Budgeting for economic development: the case of Tanzania

Introducing the budget for the financial year, 1972/73, before the Parliament, the then Minister for Finance said:- “Mr Speaker, Sir, I said earlier that progressive improvement is needed in our traditional budgetary process of the Ministries and Regions to fit them to the demands of development and good management. There are several weaknesses in the utility of our traditional budgetary procedure which make it a relatively ineffective tool for rational management of public funds. It is, therefore, desirable that expenditure should be more systematically and consistently related to programme or activities with certain objectives”. This statement seems to lead to one important conclusion, the adoption of Improved Planning and Budgeting techniques, which involve objectives analysis, goals definition and programmes restructuring. The implication here is Forward Budgeting whereby the objectives of the government operations have to be analysed, redefined and thus predetermined before resource allocations affected. Various situations, may of course, necessitate reconsideration of the predetermined objectives, but this should come automatically in the process of resource allocation. Having analysed the present budgetary procedure, it quickly became evident that, although government decision to introduce Programme and Performance Budgeting was reached way back in 1969, no major improvement has been made in the traditional system, since then. However, in economic terms, the benefits to be gained from Programme and Performance Budgeting, which loads to rational allocation of scarce resources, cannot be overemphasized. This granted, and bearing in mind the fact that the Treasury, being the Central Budget Agency, realised these obvious merits in 1972, it is indeed painful to realise that government authorities have ignored, or rather, delayed the introduction of Programme and Performance Budgeting. The main difficulties in introducing this technique, have been assessed in this paper, and appreciated, but one consolation which has not yet fully appealed to the government authorities, is that Programme and Performance Budgeting can be introduced in a step-by-step process: after all programme and Performance Budgeting is not a destination but a pilgrimage. This dissertation is divided into three chapters. In the first chapter, I attempt to define the role of the government in the economy and the extent to which government should participate in the production and distribution of goods and services. The analysis is based on a typically socialist oriented economy. The analysis shows that the three major functions of resource allocation, output distribution and stabilisation, are better performed by some authority which has sufficient ability to enforce its decisions upon members of a society, that is, the Government. And how best a government performs these functions, depends on the form of the Government itself. It is obvious, however, that a detailed definition of the best form of the Government is beyond the scope of this paper, and has, therefore, not been attempted. The second chapter concentrates on the analysis and interpretation of the patterns and trends in the government expenditures, since 1967. There are various determinants of the growth of government expenditures, apart from those related to the traditional functions of allocation, distribution and stabilisation. Discussions of these determinants take a considerable part of chapter two. In the final chapter, I critically review the formulation, financing and execution of the present budget. This review brings me to two main conclusions from the evident inadequacies of the present budgetary procedure, which call for serious attention. It became evident that the present system is inconsistent, static and is by itself a source of unnecessary and increased government expenditure. The two main conclusions are: first, that budgetary reform of the present system is long overdue, and secondly that a genuine effort must be made to replace the present system with a more modern and less cumbersome system; Programme and Performance Budgeting. It must be realised that in Tanzania, the government budget has to become an important tool in our socialist transformation. For besides being a device for implementing development plans, it must also be a means for financial control and management of government operations. Above all, it must be designed to provide for accountability to the legislature. The present budget does not meet these demands. It is my hope that this study will be of some use to my colleagues, the budget makers and implementers, who, very often, are confronted with the problem of allocating x shillings to activity A instead of B