tanzania - the governance and economic competitiveness ... · of audit reports by legislature (csi)...
TRANSCRIPT
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Language: English
Original: English
AFRICAN DEVELOPMENT FUND
PROGRAM: GOVERNANCE AND ECONOMIC
COMPETITIVENESS SUPPORT PROGRAM
(GECSP)
COUNTRY: UNITED REPUBLIC OF TANZANIA
APPRAISAL REPORT
Date: August 2011
Appraisal Team
Task Team Leader:
Co-Task Team Leader:
Team Members:
Sector manager p.i.:
Sector Director:
Regional Director:
Tonaina NGORORANO, Principal Governance Expert, OSGE.1
Shirley CHINIEN, Principal Economist, OSGE.1
Cecile Ambert, Senior Strategy Officer, OPSM.0
Tilahun TEMESGEN, Principal PSD Specialist, OSGE.2
Prajesh BHAKTA, Principal Country Program Officer, TZFO
Francis MKANDAWIRE, Regional Financial Mgt. Coordinator , KEFO
Franck MVULA, Regional Procurement Coordinator, KEFO
Godfrey KAIJAGE , Financial Management Specialist, TZFO
Prosper CHARLE, Macroeconomist, TZFO
Balozi HIJA, Procurement Officer, TZFO
Selpha NYAIRO, Legal Consultant, GECL.1
Abdoulaye COULIBALY, OIC
Isaac LOBE NDOUMBE, OSGE
Gabriel NEGATU, OREA
Peer Reviewers
Internal reviewers:
Peninah KARIUKI, Principal Country Economist, UGFO/OREA
Michel MALLBERG, Principal Economist, OSGE.2
Carlos MOLLINEDO, Principal Country Economist, ORCE
Angela NALLIKA, Chief Investment Officer, OSPM.3
Stephen OLANREWAJU, Consultant, OSGE.0
Edward SENNOGA, Principal Country Economist, RWFO/OREA
Kate TENCH, Economic Advisor, OSGE.0
ii
Acronyms and Abbreviations ................................................................................................... iv
Loan Information ....................................................................................................................... v
Executive Summary .................................................................................................................. vi
I. THE PROPOSAL ................................................................................................................... 1
II. COUNTRY AND PROGRAM CONTEXT ......................................................................... 1
2.1 Recent Political, Economic & Social Developments, Perspectives and Challenges ...... 1 2.2 Overall Development Strategy and Medium-Term Reform Priorities ........................... 6 2.3 Bank Group Portfolio Status ........................................................................................... 7
III. RATIONALE, KEY DESIGN ELEMENTS, AND SUSTAINABILITY .......................... 8
3.1 Link with the CSP, Analytical Underpinnings and Country Readiness Assessment ..... 8 3.2 Collaboration and Coordination with other Development Partners ................................ 9 3.3 Outcomes of Past and On-going Similar Operations and Lessons ............................... 10
3.4 Relationship to On-going Bank Operations .................................................................. 10 3.5 Bank’s Comparative Advantage and Value-added ....................................................... 10 3.6 Application of Good Practice Principles on Conditionality ......................................... 11 3.7 Application of ADB policy on non-concessional borrowing ....................................... 11
IV. THE PROPOSED PROGRAM AND EXPECTED RESULTS ........................................ 11
4.1 Program’s Goal and Purpose ........................................................................................ 11
4.2 Program Components, Operational Objectives and Expected Results ......................... 11 4.3 Financing Needs and Arrangements ............................................................................. 17 4.4 Beneficiaries of the Program ........................................................................................ 17
4.5 Impact on Gender .......................................................................................................... 18
4.6 Environmental Impact ................................................................................................... 18
V. IMPLEMENTATION, MONITORING AND EVALUATION ........................................ 18
5.1 Implementation Arrangements...................................................................................... 18
5.2 Monitoring and Evaluation Arrangements.................................................................... 18
VI. LEGAL DOCUMENTATION AND AUTHORITY ........................................................ 19
6.1 Legal Documentation .................................................................................................... 19
6.2 Conditions Associated With Bank’s Intervention......................................................... 19 6.3 Compliance with Bank Group policies ......................................................................... 20
VII. RISK MANAGEMENT ................................................................................................... 20
VIII. RECOMMENDATION .................................................................................................. 20
iii
List of Tables
Table 1: Results Based Logical Framework ......................................................................................... vii
Table 2: GECSP linkages with the new NDS and the Bank’s CSP ........................................................ 8
Table 3: General and Technical Prerequisites for Budget Support ......................................................... 8
Table 4: Key lessons learned from past operations and related improvement in design of the GECSP
.............................................................................................................................................................. 10
Table 5: GoT Financing needs for FY 2010/11 to FY 2013/14 ............................................................ 17
Table 6: GECSP risks and mitigation measures ................................................................................... 20
List of Annexes
