Journal Articles

Permanent URI for this collectionhttp://dspace.ifm.ac.tz/handle/123456789/95

Browse

Now showing 1 - 20 of 29

Managing performance or legitimacy? A case study of the Tanzanian Local Government Authorities
(Emerald Publishing Group, 2015) Abeid, Francis Gaspar; Mkasiwa, Tausi Ally
Purpose The purpose of this paper is to investigate performance measurement practices in the Tanzanian Local Government Authorities (LGAs). It seeks to understand the performance measurement practices in the context of new public management (NPM) (Hood, 1991, 1995). Specifically, the paper focuses on the annual performance assessment (the local government development grant system), which operated in the Tanzanian LGAs as a base for accessing grants from the central government. Design/methodology/approach The study executed a grounded theory strategy for data collection and analysis. Fieldwork was undertaken in three Tanzanian LGAs. Findings The findings revealed how performance measurement practices were involved in the process of managing legitimacy, and consequently, in the acquisition of grants from the central government. Dialogue and learning about the performance measurement exercise and the production and manipulation of evidence were the two strategies employed by LGAs in the management of legitimacy. Practical implications In practice, efficiency in organizations may be achieved through the appropriate design of systems, and by understanding, and addressing problems which emerge during their implementation. Learning is a significant strategy used by actors, and this needs to be taken into consideration by reformers when designing and implementing reforms. Originality/value The paper contributes to existing research by providing a framework for managing legitimacy. The framework supports and extends Oliver’s (1991) typology of strategic responses to institutional processes and Suchman (1995) legitimation strategies. It identifies dialogue and learning as other forms of significant strategy in actors responses to institutional pressures. The study also provides additional evidence of the responses to the accounting changes and the NPM reforms.
New public management and budgeting practices in Tanzanian Central Government: “Struggling for conformance”
(Emerald Group Publishing Limited, 2016) Andrew, Goddard; Tausi, Ally Mkasiwa
Purpose The purpose of this paper is to investigate the budgeting practices in the Tanzanian Central Government. New budgeting reforms were introduced following exhortations from the bodies such as the UN, the World Bank and the IMF and reflect the new public management (NPM). Design/methodology/approach A grounded theory methodology was used. This methodology is inductive, allowing phenomena to emerge from the participants rather than from prior theory. This ensures both relevance and depth of understanding. Findings The principal research findings from the data concern the central phenomenon of “struggling for conformance”. Tanzanian Central Government adopted innovations in order to ensure donor funding by demonstrating its ability to implement imposed budgetary changes. Organizational actors were committed to these reforms through necessity and struggled to implement them, rather than more overtly resisting them. Research limitations/implications The research is subject to the usual limitations of case study, inductive research. Practical implications This research has several implications for policy-makers of NPM and budgetary reforms. These include the recognition that the establishment of the rules and regulations alone is not adequate for the successful implementation of budgetary and NPM reforms and should involve a comprehensive view of the nature of the internal and external environment. Originality/value There are few empirical papers of NPM accounting practices being implemented in the public sector of developing countries and none at all based in Tanzania. The paper identifies the existence of struggling to conform to reforms rather than resistance identified in prior research. Keywords
The two publics and institutional theory – A study of public sector accounting in Tanzania
(Elsevier, 2015) Andrew, Goddard; Mussa, Assad; John, Malagila; Tausi A., Mkasiwa
This paper summarises, and attempts to theorise, the findings of a series of research projects investigating accounting practices across the public sector in Tanzania. Data was collected principally by interviewing participants in central and local government and in a number of NGO's. Analysis was undertaken using grounded theory methods, alongside a theoretical framework. This framework comprised the work of the post-colonial theorist Ekeh, 1975, Ekeh, 1994a, Ekeh, 1994b and the concepts of legitimacy, loose coupling and isomorphism from institutional theory. Legitimacy and loose coupling were central concerns in all the institutions and played a significant role in understanding their accounting practices. However, there were significant differences between the settings’ responses. These can be partly explained as responses to different isomorphistic pressures. Differences between institutions can be further explained using Ekeh's concepts of the primordial and the civic publics. Gaming and corruption were evident in central government, associated more with the civic public. Accountability and a sense of moral responsibility appeared to be stronger in NGOs, which were more closely associated with the primordial public. In contrast to the central government, which was associated more with the civic public, accounting was extremely problematic resulting in many dysfunctional practices. However gaming and corruption were most evident in local government where participants were subject to a conflict between the two publics’ moralities.
