[{"bbox": [83, 88, 1119, 142], "category": "Text", "text": "risks as commercial debt has increased from just 4 percent to about 20 percent over the past 8 years, driven by the financing needs of large capital projects. In March 2021, debt service equalled 41% of domestic revenues."}, {"bbox": [83, 147, 1120, 254], "category": "Text", "text": "Tanzania reached an important milestone in July 2020, when it formally graduated from low-income country to lower-middle-income country (LMIC) status. This reclassification reflected the country's rising gross national income per capita, which reached USD 1,080 in 2019. However, Tanzania's extreme poverty rate remains high at close to 50 percent."}, {"bbox": [83, 259, 1120, 526], "category": "Text", "text": "Domestic revenue mobilisation continues to be a priority for the Government of Tanzania to finance the FYDP III. The country's recent reclassification to LMIC is likely to reduce access to grants and concessional loans. Tanzania has considerable untapped tax revenue potential. The tax gap is estimated at 6 to 7 percent of GDP, one of the largest in the region. The tax to GDP ratio has increased marginally over time and is still relatively low at 12 percent. During the implementation of the FYDP II (2015/16 – 2020/21), tax revenues increased by 56% in nominal terms. Since the start of Covid-19, nominal tax revenues have contracted by roughly 3% in 2020. Zanzibar experienced a particular large drop due to the collapse of the tourism industry. Tax revenue targets for FY2021/22 seem optimistic, predicting a 9% nominal increase while the economy is still recovering from the pandemic. On the other hand, the increase is much more conservative than the >20% increase in the first budget of the previous 5th phase government."}, {"bbox": [83, 531, 1119, 582], "category": "Text", "text": "In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy and the eligibility criterion is met."}, {"bbox": [159, 593, 511, 620], "category": "Section-header", "text": "### 2.3.4 Public Financial Management"}, {"bbox": [83, 629, 1120, 816], "category": "Text", "text": "The Government of Tanzania (GoT) has made progress to strengthen its Public Financial Management (PFM) systems since the latest PEFA in 2017. The 2017 Public Expenditure and Financial Accountability Assessment (PEFA¹²) concluded that Tanzania's PFM System improved in 9 out of 28 performance indicators and regressed in 10 out of 28. The PFM system is strong in the following areas: Reporting on extra-budgetary operations, fiscal risk reporting, public asset management, debt management, budget preparation, legislative scrutiny of budgets, accounting for revenue, payroll controls and legislative scrutiny of audit reports. Procurement management, internal and external audit are emerging strengths."}, {"bbox": [83, 821, 1120, 952], "category": "Text", "text": "PEFA 2017 identified budget credibility as a weakness, with discrepancies between budgets and actual expenditures. Other weaknesses were public investment management, comprehensiveness of budget documentation, fiscal strategy, expenditure arrears, public access to fiscal information, medium term expenditure framework, in-year controls on non-salary expenditures, in-year budget reports and predictability of in-year resource allocation."}, {"bbox": [83, 959, 1120, 1280], "category": "Text", "text": "Since the PEFA in 2017, cash management has improved following the adoption of a Treasury Single Account, compliance with public procurement regulations improved as a result of the e-procurement system, GoT made progress in arrears clearance, internal availability of budget information improved due to the Central Budget Management System. The Government is also more compliant with the international Public Sector Accounting Standards⁹ (IPSAS) accounting standards as the 2019/20 financial statements received an unqualified opinion, has accelerated the integration of IT systems through an Enterprise Service Bus¹³ and deployed an audit recommendation tracking information system to enhance the implementation of audit recommendations. Revenue and expenditure targets have shown more realism. Marginal real term annual increases, translated in improved budget credibility prior to Covid-19. It is unclear whether the economic impact of the pandemic has sufficiently been taken into account in the latest budget as targets seem on the ambitious side. Budget credibility, in-year resource allocation, commitment controls and arrears prevention remain areas to monitor throughout the implementation of the programme."}, {"bbox": [83, 1284, 1120, 1472], "category": "Text", "text": "The existing PFM reforms programme in Tanzania (PFMRP) is both credible and relevant. The programme's strategic objectives are formulated to address the weaknesses identified in the PEFA assessment. PFMRP has a comprehensive action plan that identifies tasks, timeframes, resources and responsibilities. The action plan is coherent with Tanzania Development Vision 2025 and Five Year Development Plans. The PFMRP has been adequately financed by GoT and Development Partners and is implemented, with oversight from stakeholders such as the Development Partners PFM Group and the PFMRP Secretariat¹⁴. A results-oriented Monitoring and Evaluation Framework is in place."}, {"bbox": [83, 1476, 1120, 1529], "category": "Text", "text": "Tanzania does not have a separate policy for domestic revenue mobilisation or tax revenues beyond the chapter on policy financing in the FYDP III. Tax policy changes are introduced annually through the Finance Bill. The"}, {"bbox": [73, 1567, 348, 1593], "category": "Footnote", "text": "¹² 2017 PEFA Assessment report"}, {"bbox": [73, 1591, 1032, 1617], "category": "Footnote", "text": "¹³ Enterprise Service Bus is a communication system between interacting software. It improves systems integration."}, {"bbox": [73, 1616, 825, 1641], "category": "Footnote", "text": "¹⁴ Public Financial Management Reform Program- Joint Supervision Mission Report-2019"}, {"bbox": [1044, 1641, 1130, 1664], "category": "Page-footer", "text": "Page 9/34"}]