Annex 1: Letter of Development Policy .................................................................................................. I
Annex 2 : Operations Policy Matrix ...................................................................................................... X
Annex 3: IMF Press Release on Completion of Tanzania’s Second PSI Review ................................. XI
Annex 4: Tanzania’s Comparative Socio-Economic Indicators ......................................................... XII
Annex 5: Tanzania’s Development Partners and Commitments for FY 2011/12 .............................. XIII
Annex 6: Fiduciary Risks and Safeguards under GECSP .................................................................. XIV
Annex 7: Achievements under PRSL I, PRSL II and PRSL III.......................................................... XV
Annex 8: Intervention Areas of GECSP Compared to the Bank’s predecessor GBS Operations .... XVII
List of Graphs
Graph 1: Real GDP Growth 2003-2010 .................................................................................................. 2
Graph 2: Tax revenue as a percentage of GDP ....................................................................................... 2
List of Boxes
Box 1: Limitations in PFM System......................................................................................................... 4
Currency Equivalents
(As of November 2011)
1 UA = Tsh 2,534
1 UA = US$ 1.59
1 US$ = Tsh 1,598
Fiscal Year
July 1st – June 30
th
iv
Acronyms and Abbreviations
ADF African Development Fund PBO Policy Based Operation (AfDB)
AfDB African Development Bank PCR Project Completion Report
AFROSAI-E African Organization of English-speaking
Supreme Audit Institutions
PEFA Public Expenditure Financial
Accountability Assessment
CAG Controller and Auditor General PE Procuring Entities
CIDA Canadian International Development Agency PFM Public Finance Management
CPI Corruption Perceptions Index PFM-PR Public Financial Management - Performance Report
CSI Core Sector Indicator PFMRP Public Financial Management Reform Program
prouc Country Strategy Paper PIP Public Investment Program
DANIDA Danish International Development Agency PPA Public Procurement Act
DBR Doing Business Report PPP Public-Private Partnership
DBSL Development Budget Support Loan (AfDB) PPRA Public Procurement Regulatory Authority
DfID Department for International Development PRS Poverty Reduction Strategy
DP Development Partner PRSL Poverty Reduction Support Loan
DPP District Public Prosecutor PSD Private Sector Development
DRM Domestic Revenue Mobilization PSI Policy Support Instrument
EITI Extractive Industry Transparency Initiative TANESCO Tanzania Electricity Supply Company Ltd.
EU European Union TANROADS Tanzania Roads Authority
FDI Foreign Direct Investment TDV Tanzania Development Vision 2025
FRA Fiduciary Risk Assessment TIC Tanzania Investment Centre
GAP Governance Strategic Directions and Action Plan
TEITI Tanzania Extractive Industry Transparency Initiative
GCI Global Competitive Index TRA Tanzania Revenue Authority
GFC Global Financial Crisis Tsh Tanzanian Shillings
GDP Gross Domestic Product TVET Technical Vocational and Educational Training
GoT Government of Tanzania TZFO Tanzania Field Office (of the AfDB)
HBS Household Budget Survey UA Units of Account
HDI Human Development Index USD United States Dollar
IFMS Integrated Financial Management System WGI World Governance Indicator
IMF International Monetary Fund
KRA Key Result Area
JICA Japan International Cooperation Agency
LDP Letter of Development Policy
LGA Local Government Administration
MDA Ministry, Department and Administration
MDG Millennium Development Goal
MoF Ministry of Finance
MSG Multi-Stakeholder Group
MTEF Medium-Term Expenditure Framework
NACSAP National Anti-Corruption Strategy and Action
Plan
NAO National Audit Office
NDP National Development Plan
NDS National Development Strategy
NRM Natural Resource Management
ODA Overseas Development Assistance
PAC Public Accounts Committee
PBL Policy Based Lending (AfDB)
v
Loan Information
CLIENT’S INFORMATION
Borrower
United Republic of Tanzania
Executing Agency
Ministry of Finance
FINANCING PLAN
Source Amount (Million UA)
Share (%)
Instrument
African Development Fund (ADF) 100 N/A
Loan
ADF FINANCING INFORMATION
Loan currency Units of Account
Service Charge 0.75% yearly on amounts disbursed and not yet
repaid
Commitment Fee 0.5% yearly on undisbursed loan amount, beginning
to run 120 days after the signing of the loan
agreement
Tenor 50 years including the 10-year grace period
TIME FRAME - MILESTONES
Request from GoT for an ADF loan April 2011
Bank Program Concept Note Approval June 2011
Bank Program Board Consideration December 2011
Effectiveness December 2011
Indicative First Tranche Disbursement December 2011
Indicative Second Tranche Disbursement July 2012
Indicative Last Tranche Disbursement July 2013
Completion December 2013
vi
Executive Summary
Program Name
Governance and Economic Competitiveness Support Program (GECSP)
Geographic
Scope
Countrywide
Time Frame Three fiscal years: FY 2011/12 to FY 2013/14
Program Cost UA 100 million (to be disbursed in three tranches)
Program
Overview
The overarching development goal of the GECSP is to contribute to
maintaining an accelerated economic growth by strengthening economic and
financial governance and improving the business enabling environment. In
this context, the GECSP’s operational policy objectives are focused on: (a)
strengthening the accountability, transparency and oversight of public
resources (Component 1), (b) improving domestic resource mobilization
(Component 2) and (c) improving private sector development (Component 3).
A distinguishing feature of this fourth general budget support (GBS)
operation is that it goes beyond the traditional focus on public financial
management, by widening the scope of the Bank’s intervention to target
certain hard and soft enablers for private sector development, in line with the
country’s new National Development Strategy (NDS).
