Creating Fiscal Space for Social Sectors Development in Tanzania

Abstract

This paper discusses fiscal space creation and use in the context of development of social sectors in Tanzania. The paper observes that Tanzania is making good progress in creating and using her fiscal space. The priority being accorded to social sectors, especially in education and health is in the right direction. However, weaknesses in tax administration, imprudent tax exemptions, high debt service, excessive reliance on external funding, and high administrative expenditures dampen the robustness of the fiscal space. In this regard, the paper argues that there is a need for creating additional fiscal space through re-prioritization of spending, especially by reducing the size of government, scaling up mobilization of domestic revenue, including reducing or eliminating tax exemptions, broadening the tax base and reducing external debt to sustainable levels. In tandem, the available fiscal space has to be used more effectively and efficiently, and progressively increasing social sector’s funding to meet internationally agreed commitments and targets.

Key words: Fiscal space, social sectors’ development, education, and health