1. 20 November 2009

2.  We acknowledge the key observations as outlined in the Synoptic Note – RBA  In terms of Challenges, and  Good progress made in various areas  The challenges form the stepping stone for future improvement.

3. 1. The underperformance in domestic revenue for the first quarter of 2009/10 2. The increase in expenditure over 3 years does not reflect priority towards growth and poverty reduction objectives 3. Roads: Over commitment and inadequate funding in roads sector 4. Education: Inadequately financing of capitation grant component of the recurrent budget at primary and secondary school levels. 5. Agriculture: Increased bias towards current expenditure Vs capital spending 6. Inadequate funding of Health sector 7. D by D: Inequity in resource allocation 8. Arrears in Education and roads 9. Definition of Personal Emoluments (PE)

4.  The underperformance in domestic revenue for the first quarter of FY2009/10  Domestic revenue collection for the first quarter of 2009/10 was TShs. 1,107.2 billion against the target of TShs. 1,231.8 billion, or 90% performance level partly attributed to:  impacts of the global financial crisis  If this trend continues, it will require adjustment in expenditure on goods and services, but protect MKUKUTA expenditures

5.  The increase in Public expenditure over 3 years does not reflect priority towards growth and poverty reduction objectives.  The share of MKUKUTA expenditure has increased from 65% in 2005 to 71.2% in 2009/10.  This trend is encouraging and we intend to maintain it around that level at the minimum

6.  Roads: Over commitment and inadequate funding in roads sector  The government continues with its commitment to road maintenance as a key priority  There is a financing gap due to the increase in allocation of fund to newly signed road construction; upgrading and rehabilitation projects in FY 2009/10.  The government has taken the following measures:  Stopped the signing of new contracts which do not have enough funding in the approved budget  Consider reallocating funds from ongoing but underperforming road projects during the mid-year review.

7.  Education: inadequate financing of capitation grant component of the recurrent budget at primary and secondary school levels.  The government is committed to improve education delivery at all levels  In 2004/05 the government introduced formula-based recurrent grants for primary education to provide funding for the effective administration and delivery of universal primary education including operation costs  Allocation of block grant is 100% based on the number of school aged children in each council.  Capitation grants are allocated to councils according to PEDP formula,  USD10 for each enrolled student.  Currently, capitation grants stands at an average of TShs 7,500/= per student.  The government will consolidate these achievements and continue to improve so as to realize the desired target of USD10 per student as per PEDP capitation grant formula.

8.  Agriculture: Increased bias towards current expenditure Vs capital spending  With the current government motto “Kilimo Kwanza”, agriculture continues to be the backbone of Tanzania economy in terms of production, employment, income and foreign exchange generation.  Current expenditure increased significantly compared to capital expenditure in 2009/10 mainly due to:  allocation of specific fund for purchase of fertilizer,  enhancing National Food Reserve and strengthening of extension services by training and recruiting of extension officers. 

9.  Inadequate funding of Health sector:  The government continues to implement various interventions directed to improve health sector ◦ health infrastructure, ◦ control of endemic diseases, by providing preventive education to the communities.  Implementation of Primary Health Service Development Program (MMAM) by phases and other health sectoral programmes.  In the medium term the major focus will be on improving human resource capacity at all levels  Other interventions include: constructing, rehabilitating and equipping health facilities with basic equipment.

10.  D by D: Inequity in resource allocation  The Government remains committed to fully implement Decentralization by Devolution.  This requires that resources (financial and human) be provided to each Government level in accordance with their functions- “resources follow functions”.  The formula based allocation is determined objectively and LGAs have greater stability in their budget allocations.  To address the inequity in LGAs allocation, some studies are underway to review the effectiveness of formula based allocations of resources.

11.  Arrears in Education and Roads  The issue of arrears is a problem which hinders smooth implementation and execution of Government Budget.  The Government has continued to strengthen public financial management by improving expenditure control and thus ensuring efficiency, transparency and accountability at all levels.  Arrears consist of verified claims/certificates. The verified bills that were not paid at the end of 2008/09 were settled in the first quarter of 2009/10.  The government continues to verify various claims and will subsequently pay them.

12.  Definition of Personal Emoluments (PE)  The government continues to implement the Public Service Reform Program  The definition used in the classification of PE in RBA differs from the way the Government allocates resources to PE (i.e: basic salary, annual increment and promotion).  According to RBA, PE includes allowances and other employee’s statutory payments which are not part of PE in government definition.  Since 1996 the Government consolidated all allowances related to salary into employee basic salary.

13.  THANK YOU  AHSANTENI SANA