Zanzibar unveils strategic budget for 2024/25 financial year

Unguja. Zanzibar’s government has unveiled its 2024/25 budget, outlining five key priorities amidst a projected economic growth of 7.2 percent in 2024, exceeding the 7.1 percent achieved in 2023.

Presenting the government’s budget speech on June 13, 2024, the minister for Finance and Planning, Dr Saada Mkuya, stated that government revenue for 2024/25 is estimated to reach Sh5.182 trillion, an increase of Sh2.342 trillion, which is equivalent to 54.81 percent, compared to the 2023/24 budget of Sh2.840 trillion.

Dr Saada said this growth expectation is due to a projected 30 percent increase in tourists visiting Zanzibar, from 638,498 tourists in 2023 to 829,929 in 2024 for international visitors, and an increase in domestic tourists by 64.5 percent, from 164,084 tourists in 2023 to 270,000.

Additionally, the ongoing implementation of major strategic development projects and infrastructure construction projects will contribute to economic growth and social services, including health, education, and clean and safe water infrastructure.

“For the fiscal year 2024/25, the level of dependency on the government budget is estimated to reach 6.3 percent, based on the expectation of receiving Sh322.95 billion in aid from development partners,” she said.

She added that for the fiscal year 2024/25, the government proposes to provide Value Added Tax (VAT) relief for the importation or distribution of equipment used by people with special needs to reduce the cost of purchasing such equipment, including wheelchairs, prosthetics, visual and reading aids, white canes, and braille machines.

Furthermore, she said the long-standing imposition of VAT on the distribution of boats has increased investment costs in the fishing sector in the country. “Therefore, the government proposes to provide VAT relief for the distribution of locally manufactured boats,” she said.

She noted that the Zanzibar Revenue Authority (ZRA), in collaboration with the Tanzania Revenue Authority (TRA), has begun registering and incorporating into the VAT system companies providing services on social networks. She said these companies are registered in a special tax system capable of recognising transactions made in both parts of the Union. Currently, this system charges an 18 percent tax rate, while Zanzibar’s VAT system charges 15 percent.

She proposed an 18 percent VAT rate for companies providing services on social networks to eliminate tax collection challenges and protect government revenue. This move is expected to increase government revenue by Sh3.75 billion.

As with online business companies, the government proposes to align the VAT rate for insurance services in the country to 18 percent instead of the current 15 percent. “This step is expected to increase revenue by Sh3.57 billion,” she said.

To encourage the use of gas by citizens and reduce the adverse effects of climate change, it is proposed to exempt excise duty on gas imports.

The government proposes an excise duty rate of Sh300 per kilogramme for imported chicken or fish to encourage investment in the production of these products, which will increase employment and enhance the competitiveness of the local market.

This measure is expected to increase government revenue by Sh3 billion.

Dr Saada said the government proposes to increase the excise duty rate on alcoholic beverages, including beer. The excise duty on wine will increase from Sh2,466 to Sh4,386 per litre, and the excise duty on other alcoholic beverages will rise from 35 percent to 70 percent. This step will increase government revenue by Sh1 billion.

Recognising the growing trend of shisha and electronic cigarette consumption, particularly among youth, the government proposes increasing the excise duty from 35 percent to 120 percent.

This measure aims to curb consumption, protect public health, and generate additional revenue for the government.

Public opinions

While some experts commend the government’s focus on boosting revenue, others express concerns about the lack of emphasis on identifying new revenue sources and the potential impact of increased taxes on the cost of living.

Businesswoman Khadija Yussuf praised the increase of Sh300 per kilogramme for imported chicken and fish, saying this step will help local traders expand their business scope.

An economist, Mr Said Ali Issa, said the budget focuses on increasing taxes but does not show revenue sources.

“I have heard the budget, but it is the same system as always; we do not see new sources; we only see increased taxes on certain products, so it continues to make us dependent on external budgets,” he said.

Mr Muhidini Mwinyishekha said many citizens wish to see the cost of living go down, so having a budget that does not target them will be challenging.