THE UNIVERSITY OF DODOMA

COLLEGE OF BUSINESS STUDIES AND ECONOMICS

DEPARTMENTS OF ACCOUNTING AND FINANCE

COURSE NAME: PUBLIC FINANCE AND TAXATION 1

COURSE CODE: AF 312
LECTURE: MR DAVID MWAKAPALA(CPA-T)
NATURE OF WORK: INDIVIDUAL ASSINGMENTS
DATE: 16.01.2024

NAME OF STUDENTS REGSTRATION NO: COURSE SIGNATURRE

RAPHAEL R. MHELELA T21-03-11254 BBA

QUESTIONS

1. Describe what does it mean by Public Budget.

2. Explain types of Public budget.
3. Describe processes of the Public budget.
4. What are the possible problems faces Public budget in LDCs.
5. Provide the suggestions on how to improve public budget processes in Tanzania.
The Public budget is a financial plan that shows the estimated income and expenses of the
government for a given time frame, usually a fiscal year. It acts as a guide for investing public
funds, allocating resources, and accomplishing social and economic objectives. There are public
budgets at the federal, state, and local levels of government.

Key terms related to public budgeting:

 Revenue- denotes the revenue or money that a government gets from several sources in
order to pay for its expenses and fulfil its debt. The amount of money the government
receives impacts the resources available for infrastructure development, public services,
and other governmental operations, making government income a critical component of
budgeting. Sources can be from taxation, fees and charges, grants and aids, borrowing,
and/or investment income.
 Expenditure- relates to how much money the government sets aside and spends on
different services, initiatives, and events. It stands for the monetary resources allocated to
addressing the objectives and needs listed in the budget. The budgetary process depends
heavily on public spending, which also has a big impact on how the economy and society
are shaped.
 Deficit- happens when a government's spending exceeds its income for a given time
frame, usually a fiscal year. In other words, the government is spending more money than
it is bringing in. The difference between the government's revenue and outlays is known
as the deficit.
 Public debt- is used to describe the entire amount of debt a government has, both to its
own people and to creditors abroad. The total of previous borrowings made to finance
certain projects or make up budget deficits is what it is. Its role in public budget is to
finance any deficits when expenditure exceeds revenue, to finance long term capital
projects such infrastructure projects, education, or healthcare.

With the above being said, the following are types of public budgets

1. Balanced Budget
A balanced government budget occurs when forecasted revenues match projected
expenditures, typically derived from taxes and other sources. Traditionally seen as a
 check on wasteful spending, proponents like Adam Smith endorsed its economic
neutrality. Modern economists, however, argue that during economic downturns,
borrowing for public projects can stimulate demand, create jobs, and foster investment.
2. Surplus Budget
A surplus budget occurs when government receipts exceed expenditures, reducing public
debt or increasing savings. This surplus can help counter inflation by decreasing effective
demand through measures like tax increases or reduced government spending. However,
using an excess budget in non-inflationary conditions may lead to low economic activity
and unemployment.
3. Deficit Budget
A deficit budget occurs when projected government revenue is less than estimated
spending, a common scenario in modern economies. It increases government obligations
and depletes savings. During economic downturns, deficit budgets may be used to
stimulate activity, though they can lead to inflation, corporate losses, and unemployment.
Governments resort to deficit financing, taking on debt to fund public projects, boosting
employment and effective demand. Nations generally strive for balanced budgets to avoid
inflation, unemployment, and loss, even if achieving a surplus is challenging.

Processes of the Public Budget

the budget process is a cyclical process that is ongoing throughout the year. It is comprised of
stages which feed into one another in a circular process. The following are the processes
explained:

1. Budget Formulation
The budget cycle commences annually in November7 with consultations on the
macroeconomic framework, which entails projecting the size of the economy and
anticipated revenues to establish the budget frame. The Ministry of Finance and
Economic Affairs (MOFEA) collaborates with the Tanzanian Revenue Authority (TRA)
to forecast tax revenues. It involves several key steps:
 Formulation of Budget Policy and Resource Projections: The government projects
the amount of resources available for the budget by examining tax receipts,
 spending trends, and economic developments. To do this, accurate forecasts must
be made utilizing historical data and economic models.
 The Ministry of Finance issues guidelines to ministries, setting budget ceilings,
program priorities, and reporting requirements. Proposals must include
justifications and analyses, promoting evidence-based resource allocation.
 The government estimates revenues from taxes and other sources, analyzing
trends, economic forecasts, and potential policy changes. Ministries and agencies
estimate program costs, including personnel, operations, procurement, and
infrastructure investments. Accurate estimates are vital for effective budget
formulation, preventing fiscal imbalances and maintaining public trust.
 Cabinet approval of budget estimates: the Cabinet reviews the final budget
proposals and makes any necessary adjustments. Once approved by the Cabinet,
the budget estimates are submitted to the legislature for formal consideration and
approval.
2. Debating and Approval
The budget debate and approval process mirror the general budgeting process described
earlier. It begins with a public address on macroeconomic performance, followed by the
Finance Minister presenting the proposed budget to Parliament. Government ministries
draft their budgets aligned with priorities, overseen by the Ministry of Finance and
Planning. The President submits the budget proposal to Parliament, encompassing
revenue estimates, spending plans, and the overall financial strategy. Legislative
committees, notably the Budget Committee, scrutinize the proposal, holding hearings and
suggesting changes. Parliamentarians discuss various aspects, proposing adjustments to
better represent constituents' interests. After parliamentary approval, the budget receives
final authorization from the President or relevant executive authorities. Ministries
implement the budget adhering to approved priorities and allocations.
3. Budget Execution
After budget authorization, Tanzania ensures effective, transparent, and compliant use of
public funds during the crucial budget execution stage. Ministries, departments, and
agencies (MDAs) receive budgetary authorizations and allotments from the Ministry of
Finance and Planning post-Parliament approval. Disbursement to MDAs aligns with the
 approved budget, subject to revenue availability and compliance with financial
regulations. MDAs engage in procurement procedures to obtain necessary supplies, labor,
and materials, adhering to public procurement guidelines. Treasury and monitoring
bodies oversee spending adherence, generating regular financial reports for monitoring.
Internal controls within MDAs prevent waste and fraud, while regular audits by internal
and external auditors ensure financial accountability. The Treasury manages cash flow,
arranging financial transfers based on budget demands. Budget modifications may occur
due to unforeseen events, requiring parliamentary approval for significant changes.
MDAs submit periodic financial and performance reports to the Ministry of Finance and
Planning, ensuring responsible use of public funds. The fiscal year concludes with the
government closing the budget, compiling financial statements, and reconciling accounts.
Unused funds may be carried forward or refunded with proper justification.
4. Oversight and Control
The Tanzanian public budget process relies on robust oversight and control for
accountability and transparency. The Tanzanian Parliament, including the Budget
Committee, ensures strict oversight by scrutinizing budget proposals and evaluating
expenditures. The Public Accounts Committee (PAC) investigates financial abnormalities
and holds officials accountable, while the Auditor General's Office conducts audits for
compliance. Internal controls in government ministries enhance budget management, and
public participation, civil society involvement, and donor fund control contribute to
accountability. Continuous scrutiny of budget revisions, comprehensive reports, and
accountability mechanisms strengthen Tanzania's budgetary framework for responsible
financial management and national development goals.

Possible problems faced by Public Budget in Least Developed Countries(LDCs)

Least Developed Countries (LDCs) face several challenges in earning revenue, including a
limited tax base, a substantial informal economy, poor tax administration, and a dependency on
foreign help. Problems such as resource mismanagement, tax evasion, and exposure to
international economic changes exacerbate the dilemma. To tackle this, significant
administrative and tax reforms as well as initiatives to build institutional capacity are required.
International collaboration and support are also necessary for LDCs to establish frameworks for
sustainable revenue mobilization.

Possible suggestions on how to improve Public budget processes in Tanzania

 Enhancing Revenue Mobilization- To boost revenue collection, diversify the tax base
beyond key commodities, including the informal economy and real estate. Enhance
registration processes and adopt digitalization for efficient tracking. Implement stricter
fines, invest in transaction monitoring technology, and improve administration to curb tax
evasion. Encourage formal financial service usage for financial inclusion, streamlining
tax collection and fostering economic growth. The establishment of a robust revenue
mobilization framework hinges on these initiatives.
 Optimizing Expenditure Management- To optimize resource allocation, it is crucial to
prioritize needs through comprehensive assessments, directing resources towards
essential areas such as education, healthcare, and infrastructure. Implementing rigorous
cost-benefit analyses for proposed projects ensures the efficient utilization of resources.
To enhance transparency and accountability, make budget documents accessible, involve
the public in consultations, and strengthen oversight mechanisms as a deterrent against
corruption.
 Investing in Technology and Capacity building- Upgrading budget systems through
digital platforms is crucial for enhancing transparency and efficiency in planning,
tracking, and reporting. Capacity building programs should be instituted to train
government officials in the best practices of public financial management. To foster
accountability and advocate for budget reforms, collaboration with NGOs and citizen
groups for monitoring and awareness campaigns is essential.
 REFERENCE

Boardman, A. E., Greenberg, D. H., Vining, A. R., & Weimer, D. L. (2017). Cost-benefit
analysis for public projects (5th ed.). https://www.cambridge.org/9781108448284

United Nations Development Programme. (2020). Financial Management for Sustainable health
policies and programmes. https://undp-capacitydevelopmentforhealth.org/category/health-
system-components/public-financial-management/overview-public-financial-management/

World Bank. (2019). Property taxation in Sub-Saharan Africa: A key to fiscal sustainability
and inclusive growth. Bristol University Press. [Link to book chapter:
https://bristoluniversitypressdigital.com/view/journals/jpfpc/aop/article-10.1332-
251569121X16817386486785/article-10.1332-251569121X16817386486785.xml]

World Bank. (2019). Property taxation in Sub-Saharan Africa: A key to fiscal sustainability and
inclusive growth. International Bank for Reconstruction and Development/World Bank.

HakiElimu & Policy Forum, Understanding the Budget Process in Tanzania,

https://www.policyforum-tz.org/sites/default/files/202103/Understanding%20the%20Budget
%20Process%20in%20Tanzania%20%20A%20CSO%20Guide.pdf