Exploring the value of factoring as a finance option for small enterprises in emerging economies: A Tanzanian case study
(Entrepreneurship and Innovation, 2006) Satta, Tadeo Andrew
Using Tanzania as a case study, this paper explores the value of factoring as a finance option for small enterprises in emerging economies. Based on identified challenges, the paper develops a policy framework that could facilitate the growth of the factoring industry in Tanzania. Within the boundaries of the developed framework, the paper concludes that there is a need for the Tanzanian government to create a favourable legal and regulatory environment, foster economic growth, support the formation of factoring associations, strengthen credit information infrastructure, and create an overall favourable tax structure that is supportive of the factoring industry. Furthermore, the paper argues that the ongoing global growth in factoring provides a unique opportunity for fostering the growth of factoring finance in emerging economies through cross-border factoring.
On understanding the implication of pension debt on fiscal policy in Tanzania: Is there any room for improving the adequacy of pension benefits?
(Cogent Economics & Finance, 2020-11-01) Lotto, Josephat; Isaka, Irene
This paper aims at understanding the implication of pension debt on fiscal policy in Tanzania. The paper employed a modified projected benefit obligation (PBO) approach for a period between 2010 and 2018. The results of the paper indicate a mismatch between benefit payments and members’ contributions, in that outflows are found to exceed inflows for a large part of the examined period, which tends to imply that pensions adequacy is questionable, and that the system cannot be sustained for a longer period if no rescue is put in place immediately. Further, drawing from the computed life expectancy of pensioners, it is indicative that the size of the retirement age cohort will continue to enlarge over time; which would result in increasing pension obligations. Since increased pension expenditure would not be fully covered from the existing pension assets, the Government as a guarantor would be required to cover the matured pension obligations through its annual fiscal budget. Unfortunately, looking at the current National Debt sustainability report pension debt is not part of the proposed national debt. Following these findings, and since neither increasing the contribution rate nor the retirement age may not be sustainable options, the reduction of accrual rate is the most suitable option the government is recommended to implement so as to rescue the current situation. However, in a long run, the paper recommends the government to undertake a systemic pension reform, which would change the entire pension system from a defined benefits scheme to a defined contributions scheme.
Determinants of Financial Performance of Tanzanian Banks
(The African Journal of Finance and Management, 2016) Lotto, Josephat; Kakozi, Ezra
This paper examines factors that affect bank performances in Tanzania for the period of 2006 to 2013. The empirical results suggest that high net interest margins (NIM) and return on bank assets (ROA) are significantly associated with larger banks that hold a relatively high amount of capital. However, such banks have lower liquidity levels and poor management quality measured by how efficiently they reduce operating expenses. This calls for banks owners to review the performance of banks management in relation to their incentive packages so as to match management remunerations with their contribution towards bank performance. No impact was found of macroeconomic variables measured by GDP growth rate and inflation on bank interest margin and profitability. Also the findings show that micro-financial factors, measured by financial structure and market concentration, are worth less to banks interest margin and profitability in Tanzania. As a matter of policy implications at the bank level, the improvement of the profitability of Tanzanian banks need to be conducted by a reinforcement of the capitalization through national regulation programs, and by reducing the proportion of non-interest bearing assets to the benefit of bank loans.
Credit availability for Tanzania’s small businesses: a gender perspective
(Business Management Review, 2016) Lotto, Josephat
The purpose of this study was to examine whether firm and owners’ characteristics are driven by gender and whether gender is attributable to credit accessibility in small and locally-owned firms in Tanzania. The study uses data collected from 400 small businesses through questionnaires and interviews and analyses it using univariate and multivariate statistical tools The findings show that female owners are less educated, have less work experiences and their firms are relatively smaller and younger than in the case for males. Moreover, female-owned firms were more likely to be organised as sole proprietorship or partnerships. Also the findings indicate that female-owned firms are more likely to have a need for credit during the three years prior to the survey. Nevertheless, when it comes to applying for credit, male owners were more likely to apply for credit than their counterpart female owners. Surprisingly, the credit applications of female-owned firms were more likely to be approved than those from the male-owned firms. The results suggest that policy-makers and regulators should not use the “one-size-fits all” approach when setting policies for the growth and survival of small firms due to the differences in firm and owners’ characteristics with regard to credit accessibility between male and female-owned firms. Furthermore, the results imply that when formulating policies for credit accessibility the issues of size and gender are pertinent. On the whole, the study contributes to the extensive literature on gender and entrepreneurship for a specific Tanzanian context.