Program
Outcomes
The GECSP’s expected program outcomes are: (i) enhanced budget
accountability and transparency; (ii) improved budget oversight; (iii)
increased tax revenue generation; (iv) increased mineral resources
management; and (v) improved business enabling environment and
investment climate.
Needs
Assessment
The program is needed now to support the GoT’s current reform program
and consolidate the gains under the Bank’s predecessor GBS program (PRSL
III). It will assist the GoT to address pressing fiscal challenges. The Bank’s
support represents the best use of funds for Tanzania at this critical time
when the country is experiencing worsening fiscal deficits and the economy
is facing a critical energy crisis, which is exerting pressure on public
services’ delivery in the infrastructure and social sectors. The proceeds of the
budget support operation will provide the GoT the means to better execute its
poverty reduction program.
Bank’s Added
Value
Intervention areas under the proposed GECSP are areas where the Bank
continues to exercise a leadership role in its Regional Member Countries, in
terms of its regional mandate and its capacity to deliver. Since adopting the
Governance Strategic Directions and Action Plan (GAP) in 2008, the Bank
has also streamlined its approach to its work on governance, anchoring its
focus on PFM and the investment climate. In so doing, it has scaled up its
resources and reoriented its policy and institutional actions to respond to the
challenges in key PFM reform areas. In addition, with regards to private
sector development, the Bank’s proposed GECSP will bring significant value
addition since relatively few Development Partners (DPs) are focusing in this
area.
Institutional
Development and
Knowledge
Building
Through continued policy dialogue and engagement with the GoT, the Bank
will enhance its knowledge base on the developmental challenges of
Tanzania. In doing so, and in the process of implementing the GECSP it will
accumulate lessons that could be used to inform future operations, in the country and region.
vii
Table 1: Results Based Logical Framework
RESULTS CHAIN
PERFORMANCE INDICATORS MEANS OF
VERIFICATION
RISKS/
MITIGATION
MEASURES Indicator (including CSI) Baseline Target
IMP
AC
T
Contribute to maintaining an
accelerated growth by
strengthening economic and
financial governance, and improving the investment
climate
GDP growth rate
Corruption Perception Index
Ratio of total revenue to GDP
Human Development Index
6.9% in 2010
2.7 in 2010
Ratio is 16.2% in 2010
0.466 in 2011
>7% in 2014
3.0 in 2014
Ratio is 18.0% in 2014
> 0.6 in 2014
MoF
NDS monitoring
report
Transparency International
Report
ADB Completion
report
Household Budget
Survey Reports
Increasing fiscal
challenges Mitigation
measure: The
AfDB will pursue its efforts to
further coordinate
its policy dialogue with other DPs.
Corruption Mitigation
measure
delays in the adoption of
essential anti-
corruption legislation risks
diminishing GoT
credibility.
OU
TC
OM
ES
Outcome 1: Strengthened
accountability, transparency
& oversight of public
resources
1.1 Enhanced budget
accountability and
transparency
1.2 Improved budget oversight
1.1.1 Average level of
compliance of PEs to PPA
1.1.2 Timeliness of examination
of audit reports by legislature
(CSI)
1.2.2 Implementation of audit
recommendations made by CAG
69%73% in 2011
Examination starts 6 months
after receipt of NAO reports in
[2010]
29% of audit recommendations
fully implemented for FY
2008/09
>80% in 2014
Examination starts 3 months
after receipt of NAO reports
by 2014
>50% of audit
recommendations fully
implemented for FY 2012/13
PPRA reports
PFMRP III
supervision report
& PFMRP IV
CAG Reports
Lack of capacity
to implement
reforms
Mitigation
measures The Bank is
implementing
ISPGG II targeting capacity building
in key institutions
Outcome 2: Improved
domestic resource
mobilization
2.1 Increased tax revenue
generation
2.2 Enhanced mineral
resources management
2.1.1 Ratio of tax reve5nues as a %
of GDP
2.2.2 Variation between payments
made by mining companies and
revenues received by GoT
Ratio is 16.3% in 2010
Variation is 42% in 2011
Ratio reaches at least 18% in
2014
Variation is <10% in 2014
TRA report &
IMF Staff Reports
2nd
EITI
reconciliation
report
Slow approval of
legislation by
parliament Mitigation
measures
Training for PAC under ISPGG II.
