Budgeting for the Digital Economy

The word “Digital” has been used to influence modern changes in different industries and businesses. Mining, education, infrastructure, energy, health, and agriculture have benefited from the digital transformation that aims at utilizing resources and increasing efficiency. Developed countries like those in the West and some in Asia, have been at the front line to actualize the digital transformation for their national economy.

The Digital economy is the economic activity that results from billions of everyday online connections among people, businesses, devices, data, and processes . Developed countries tend to have a stronger digital economy compared to developing countries, due to better access to digital infrastructure such as high-speed internet, mobile devices, and advanced telecommunications networks. All of these are essential for conducting digital transactions and participating in the digital economy. In addition, developed countries often have more favorable regulatory environments which are conducive for to the growth and development of digital businesses and industries. As a result of these factors, developed countries have more mature and diversified digital economies than developing countries.

With a real GDP growth rate of +5.3% in the year 2023, Tanzania is among the fastest growing economies in Africa and the world in general. The Tanzania’s economy even maintained a positive economic growth in 2022 of +2% while most of the economies were in recession due to the impact of the COVID-19 pandemic . The World Bank projects Tanzania’s GDP growth to reach 5.1% in 2023-about 2.2% per capita as investment increase and external terms of trade improve . However, Tanzania is only projected to reach its potential growth rate of 6% in 2025. Similarly, according to the International Monetary Fund (IMF), the real GDP growth of Tanzania in 2022 was 4.7% in 2022 and is projected to grow by 5.2% and 6.2% in 2023 and 2024 respectively.

Considering the Tanzania Budget for 2022/2023, The government proposed a total budget of TZS 41.48 trillion for the fiscal year 2022/23 , representing an increase of 13.1% from the previous year. This increase is mainly attributed to increased expenditure on infrastructure, social services, and economic development . The 2022/23 budget was geared towards economic recovery and development with a focus on sectors such as agriculture, tourism, and manufacturing. Additionally, the government proposed several measures to improve revenue collection, including the introduction of digital stamp for alcoholic beverages and a tax amnesty program for taxpayers with outstanding tax debts. Furthermore, the government aimed to reduce its reliance on borrowing and instead focusing on increasing domestic revenue collection to finance its activities.

Budgeting for the digital economy can make Tanzania’s budget work more efficiently by providing new tools and technologies that can improve the budgeting process in several ways including real-time monitoring and reporting, collaboration and communication between government departments and stakeholders, data analytics and modelling to help policymakers to analyze and model different budget scenarios, and improving public participation allowing citizens to provide feedback and suggestions on budget priorities and allocations.

Tanzania should budget for the digital economy by allocating funds towards the development and implementation of digital technologies and infrastructure. The digital economy is a crucial component of modern economic growth and development will facilitate and fasten infrastructure development, skills development, digital innovations, digital public services, development of cybersecurity to enhance data storage security and cyber defense systems.

Our Development Vision 2025 includes a comprehensive plan that seeks to transform Tanzania into a middle-income country with a high quality of life for all its citizens. It emphasizes the importance of sustained economic growth, good governance, education, health, infrastructure development, science, technology, innovation, and environmental sustainability in achieving Tanzania’s long-term goals . However, by leveraging the digital economy, Tanzania’s government can make its budgeting process more efficient and effective, promoting transparency, accountability, and better use of public funds to ensure that the vision is fully embraced.

Kelvin K. Zacharia is an Audit Associate at Deloitte Consulting Limited. The views expressed are his own and not necessarily those of Deloitte. He can be reachedat kzacharia@deloitte.co.tz