Towards the growth of domestic credit in Tanzania: Does foreign capital flow really matter?
(African Journal of Business Management, 2017-04-14) Lotto, Josephat
This study aims to examine the relationship between international capital flows, and domestic credit expansion in Tanzania during the period between 2004 and 2012. The data used in this study is extracted from World Bank database except credit regulation quality index (CRINDEX), which is taken from the Fraser Institute Index of Economic Freedom. The study disintegrated the variable capital flow into debt and equity flows, and examined the relationship between the two sub-variables and the domestic credit. The findings of this study reveal that the general current account balance is not influential enough to determine the empirical relationship between international capital flows and domestic credit expansion; rather the component of international capital flow, net debt flow, is reported to have more significant relationship with domestic credit. The perceptible empirical relationship reported in this study between net debts flows and domestic credit development brings forward the need for analytical models which can explain this relationship. Particularly, it is imperative to gain a better understanding of both the positive and negative relationships between international debt flows and domestic credit growth. In essence due to the current East African Community Common Market Agreement, the financial integration and free mobility of capital among country members will have a serious effect on productive allocation of bank credit via the rise of inflows into the non-banking sector which crowd out domestic loans to non-financial business sector. This twist in credit allocation may result into real estate booms, financial vulnerability, and poor economic growth. Therefore, creating more investment opportunities could significantly alleviate the adverse effects of capital inflows.
The impact of owner's identity on corporate capital structure
(Business Management Review, 2016) Lotto, Josephat
This paper examines how the identity of corporate owners affects corporate leverage in the UK. Using data from a sample of 643 listed UK firms, the results show that family-controlled firms have higher debt ratios than companies controlled by financial institutions. The implication is that family-controlled companies prefer debt to equity in their capital structure due to either a control-enhancing mechanism and/or firm’s protection from take-over threats. The paper, further confirms that corporate control contestability has also a positive impact on debt ratio. In essence, a smaller value of control contestability signifies more equal distribution of the voting power between the two largest shareholders. This finding is in line with the monitoring hypothesis of the second largest shareholder, hence suggesting that the involvement of the second largest shareholder in monitoring the activities of the largest shareholder reduces the second-order agency costs, the agency conflict between minority and majority shareholders.
The Interrelationship between Corporate Ownership Structure and Leverage
(ARPN Journal of Science and Technology, 2013-12-08) Lotto, Josephat
Previous studies on the agency model of the firm extensively recognize the managerial ownership and external debt as important tools in mitigating agency conflicts and enhancing firm value. They also find that increase in the external monitors, for example the institutional investors, can actually play a useful role in limiting agency problems in the firm. This paper, using 1351 companies from UK between 2004 and 2008 explores the impact of institutional holdings on managerial ownership and debt policy in an integrated framework by using a simultaneous equations estimation procedure (2SLS). The findings show that there is a significant negative relationship between institutional ownership and corporate leverage. This escalates the agency costs of debt because debt holders increase the rate of borrowing when they realize that institutional ownership increases in such a way as to jeopardize their wealth because using the control power they accumulate from their ownership, institutional shareholders may engage in riskier projects.In addition, corporate leverage is also governed by managerial ownership and revealed a statistically significant negative relationship. At the same time, debt appears as a key governance variable as it moderates private benefits extraction from corporate free cash flows as reported in the results of this paper that companies with higher average debt ratios accumulate less free cash flows as opposed to companies with lower average debt ratios.
Examining the impact of information technology on internal auditing effectiveness in Tanzanian organizations
(Time Journals of Social Sciences, 2014-11-06) Lotto, Josephat
This research assessed the impact of Information technology on internal auditing in Tanzanian organizations. The study was exploratory and descriptive in nature and it was restricted to the Dar es Salaam area, which is the commercial center of Tanzania. As such it represents IT growth of both government and a business organizations in the country. Primary data was collected through questionnaires. The central finding in this research work reveal that the internal audit profession in Tanzania lags behind in effective use of IT to support their duties. From the discussion of the findings it was clearly observed that several factors, which contributed to the hindrance of internal auditors’ use of technology, are interwoven. As such, it was clear that the lack of top management support seemed to be a critical problem because it is from this factor that other factors were brought into existence. For instance, inadequate training programs, internal auditors’ involvement in information systems development, and poor allocation of budget to the internal audit department were the result of lack of top management support.
