The Parastatal Sector in Tanzania: Fiscal Impact, 1984-1995

Abstract

The parastatal sector in Tanzania grew at a tremendous pace in the last three decades. An inventory of the sector done by the Parastatal sector Reform Commission in the early 1990s came up with a figure of 425 firms. The large number of firms is also reflected in the large proportion of gross capital formation and high share in waged - employment. The strength in numbers and level of investment has not been matched with a positive fiscal impact on the government sector. The parastatals have consumed a disproportionately huge portion of the government's financial resources. Apart from failing to generate surplus to be transferred to the government as dividends, it continued to receive subsidies and grants to extend is survival. Furthermore, it continued to enjoy high tax exemptions thus accentuating further the government budgetary problems. On the external sector, the parastatals have left the government with huge external debts that are yet to be settled. The study has basically established the magnitude of the net fiscal transfers from the government to the sector. The findings tend to provide a further justification on the action taken by the government to either privatize the solvent commercial firms or liquidate the insolvent ones or restructure and rationalize the quasi-government firms. It is concluded that the pace of closing the parastatals has to be expedited to avoid further depletion of the remaining resources.


African Journal of Finance and Management Vol.9(1) 2000: 59-69