Outcome 3: Accelerated
private sector development
3.1 Improved business
enabling environment and
investment climate
3.1.1 Improved time it
takes in paying taxes (CSI)
3.1.2 Total electricity installed,
capacity in MW
172 hours per year in 2010
1,077 MW in 2011
160 hours per year in 2014
>1,247 MW in 2014
Doing Business’
Report
GBS Annual
Reports
viii
OU
TP
UT
S
1.1 Budget accountability &
transparency
1.0 PFMRP IV endorsed
1.1.2 Whistle Blowers’ Bill
1.2 Budget oversight
1.1.5 An increase in number of
PAC members trained
2.1 Tax revenue generation
2.1.1 Review of tax legislation
and non-compliance sanctions
2.1.2 Elaboration of taxpayers communication strategy
2.1.3 Start review of LGA
legislation
2.2 Mineral resources
management
2.2.1 Submission of 2nd
reconciliation report
2.2.2 Tanzania EITI (TEITI)
Bill
3.1 Enabling environment &
investment climate
3.1.1 Operationalization of
PPP unit within MoF
3.1.2 Introduction of PPP
Finance Regulation to grant
mandate to PPP unit for
management of contingent
liabilities
3.1.3 General Electronic Filing
& Payment Regulations
published as Government’s
notice
3.1.4 Undertake energy sector
study
Endorsement of PFMRP IV
Whistle-blowers Bill
Number of PAC members trained
Tax legislation and non-compliance
sanctions
Taxpayers communication strategy
LGA Legislation revised
2nd
reconciliation report finalised
TEITI Bill drafted
Comprehensive PPP procedures
manuals produced
PPP Finance Regulation to grant
mandate to PPP unit for
management of contingent liabilities
General Electronic Filing &
Payment Regulations published as
Government’s notice
Energy Sector Study conducted
Final drafting of PFMRP IV
No Whistle-blowers Bill
0 of PAC members trained in
2010
Harmonised tax legislation and
inadequate non-compliance
regulations
No Taxpayers communication strategy
LGA Legislation not adequate
in allowing to strengthen
capacity of LGAs for revenue
mobilisation
1st reconciliation report
submitted in February 2011
No TEITI Bill
prepared
No comprehensive PPP
procedures manuals in 2010
No PPP Finance Regulation to
grant mandate to PPP unit for
management of contingent
liabilities
General Electronic Filing &
Payment Regulations not yet
published as Government’s
notice
No review of Energy Sector Strategy
PFMRP IV endorsed by end
December 2011
Drafting of Whistle-blowers Bill & endorsement by GoT
submitted to Parliament by
December 2012
25 PAC members trained by
2012
Tax legislation and non-
compliance sanctions
regulations revised by
December 2013
Taxpayers communication strategy by December 2013
Start LGA Legislation
revisions by 2013
2nd
reconciliation report
submitted to EITI Board by
Jun e 2012
TEITI Bill submitted by GoT
to Parliament by July 2013
Comprehensive PPP
procedures manuals PPP
document developed by
March 2012
PPP Finance Regulation
endorsed by Govt. by
December 2013
General Electronic Filing &
Payment Regulations
published as Government’s
notice by December 2012
Energy Sector Review conducted by end 2012
GBS Annual
Review Report
PPRA Annual
reports
CAG Report
TRA Annual
Reports
2011 GBS Annual
Review Report
2012 GBS Annual
Review Report
TRA Annual
Reports
KE
Y R
EF
OR
MS
COMPONENT I: Strengthening accountability and transparency of public resources
COMPONENT II: Improving domestic resource mobilization
COMPONENT III: Accelerating private sector development
INPUTS: ADF loan: UA 100 million of which:
UA 25 MILLION IN FY 2011/12
UA 35 MILLION IN FY 2012/13
UA 40 MILLION IN FY 2013/14
Note: text in blue (bold and italics): conditions for disbursement.
1
REPORT AND RECOMMENDATION OF THE MANAGEMENT OF THE
AFRICAN DEVELOPMENT FUND TO THE BOARD OF DIRECTORS ON A
PROPOSED LOAN TO THE UNITED REPUBLIC OF TANZANIA TO FINANCE
THE GOVERNANCE AND ECONOMIC COMPETITIVENESS SUPPORT
PROGRAM (GECSP)
I. THE PROPOSAL
1.1.1. Management submits the following proposal and recommendation for a loan of UA
100 million to Tanzania to finance the Governance and Economic Competitiveness Support
Program (GECSP) over three fiscal years (2011/12 to 2013/14). This is the Bank’s fourth
General Budget Support (GBS) operation in Tanzania and it follows a request from the
Government of Tanzania (GoT) in April 2011. The program appraisal was carried out in July
2011, primarily on the basis of discussions with the Tanzanian authorities and private sector
stakeholders. It was also guided by the GBS Group’s 2011 Performance Assessment
Framework (PAF). A distinguishing feature of this fourth GBS operation is that it widens the
scope of the Bank’s intervention to target both soft and hard enablers of Private Sector
Development (PSD) deepens Public Financial Management (PFM) reforms, whilst
mainstreaming anti-corruption reforms under each Program component.
1.1.2. The GECSP is aligned to the country’s new National Development Strategy1 (NDS)
2010/11-2014/15. It is also aligned to the “2011-16 Partnership Framework Memorandum
governing GBS”. Furthermore, it is consistent with: (i) the Bank’s Governance Strategic
Directions and Action Plan (GAP) 2008-12, (iii) the Bank’s Private Sector Development
Strategy; and (iv) the Country Strategy Paper (CSP) 2011-2015. It also complements the
GoT’s ongoing Policy Support Instrument (PSI) Agreement with the International Monetary
Fund (IMF). The program, which is articulated within the Letter of Development Policy
(Annex 1), supports the GoT’s current reform program, whilst consolidating gains and
deepening reforms, which the Bank has supported in its predecessor GBS programs, notably
the Poverty Reduction Support Loan III2. In addition, the ADF-XII resources, tied to the
GECSP, will help the GoT at a time where the economy is facing a critical energy crisis,
which is exerting pressure on public services’ delivery, notably in the infrastructure sector.
