The ZPRP budget frame includes decreasing the recurrent expenditure from 44 to 38% of GDP in 2000/01 and increasing development expenditure from 0.4 to 15.6% of GDP in the same period.

 

	The percentage of the budget for both health and education has dropped but it will have to increase under the ZPRP
	The percentage of the budget for agriculture has stayed about the same but it will also have to increase under ZPRP especially those parts that deal with extension and research services
	Justice has remained about 10% since it rose from 7% in 1996/97. This includes the costs of the high court, the attorney general's office, prisons and the anti-smuggling unit. A new Ministry of Constitutional Affairs and Good Governance has been created to improve governance and the administration of justice. This will need extra resources.

 

	a review of the past performance of particular types of tax
	the effect of improvements in the tax collection systems
	the strengths and weaknesses of widening the tax base
	developments in the international economy - especially where they affect imports and exports
	the amount of external funding that might be available as grants or loans

Using the above types of information the government will be able to create a Medium Term Expenditure Framework (MTEF) to guide its future activities. But this needs to make allowance for the government not being alone in the fight against poverty. There are other stakeholders.