FISCAL AND MONETARY POLICIES:  CHALLENGES FOR SMALL AND MEDIUM ENTERPRISES (SMES) DEVELOPMENT IN TANZANIA

Mohamed Yusuph

Temeke Municipal Council, Dar es Salaam, Tanzania

Mnguu Youze O.

Institute of Rural Development Planning Dodoma, Tanzania

ABSTRACT

The role of the Small and Medium Enterprises (SMEs) as a catalyst for economic growth and development has been well documented in the economic literature and it is recognized that fiscal and monetary policies played a great role to robust such economies in most countries. SMEs depend on features such taxations, spending decision of the government, optimal use of money, level of employment and interest prevailing in the economy. In Tanzania, SMEs enjoy a competitive advantage over large enterprises in servicing dispersed local markets. It presumed to play the leading role in developing the sector on their ability to identify and exploit opportunities for the sector’s future rests. The paper based on secondary data with a review on the fiscal and monetary factors in Tanzania  that have repercussions on SMEs development as to recount the way forward in improving SMEs development in the economy. The review reveal that fiscal policy in Tanzania is pro-cyclical due to rise in inflation rates that crowd out SMEs investment, it realized that offsetting the fiscal stimulus is necessary to control price because pro-cyclical behavior of fiscal policy affects SMEs development. From the review it observed that although main challenge is fiscal and monetary policies as macroeconomic factors but other challenges are historical determinants, business environments and growth opportunities still challenges SMEs development.

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