1.1.3. The GECSP’s development goal is to contribute to maintaining an accelerated
growth by strengthening economic and financial governance, and improving the business
enabling environment. In this context, the GECSP’s operational policy objectives focus on:
(a) strengthening the accountability, transparency and oversight of public resources
(Component 1); (b) improving domestic resource mobilization (Component 2) and; (c)
accelerating private sector development (Component 3). The GECSP’s expected program
outcomes are: (i) enhanced budget accountability and transparency; (ii) improved budget
oversight; (iii) increased tax revenue generation; (iv) enhanced mineral resources
management; (v) improved business enabling environment and investment climate.
II. COUNTRY AND PROGRAM CONTEXT
2.1 Recent Political, Economic & Social Developments, Perspectives and Challenges
Political context
2.1.1 Tanzania is one of the most politically stable countries in Africa. The country
held its fourth multi-party elections in October 2010, which took place peacefully. However,
these elections were characterized by a low voter turnout (43%) suggesting an
unprecedented voter apathy. The incumbent President Jakaya Kikwete, representing the
1 The country’s new development framework consists of the strategy for the Mainland; the National Strategy for Growth and Reduction of
Poverty II (NSGRP II) and the Zanzibar Strategy for Growth and Reduction of Poverty (ZSGRP II). 2 Ref: ADF/BD/WP/2008/105, October 2008.
2
ruling party Chama Cha Mapinduzi (CCM), won the elections by 61.2%, and the nearest
opposition candidate got 26.3% of the votes. The next elections are due to be held in 2015.
Economic Context
2.1.2 Tanzania achieved one of the most
notable growth rates for a non-oil-producing
sub-Saharan African country in 2000s. It
registered eight consecutive years of Gross
Domestic Product (GDP) growth of above 6%
(graph 1). The main growth drivers have been,
gold exports, manufacturing and construction.
There was a decline in growth in 2009, to 6.0%,
linked to a Global Financial Crisis (GFC)-
induced slowdown in economic activity.
2.1.3 Tanzania implemented a package of fiscal measures in FY 2009/10 to cushion its
economy from the impact of the GFC.3 Thus in 2010, GDP picked up to its pre-crisis
levels and stood at 6.9%. Moreover, inflation, which in recent years has been maintained
mostly at single digit levels, has started to rise in 2011, mainly as a result of higher energy
and food prices. Headline inflation in September 2011 reached a peak of 16.8%.4
2.1.4 Tanzania’s fiscal position moved from a surplus in fiscal year (FY) 2007/08 to
deficits in the three subsequent years. The fiscal position after grants worsened from -
4.6% of GDP in FY 2008/09 to -6.4% in FY 2009/10. For FY 2010/11 the fiscal deficit
stood at -6.9% of GDP, deteriorating by 0.7 percentage points compared to the previous FY.
These persisting fiscal deficits were due to actual revenues being below budget targets,
coupled with increases in total expenditures. For FY 2008/09, the budget target for domestic
revenues was 18.0% of GDP, but actual revenues were nearly 2 percentage points below this
target, at 16.2%. In FY 2009/10, actual revenues were less than 1 percentage point lower
than the budget target of 16.2% of GDP at 15.9%. In FY 2010/11 revenue to GDP ratio
reached 16.5%, however this was still lower than the budget target of 16.9% of GDP.
Against this backdrop, total expenditure to GDP ratio has gone from 26.1%, to 27.5% and
27.2% between 2008/09, 2009/10 and 2010/11 respectively.
2.1.5 These fiscal deficits have been financed with increasingly expensive resources. As from FY 2007/08 to FY 2009/10, financing became less concessional, shifting from
mostly grants to a greater use of (concessional)
external loans as well as (non-concessional)
domestic borrowing. For FY 2010/11, the deficit
was financed in part by the GoT through non-
concessional borrowing (0.4% of GDP out of 2.1%
GDP).
2.1.6 The low levels of domestic revenue have
resulted in about 70% of development
expenditures being financed by external
resources.5 The country is yet to fully optimize its
tax potential6 (graph 2). For the fiscal years
2008/09 and 2009/10, actual tax revenues recorded were lower than their budget targets by
nearly 2 percentage points and one percentage point respectively. Tanzania has also been
3 GoT implemented an Economic Rescue Package in FY 2009/10, whose key objectives were to protect employment and incomes, food security as
well as social services’ program. 4 Source: National Bureau of Statistics.
5 Source: “Domestic Resource Mobilization for Poverty Reduction in East Africa: Tanzania Case Study”, AfDB Group, November 2010.
6 Source: idem
Graph 1: Real GDP Growth 2003-2010
(Percentage)
Source: AfDB Statistics Dept., April 2011
Graph 2: Tax revenue as a percentage of
GDP
3
pursuing, since 1999, local government reforms, including decentralization by devolution.7
In terms of own source revenues, Local Government Administrations (LGA) rely mainly on
fees, permits and charges and other minor revenue sources. In addition, they also depend on
taxes on local business activity, including a service levy.8
2.1.7 Tanzania is also endowed with natural resource9 wealth that also offers
significant revenue potential. The mining sector for instance, contributes to about 2.3% of
GDP, and is projected to account for 10% in 2025. It is one of the leading sectors in
generating foreign exchange earnings within non-traditional exports. Indeed, with gold now
constituting 40% of the country’s goods’ exports, Tanzania has now become the fourth
largest gold exporter in Africa.
2.1.8 The country’s foreign reserve cover remains comfortable. As at end 2010, the
international reserves stood at 5.3 months of import cover and are projected to remain stable.
