Home   |  Budget Plans   |  LGA Finances   |  Sectors & Performance   |  Documents  
  About LOGIN   |  About LGFWG   |  LGA Finance System   |  Contact / Disclaimer  
   

The LGA Finance System in Tanzania:
An Overview

Tanzania's local government authorities play an important role in the delivery of public services in Tanzania (*). Local government authorities collect roughly 5 percent of all public revenues and are responsible for about 20 percent of public spending. This means that one out of every five shillings spent in the public sector is spent at the local government level.

For the purpose of this brief overview, the local government finance system in Tanzania Mainland can be divided into the two sides of the local government’s budget, namely local resource inflows (such as intergovernmental transfers and local government revenues) as well as local resource outflows (local government expenditures). A more comprehensive review of Tanzania's local government finance system is provided in the annual Local Government Fiscal Reviews, which are available in the document section on this website.

Local government expenditure responsibilities

Local Government Authorities are responsible for delivering three types of public services in Tanzania Mainland: (1) concurrent functions; (2) exclusive local functions; and (3) delegated functions. Concurrent expenditure responsibilities are public services which are funded and regulated by the central government, but for which the provision is devolved to the local government level. These 'concurrent' public services include the five grant-supported sectors, notably primary education; local health services; agriculture extension and livestock; water supply; and local road maintenance. Approximately three-quarters of local government spending in Tanzania is for concurrent functions; the remainder is spent on exclusive local functions (such as refuse collection and other such local services) and local government administration.

Local government expenditures can also be divided into recurrent expenditures (expenditures that recur continually or very frequently, such as salary expenditures or other recurring operational costs) and development expenditures (non-recurrent expenditures, such as spending on capital infrastructure). Recurrent public expenditures in Tanzania are commonly broken down further into wages and wage-related expenditures (Personal Emoluments, or PE) and non-wage expenditure (Other Charges, or OC). In Mainland Tanzania, roughly two-thirds of local spending is for recurrent purposes; of this amount, roughly two-thirds is spend on Personal Emoluments.

Local government financial resources

Local government authorities in Tanzania fund their expenditures from three main sources, notably intergovernmental transfers, own source local revenues, and local government borrowing. Intergovernmental transfers fund roughly 90 percent of all local government spending, while local governments' own source revenues (including local rates and other locally collected revenue sources) account for approximately 10 percent of local financial resources. Local borrowing only accounts for approximately 0.1 percent of local spending.

Intergovernmental transfers can be defined as funding received from other levels of government (typically, the central government). These transfers include recurrent sectoral block grants, sectoral basket funds and ministerial subventions, as well as local capital development grants. Recurrent block grants account for about two-thirds of all intergovernmental transfers. Recurrent block grants and local capital development grants are supposed to be formula-based and disbursed directly from the Treasury to LGAs, whereas most basket funds and subventions are more discretionary in nature and disbursed indirectly to LGAs by line ministries.

Central-local fiscal relations

Despite the importance of the local government finance system in Tanzania, no single central government agency or institution has a comprehensive mandate over the management of local government fiscal affairs. Instead, different central government ministries and agencies have responsibilities for different aspects of the local government finance system.

On one hand, in accordance with the Public Finance Act (2001), the Minister of Finance is broadly responsible for co-ordinating inter-governmental fiscal relations. On the other hand, according to the Local Government Finances Act (1982), the Prime Minister's Office – Regional Administration and Local Government (PMO-RALG) is the responsible for 'ensuring the proper management of the finance of the local government authorities'. PMO-RALG ensures proper local financial management through the issuance of local budget guidelines, procedures, and instructions on the development of the local budget, as well as through the provision of technical support and capacity building. Likewise, PMO-RALG monitors local expenditures and revenue collections and audits local government budgets to assure that local budgets are implemented or executed as planned.

In addition to the Ministry of Finance and PMO-RALG, the Ministry of Planning and Economic Empowerment (MPEE), the President's Office - Public Service Management (PO-PSM), as well as key line ministries are important stakeholders in the local government finance system. As such, these stakeholders are all represented on the inter-ministerial Local Government Finance Working Group.

Note: This website relates exclusively to Tanzania Mainland. Since local government is not a union affair, Zanzibar has its own system of local governance.