Impacts of Fiscal Factors on Employment Growth in Tanzania: 1990- 2022

Abstract

This paper is based on a study examining fiscal macroeconomic factors' impacts on employment growth in Tanzania. Time series data spanning from 1990 to 2022 collected from the Bank of Tanzania and the World Bank were used. Prior to estimation, the stationarity tests were carried followed by co-integration of bound test and ARDL of long-run and short-run Error Correction Model. The findings indicated that total government revenue (ß =-0.025, P= 0.16) and inflation rate (ß = -0.002, P= 0.62) were not favorable in generating employment growth. Conversely total government expenditure ((ß = 0.01, P= 0.63), GDP growth (ß = 0.02, P= 0.06), domestic debt (ß = 0.0002, P= 0.89), and lending interest rate (ß = 0.05, P= 0.06) had a non-undesirable impact to employment growth in the long run. The study concluded that to ensure employment opportunities are generated, the government needs to increase government spending, especially on the multiplier employment projects. The study recommended, the re-examination of the government revenue and expenditure policies to ensure bases of revenue are expanded to allow more collection of revenue and the available tax revenue sources also need to favors investment in the country. To complement the newly introduced friendly tax revenue regime by the government, it is recommended that, subsidies have to be provided to the domestic projects which absorb the labour force and have the spillover effects on the economy. Friendly tax revenue bases and subsidies to the local investors will gear to higher local production, more exports that will stimulate the presence of foreign reserves and stabilize the exchange rate in the country