In FY 2009/10, the current account deficit stood at -8.6% of GDP and deteriorated to -9.5%
of GDP in FY 2010/11 because the pickup in imports offset the growth in manufacturing
exports and the impact of rising gold prices did not match higher fuel prices.
2.1.9 Tanzania’s risk of debt distress remains low. In terms of debt sustainability, the
joint IMF/World Bank 2011 Debt Sustainability Analysis (DSA) highlights that external
debt indicators should remain below country-specific thresholds even after the country
borrows on non-concessional terms for the next three years.
2.1.10 Tanzania’s macroeconomic management is guided by the PSI Agreement with
the IMF. The current three-year PSI, approved in June 201010
, aims to maintain
macroeconomic stability and support accelerated growth in line with the NDS. The second
PSI review, endorsed by the IMF Board in May 2011, was satisfactory: all the quantitative
criteria were met and progress was made in implementing structural reforms, albeit with
some delays. Notwithstanding this satisfactory review, the IMF Staff Appraisal highlighted
the urgent need for the GoT to control the fiscal deficit for investor and donor confidence.
The third PSI review mission took place from October 26th
to Novmber 7th
. The preliminary
findings indicate that “under the PSI program through June 2011, the Bank of Tanzania’s
reserve money targets were met and foreign commercial borrowing was kept well within
program limits. However, partly due to the shortfall in commercial borrowing, domestic
financing of the budget was higher than planned and the target for accumulating net
international reserves was missed” (refer to Annex 3).
Perspectives
2.1.11 The overall economic outlook for the country remains positive, albeit the
medium-term fiscal challenges. Although, real GDP growth for 2011 is projected to
decline to 6%, mainly due to power shortages and a worsening external environment, the
Tanzanian economy is expected to recover rapidly. Indeed, power shortage resulted in up to
12 hours of daily load shedding, resulting in adjustments being made to economic growth
forecasts from an initial 7.2% to 6%. Implementation of the GoT’s Emergency Energy Plan
will deliver additional power generation to contribute to rapid economic recovery. In terms
of the fiscal deficit, latest IMF projections11
indicate that it is expected to decrease in FY
2011/12 to -6.0% of GDP, based on available financing and the urgent need to maintain
fiscal sustainability. Thereafter, the fiscal deficit is expected to gradually decline to below
4% of GDP.
7 There are 133 local governments and 13 authorities. LGAs receive the larger proportion of their resources through intergovernmental fiscal
transfers and the remainder is provided in the form of subsidies and development grants. 8 Turnover tax of 0.3% for firms with turnover in excess of Tshs 20 million.
9 In Tanzania this includes: Tanzanite, diamonds, gold, cobalt, copper, nickel, platinum group metals and silver.
10 Source: IMF Country Report No. 10/173, June 2010.
11 Source: IMF Country Report No. 11/105, May 2011.
4
Box 1: PFM Areas for Improvement
× Budget credibility: variations between actual expenditures &
originally approved budgets, depending on the year, have
been greater when assessing most ministries, departments and agencies’ (MDAs) expenditure composition.
× Budget execution: budget execution and government
operations’ implementation needs to be improved. This
stems from the monthly cash rationing system that limits MDAs’ timely purchase of goods and services.
× Budget transparency: coverage & level of information are limited during the budget execution phase.
× Public Procurement: There is insufficient focus on value-
for-money audits as well as limited mechanisms in place for
responding to whistleblowers.
× Accounting, recording and reporting: IFMS bank
reconciliation module is not operational, resulting in around
5% of transactions between the MoF and the Central Bank not being reconciled.
× External scrutiny & audit: There has been some limited
follow up by the Executive to Public Accounts Committee
reports.
Source: “2009 PFM-RP on Mainland Tanzania”, Nov. 2010
Governance Update
2.1.12 Tanzania’s governance indicators show mixed results. The World Bank’s
Worldwide Governance Indicators suggest that in all dimensions12
, the country was ranked
between the 25 to 50 percentile in 2010. Tanzania obtained its best score on the dimension
“political stability” and its lowest score on the dimension “control of corruption”. The 2010
Mo Ibrahim African Governance Index shows that between 2007/08 and 2008/09, Tanzania
maintained its score of 55 (out of 100), thus remaining well above the East African regional
average of 46.9 and the continental average of 51.2.
2.1.13 Tanzania obtained a score of 2.713
in 2010, compared to 2.6 in 2009, as per the
Corruption Perception Index (CPI)14
, implying a slight rise in the perception of
corruption. The anti-corruption agenda remains a priority for the GoT. A 2010 performance
report of the Prevention and Combatting of Corruption Bureau (PCCB), the agency
responsible for implementing the National Anti-Corruption Strategy and Action Plans
(NACSAP), highlighted several recent achievements, including: (a) the completion of the
2009 National Governance and Corruption Survey Report, that identifies areas of public
sector activity most prone to corruption, (b) an enhanced collaboration between PCCB and
other Accountability Institutions (including the National Audit Office) and (c) since 2011,
policy dialogue on anti-corruption reforms between the GoT and DPs have improved.15
2.1.14 There have, however, been
delays in implementing anti-
corruption reforms, notably in terms
of the legislative framework.