Towards Monitoring the Selfish Behaviours of Corporate Managers: Does Institutional Foreign Ownership Matter?
(International Journal of Economics, Finance and Management, 2013-11-07) Lotto, Josephat
This paper investigates the monitoring effect of institutional ownership on managerial behaviors more particularly on the corporate leverage decision of corporations listed in London Stock Exchange. Previous literature on the agency model extensively recognizes that the use of both managerial ownership and debt play a very crucial role in limiting agency conflict and improving firm value. The literature further appreciates the role of institutional intervention in limiting the possibility of managerial selfish behavior which might temper with the value of the firm. However, literature recognizes that foreign institutional interventions have more positive impact on the agency conflict reduction process than their domestic counterpart. Using a sample of 300 UK large non-financial companies in FTSE All share Index represented by FTSE 350 from 2004-2009, this study investigates the usefulness of these agency-conflict-reducing mechanisms studying the inter-relationships among them by utilizing simultaneous systems of estimation procedure. The results of the study show that the predicted inverse relationship between debt and managerial stock ownership is more statistically significant for domestic owned firms than their foreign counterparts. This implies that foreign controlled firms are believed to have higher level of international activities which increases the agency cost of debt. It can therefore be emphasized that the use of more debt is more risky for foreign-controlled firms than for domestic owned firms. This is why it is more likely to find domestic –controlled firms having higher debt levels than foreign-controlled firms.
Exploring human capital: Discrimination factors and group-specific performance in the football industry
(African Journal of Business Management, 2017) Trequattrini, Raffaele; Lardo, Alessandra; Ricci, Federica; Lombardi, Rosa
The aim of the study is to investigate whether discrimination factors exist within professional football clubs, concerning the management of their human capital, by analyzing the correlation between the footballers’ wages and their performance. An analysis was conducted to show that discrimination, based both on nationality and race, can affect the strategies adopted by football club managers and in the professional footballer labour market, where players are considered to be the human capital of football enterprises. The research framework consists of an analysis of the existing literature on discrimination in sports and of a quantitative analysis based on an exploratory approach, where the wage differences among Italian Serie A league footballers are compared to the performance of each group of players (organized by race or nationality). The results of the analysis of data for all Italian Serie A clubs show that discrimination (in pay) exists against Italian and white players. In contrast, when small and big clubs are considered separately, the findings relating to small clubs highlight that foreign and black players face such discrimination. The results suggest that managers of professional football clubs apply a discrimination strategy. In addition, the results provide practical implications on the types of discrimination errors that are committed by the management of big and small football clubs. Big clubs tend to overrate the contributions of foreign and/or black players compared to those of Italian and white players, while small clubs tend to overrate the contributions of Italian and white players compared to those of foreign and black players. To reduce discrimination, clubs have to correlate how much players are paid with their performance. Further research is recommended to identify the impact of wage inequality on the football labour market and on professional team management.
Does bank capital regulation affect bank value?
(African Journal of Business Management, 2017-05-08) Lotto, Josephat
The aim of this study was to examine the relationship between capital adequacy and the bank profitability measured by returns on equity (ROE) for Tanzanian large commercial banks during the period between 2009 and 2014. The positive relationship between bank capital and performance may also be explained using monitoring-based theory. The monitoring-based theory suggests that higher bank capitals encourage serious scrutiny and monitoring of borrowers to avoid default risk. The monitoring of borrowers indirectly improves the probability of bank’s survival by eventually increasing surplus generated through the healthier relationship between borrowers and banks, hence, bank performance Furthermore, the study found a significantly positive relationship between bank size and bank returns on equity. This is consistent with a familiar explanation that larger banks accumulate large assets which generate relatively more income and eventually increases the bank’s profitability. The study also reveals a negative and significant relationship between non-performing loans and bank profitability. This relationship shows that accumulation of Non-Performing Loans invites vulnerability to default risk which consequently causes banks’ failure to sustain or increase their investment efficiency. Similarly, lower NPLs are associated with drop in deposits rate which eventually impacts on banks’ operations and profitability. Consequently, the study recommends the banks’ capital regulation to be anchored on a sound system of bank monitoring and the Bank of Tanzania should swiftly and strictly enforce the compliance of the bank capital requirements and review the minimum capital requirement of deposit money regularly so as to maintain the optimal capital level in an attempt to improving bank profits level. The study also encourages bank capitalization to improve performance. More specifically, banks are encouraged to have a habit of retaining more earnings instead of distributing such large sums as bonuses in order to increase the banks’ capital base.
