Public Service Reform Program Public Service Reform Program in Tanzania (PSRP)in Tanzania (PSRP)

Medium Term Pay PolicyMedium Term Pay Policy

Population: 32,128,480 GNP per capita: $246 Growth: 4.6% Inflation: 7.9%

Tanzania - Few FactsTanzania - Few Facts

Tanzania an interesting case for pay reform

Classic collapse of the state Cost containment phase Serious effort at civil service reform incorporating

structural reform Addressing pay issue as a key feature of its civil

service reform

What was the situation in Tanzania before the civil service reform (late 80s)? Public expenditure framework expanded far beyond

what GOT could afford Public administration overstaffed/underfunded Establishment/payroll control fell into disuse Wage bill was out of control Civil servants demotivated:

– downward trends in real incomes– political interference in appointments and pay

decisions– growing informality

What did the first phase of the reform achieve? (1993-1999)

Medium term pay policy approved Total number of employees reduced from 355,000 to

260,000 Pay structure rationalized/decompressed from 9:1 to 21:1 75 % increase in average public service pay in real terms Control on employment, wage bill institutionalized

– central personnel database– computerized payroll system– ad hoc and non transparent allowances consolidated in

basic salary

The agenda for the Public Service Reform Program(2000-2004...)- Remaining issues Workforce still too big for resources available Cost containment issues not yet fully addressed Capacity and performance undermined by low pay

(informality continues) The take home pay has not improved. Why?

New salary levels (1997) were below total monetary benefits enjoyed by the upper-middle and top levels

Changes in tax rates for personal income reduced net salary incomes

Annual salary adjustment too low

Afocus on the Public Service Pay Policy

Primary Policy GoalPrimary Policy Goal::– long termlong term: to raise the minimum base salary to the

level of the minimum living wage (MLW)– minimize use of non-salary benefits– Implement performance-related pay system

Medium Term Policy ObjectivesMedium Term Policy Objectives:– enhance pay for technical and professional staff– develop core professional and managerial cadre

The Pay Policy (cont’d)

Continue public service rationalization and efficiency measures

Promote rationalization of donor compensation for public servants

Improve personnel management practices

What has been done so far

Pay reform implementation study:– wage-bill to GDP ratio of 4.9% to be adopted over

the medium term– linkages pay/performance based on transparent

appraisal system– new grade structure (fewer bands, multiple steps)– Local authorities to be strengthened to manage

resources and personnel functions– new approach to donor supplementation of salaries

or “local cost compensation”

Local Cost Compensation or “donor supplementation”

Extent of donor supplementation: $50-100 million/FY99-00

Effects of donor supplementation:– Unsustainable– Does not promote long term capacity– Reported as development expenditure therefore does

not reflect true cost of delivering services

How does Tanzania intend to deal with this issue? A proposal

Scheme to complement pay policy and to support an accelerated pace of salary enhancement for managerial, professional and technical personnel.

Where does that leave Tanzania?

Pay reform is a slow process - need to target Pay has improved but is still too low How to finance local cost compensation?

– HIPC?– MDRF?– Separate fund?