Following the 2008 GBS Annual
Policy Dialogue, four pieces of
legislation were proposed as a means
to better combat corruption: (a)
Political Parties’ Financing Act; (b)
Right to Information Bill; (c) Public
Leadership Code of Ethics Bill and;
and (d) Whistle-blowers Bill.
Currently, only the Political Parties’
Financing Act was passed by
Parliament in 201016
.
2.1.15 The GoT has made progress
in Public Financial Management
(PFM). The Epicor system, a resource
planning software, has been implemented at Central Government level as well as in 84
LGAs. This has led to a number of control measures, facilitated payment and report
production. Furthermore, the Integrated Financial Management System (IFMS) covers
central government ministries and all 22 sub-Treasuries across the country. IFMS has also
been rolled out to 86 LGAs, thus increasing the timeliness and quality of expenditure
information. External audit reports, including the consolidated financial statements, are
submitted to Parliament in a timely manner. In terms of public procurement, audits indicate
that the majority of contracts adopt the correct procurement modality. However, the 2010
Public Financial Management Performance Report (PFM-RP), shows continuing system and
12
Voice & accountability; political stability, government effectiveness, regulatory quality, rule of law & control of corruption. 13
CPI uses a range of 0 (very clean) to 10 (very corrupt) for the scoring of countries. 14
Source: Transparency International. 15
The 2010 GBS Annual Review resulted in a split assessment of GoT’s progress in tackling corruption, since DPs did not concur that progress in combatting corruption had been satisfactory.
16 The new Act on Public Leadership Code of Ethics was read in Parliament earlier this year. The Right to Information Bill and Whistleblower’s Bill
are still being drafted.
5
compliance limitations17
(Box 1). Although the budget preparation process in Tanzania is
participatory, it scored 45 (out of 100) in the 2010 Open Budget Index (OBI), which is lower
than other Eastern African countries such as Kenya (49) and Uganda (55). This indicates
that the GoT provides the public with only some information in its budget documents during
the year.
Investment Climate
2.1.16 Tanzania has attracted FDI in tourism, mining, agriculture and services over
the last decade. FDI is projected to increase from USD 424 million in FY 2009/10 to USD
666 million in FY 2012/13. The GoT has taken several initiatives to further improve the
country’s investment climate. These include: (a) enactment of the 2007 Business Activities
Registration Act, which simplifies the process of starting businesses; and (b) investment
promotion incentives and land mobilization, through the Tanzania Investment Centre (TIC),
to ease FDI barriers to entry, particularly during the initial business establishment period. In
terms of Public-Private Partnerships (PPP), the GoT has mobilized all departments and
parastatals to identify numerous projects suitable for investment with the private sector.
2.1.17 There remains, however, shortcomings in Tanzania’s business environment
According to the 2012 Doing Business Report18
(DBR), Tanzania ranked 127 in 2011, a
drop compared to its ranking (125th
) in 2010. The 2012 DBR highlights that the constraints
for doing business in Tanzania relate to: starting a business; dealing with construction
permits and registering a property. Tanzania’s scores on the World Economic Forum’s
Global Competitive Index (GCI) also remain low. Tanzania is ranked 120th
according to the
2011 GCI, falling by six positions in a constant sample of economies included last year.
According to the GCI findings, Tanzania’s competitiveness depends mainly on improving
and/or sustaining the basic requirements: institutions, infrastructure, macroeconomic
environment, as well as health and primary education (Technical Annex 3).
Social context
2.1.18 The main social development challenge in Tanzania remains the reduction of
poverty. The notable growth that the country has enjoyed, during the past decade, has not
had a significant impact on poverty reduction. The continued weak redistributive aspects of
growth, especially in the rural areas, have contributed to this negative trend. Indeed, in terms
of income inequality, the 2007 HBS reveals that the Gini coefficient remains virtually
unchanged at 0.35 from the 2000/01 HBS. According to the most recent 2007 Household
Budget Survey (HBS), the basic needs poverty ratio stood at 33.4%, decreasing only slightly
from 35.6% compared to the 2000/01 HBS.19
Moreover, the food poverty ratio decreased
modestly from 19% as per the 2000/01 HBS to 17% according to the 2007 HBS.
2.1.19 Tanzania has registered marginal improvement in human development.
Tanzania’s Human Development Index (HDI) in 201120
is 0.466, thus placing the country
slightly above the regional average of 0.463. As regards to progress being made in achieving
its Millennium Development Goal (MDG) targets for 2015, the country is on track to
meeting the indicators for education, but it is still lagging behind in reaching its other
targets, in particular with respect to health, access to water and sanitation and nutrition
(Annex 4). According to the UNDP21
, the rural-urban gap in the provision of basic
necessities is a critical issue in human development in Tanzania. The inability to meet basic
needs in rural areas remains high in spite of Government efforts to narrow such gaps. In
terms of employment, Tanzania’s economic growth has not been sufficiently inclusive. The
mining sector, which is an emerging growth driver, currently provides employment to
17
Technical Annex 1 shows the trajectory change in PEFA scores between 2006 and 2009. 18
Source: World Bank 19
Source of data: “Household Budget Survey 2007 – Tanzania Mainland”, National Bureau of Statistics 2009.
20 Source: “Human Development Report 2011”, November 2011
21 Source: “UNDP Press Release”, November 16
th 2010.