The Role of Agency Banking in Promoting Financial Inclusion: Descriptive Analytical Evidence from Tanzania
(European Journal of Business and Management, 2016) Lotto, Josephat
The objective of this paper was to assess the leverage provided by agency banking in promoting the financial inclusion in Tanzania. The study was descriptive in nature and utilized primary data collected from bank agents’ outlets in Dar es Salaam. Overall, the study was very important as it tells how financial inclusion in Tanzania has been accelerated by use of agency banking practices.The analytical results of the study show that agency banking has helped to simplify banking service by reducing distance for customers to reach service point. The study has also found that liquidity problem is not a big concern as the agents’ operation are properly scrutinized and monitored by the parent banks to avoid cash shortage crisis and minimizes security issues. It is also found in the study that agency banking costs are reported to be lower compared to those of traditional banking services. It is therefore concluded, from this study, that greater geographical coverage brought about by agency banking is a stronger promoter of financial inclusion because services follow people closer to where they leave and hence reduce the travelling costs and other hassles involved like time wasted in long queues at bank branches. Agency banking model is therefore a success as regards to deepening financial inclusion. However, because the concept of agency banking is now widespread banks’ practice to risk management should be emphasized so as to avoid entering into agency contract with bank agents whose credentials are doubtful. In addition to that efforts have to be made to increase the number of outlets providing bank agency services so as to achieve a greater geographical coverage. Apart from that all commercial banks offering agency banking services should limit operational costs on bank agents in order to avoid the increase in cost of services to customers. Concerning security, emphasis should be put on all agency banking outlets and more frequent monitoring to be carried out as discussed in the previous section. Lastly, financial education should be provided to help customers understanding the operations of agents and assure the security of their money.
Evaluation of Financial Performance of Foreign and Domestic Banks Operating in Tanzania
(European Journal of Business and Management, 2016) Lotto, Josephat
This study aimed at conducting a comparative analysis of the financial performance of foreign owned banks and domestic banks operating in Tanzanian banking sector for the period between 2009-2016 using DuPont model and the paired-sample t-test analysis. The model depicts that return on equity of banks is affected by three parameters namely; Profit margin (PM), Assets utilization AU and Equity Multiplier (EM). The results of the analysis show that both returns on equity (ROE) and return on assets (ROA) of foreign banks are higher than those of the domestic banks. The higher ratios of ROA and ROE observed in foreign banks may have been caused by reported higher interest margin (PM) and Equity Multiplier (EM) signifying a better cost management and use of large financial leverage by foreign banks than domestic banks.Based on the results portrayed by this study we may conclude that foreign banks in Tanzania not only have higher return on assets ratio (ROA), but also higher return on equity (ROE) ratio due to a larger use of financial leverage rather than the profitable use of assets. This implies that, compared to domestic banks, foreign banks manage their capital more efficiently than their domestic counterparts
Efficiency of Capital Adequacy Requirements in Reducing Risk-Taking Behavior of Tanzanian Commercial Banks
(Research Journal of Finance and Accounting, 2016) Lotto, Josephat
This paper intended to examine the relationship between capital and risk of Tanzanian commercial banks during the period 2009-2014 using the Two Stage Least Square (2SLS) method of estimation. The empirical findings reveal a direct relationship between capital ratios and bank risk-taking behavior implying that as the level of banks’ risk increases bank managers tend to increase the bank capital ratios so as to prevent banks from violating the regulatory minimum capital requirements.The study also found a positive relationship between regulatory pressure and capital. This positive impact shows that Tanzanians large commercial banks approaching the minimum capital requirements are inclined to improve their capital base in order to circumvent the penalties resulted from infringing the legal requirements of keeping minimum capital ratio.The study further shows a positive and significant association between profitability and bank capital implying that that as the profitability of banks increases they retain more earnings to raise the level of their capital. Hence, it is concluded that improvement in profitability helps banks to increase their capital ratios and prevent them from penalty associated with failure to meet minimum capital requirements.
On an ongoing corporate dividend dialogue: Do external influences also matter in dividend decision?
(Cogent Business & Management, 2020-02-03) Lotto, Josephat
Dividend policy is among the most debated topics in corporate Finance. Determinants of corporate dividend, most commonly firm specific determinants, have attracted much attention of the researchers. This paper mainly investigates the external determinants of dividend policy in Tanzania. The study also checks the influence of firm-specific factors that determine dividend decision of non-financial firms listed in Dar es Salaam Stock Exchange using a panel data analysis for a period 2008–2017. The paper reports that gross domestic product (GDP) and inflation have both statistically negative signifant relationship with the firm payout ratio. This implies that in a country where GDP is high, firms are less likely to consider paying dividends. During high GDP levels, the economic environment is potentially conducive for potential investment, and therefore re-investing the corporate profit is relatively a wise decision than distributing it back to owners as dividend. Also in an inflationary environment, funds generated are often are not sufficient to replace a firm’s assets as they become obsolete. Under these circumstances, a firm may be forced to retain a higher percentage of earnings to maintain the earning power of its asset base that is why during this time less dividend is expected by shareholders. Furthermore, the paper reports that firm-specific factors such as profitability, liquidity, firm size, leverage and firm growth are also influencial in determining corporate dividend policy. More specifically, large-sized firms, highly profitable firms are more likely to consider paying dividend. However, payment of dividend will all depend on whether the firm is liquid enough to afford that. On the other hand, high growth and leveraged firms would not probably consider paying dividend, and will therefore, save money to finance their expansion and honor their debt obligations.
The Level of Business Informality in Tanzanian SMEs and Access to Finance
(The African Journal of Finance and Management, 2014) Lotto, Josephat
The objective of this paper is to assess the level of business informality and access to credit of Tanzania’s SMEs. The study considers business informality as a combination of improper keeping of business records, lack of business licenses, lack of business registration and lack of bank accounts. A sample of 295 SMEs and 4 commercial banks were randomly selected from Dar es Salaam, the business centre of Tanzania. The study found that improper keeping of business records was highly impacting SME’s access to credit, with other factors such as the lack of business licenses, business registration and bank accounts affecting the access to finance in the same order. The study findings reveal that on average, reasons related to business informality (lack of business registration, poor record-keeping and lack of business license) contributed significantly to difficult access to finance for SMEs compared to other reasons such as the lack of collateral and business plan. In this regard, interventions to increase the levels of formality in the SME sector would have a positive impact on the sector being able to access finance. This can be done through compulsory registration of SMEs at minimal or no cost.
Domestic Debt and Economic Growth in Tanzania - An Empirical Analysis
(Journal of Economics and Management Sciences, 2018-05-26) Lotto, Josephat
The main objective of this paper was to examine the impact of domestic debt on economic growth in Tanzania for the period 1990 to 2015 using Ordinary Least Square (OLS) regression method to estimate the effects. The study finds that there is an inverse but insignificant relationship between domestic debt and the economic growth of Tanzania as measured by GDP annual growth. The inverse relationship between domestic debt and GDP may be caused by different factors such as; increased trend in domestic borrowing, government lenders’ profile dominated by commercial banks and non-bank financial institutions which promotes the “crowding out” effect; the nature of the instruments used by the government ; the improper use of the domestic borrowed funds which may include funding budgetary deficits, paying up principal and matured obligations on debt, developing financial markets as well as fund other government operations. Other control variables relate with the GDP as predicted. For example, Inflation (INF) has a negative effect on the GDP growth rate, but the relationship is not statistically significant, while gross capital formation (GCF) has a positive statistically significant effect on GDP growth rate. Furthermore, foreign direct investment (FDI) showed a positive effect on the GDP growth rate and export (X) has a positive effect on GDP growth rate, and the relationship is statistically significant explaining that if a country applied an export-led growth economic strategy it enjoys the gains of participating in the world market. This means that an increase in export stimulates demand for goods which leads to increase in output, and as a country’s output increases, the economic performance also takes a similar trend. Finally, government expenditure (GE) had a negative effect on the GDP growth rate which may be explained by the increased government expenditures which are funded by either tax or borrowing. Therefore, what is required for countries like Tanzania is to have better debt management strategies as well as prudential financial management while maintaining to remain within the internationally acceptable debt level of 45% of GDP and maintain a GDP growth rate of not less than 5%. It is important for the country to realize from where to borrow from, the tenure, the risks involved and limitations to borrowing and thus set the right balance of combination of both kinds of debt. Another requirement is to properly utilize the borrowed funds. The central government’s objective should be to use the funds in more development-oriented projects that bring positive returns to the economic development. The government should not only create a right environment and policies for investment to attract investment from domestic and foreign sources but also be cautious about the kind of investments that the foreign investors make.

Browse

Recent Submissions