6
12,100 persons whilst 80% of the country’s economically active population remains
employed in subsistence agriculture whose contribution to GDP has decreased from 46% in
2005 to less than 30% in 2010. Moreover, the quality and productivity levels of human
resources remain an obstacle to the country’s competitiveness.
Constraints and Challenges
2.1.20 A critical challenge, in the short-term, is the GoT’s widening fiscal imbalances.
There is need for increased fiscal discipline and more focus on DRM. The GoT’s annual
budget cycles still need to be integrated into a more transparent and realistic medium-term
expenditure and borrowing plan and accompanied by greater oversight systems.
Furthermore, implementation of PFM reforms needs to be accelerated, and financial controls
and accountability strengthened.
2.1.21 Another critical, but more medium-term challenge, is accelerating PSD, which
is currently hindered by the country’s investment climate. This pertains in particular to
access to enabling infrastructure.22
Tanzanian entrepreneurs, from large industrialists, to
small-holders, continue to face crippling energy shortages and poor transport conditions.
Given the country’s limited capacity to finance development infrastructure through own
revenue and Overseas Development Assistance, the GoT’s institutional and regulatory
systems for PPPs needs enhancing to effectively catalyse private sector participation in the
infrastructure sector. There are also regulatory gaps in terms of mandates given to the
various institutions involved in planning, initiating and overseeing PPPs, as well as
institutional capacity constraints in the relevant ministries.
2.2 Overall Development Strategy and Medium-Term Reform Priorities
2.2.1 Tanzania’s long-term strategic development agenda is defined in the “Tanzania
Development Vision 2025”, adopted in 1999. The medium-term objectives for Tanzania
are guided by the new NDS (2010/11-2014/15), launched in December 2010. The new NDS
is Tanzania’s third Poverty Reduction Strategy (PRS) and it centers on three strategic pillars,
namely: (i) growth and reduction of income poverty; (ii) improved quality of life and social
well-being, and (iii) governance and accountability. The new NDS, compared to the
country’s predecessor PRS, is more oriented towards growth and enhancement of
productivity, with a greater alignment of interventions to wealth creation. Recognizing PSD
as a key to achieving sustainable poverty alleviation results, the new NDS places strong
emphasis on growth and enhancement of productivity. In so doing, PSD is recognized as key
to achieving sustainable poverty alleviation results.
2.2.2 In the specific area of PFM, the GoT is in the process of finalizing its PFM
Reform Program Phase IV (PFMRP-IV). Its predecessor program (PFMRP III), initially
covering the 2 years of FY 2008/09 and FY 2009/2010, was extended by one year so as to
implement outstanding reforms. An overall performance assessment of the PFMRP-III was
carried out in September 2011 by Development Partners (DPs), the report is expected to be
finalized by November 2011. Initial findings suggest that although progress has been made
(including the appointment of an Assistant Accountant General, improved policy dialogue
between DPs and the GoT) Phase III is recognized as being activity-and-process-oriented,
and thus does not adequately support the country’s strategic focus. The PFMRP-IV’s
overarching goal is closely related to the new NDS and aims for: (i) economic growth and
poverty reduction (through policy-based budget management and resource allocation,
improved fiscal discipline and sustainable budget balance); (ii) service delivery
improvement (through the introduction of results-based management) and (iii) good
governance (through improved transparency, accountability and efficient controls). The
PFMRP-IV has also been designed to ensure a sequencing and prioritizing of actions to
22
Refer to Technical Annexes3 and 4.
7
enable the delivery of prompt results. An appraisal of the forthcoming PFMRP-IV took
place in September 2011 for Development Partners (DPs) to assess the overall feasibility of
the Key Result Areas (KRAs).23
Preliminary findings24
indicate that: (i) the relevance of
each KRA’s objectives was generally agreed; and (ii) the PFMRP-IV Monitoring and
Evaluation Framework (M&E) should include milestones to assess annual progress. The
PFMRP-IV is expected to be launched in January 2012.
2.2.3 The GoT’s anti-corruption reforms are defined in the National Anti-Corruption
Strategy and Action Plans (NACSAP). NACSAP I, covered the period 2001-2006. Several
achievements were made during its implementation, namely: (a) creation of Offices of the
Prevention of Corruption Bureau in all districts of the country; (b) establishment of new
oversight and watchdog institutions, notably the Human Rights and Good Governance
Commission, and the Ethics Secretariat and (c) the review of the 1971 Prevention of
Corruption Act. Nonetheless, a strategic evaluation of NACSAP I in 2004 exposed several
shortcomings25 that were addressed in NACSAP II. The latter seeks to create enabling
conditions for effective anti-corruption strategies, so as to strengthen the State’s anti-
corruption agencies and enhance accountability systems. A comprehensive review of
NACSAP II is expected to be completed by mid-2012, in order to guide the design of the
successor Action Plan (NACSAP III).
2.2.4 The GoT is also committed to the principles and criteria of the Extractive
Industries Transparency Initiative (EITI) and was accepted as an EITI implementing
country in February 2009. Tanzania met its validation deadline of May 2011 and duly
submitted the report to the EITI Board for consideration. The EITI Board concluded that,
several validation indicators were unmet26, although it agreed to let Tanzania retain its status
as a candidate country. The EITI Board expressed concerns about the reconciliation process,
which determines the discrepancy between the payments made by the extractive industry
companies and the revenues received by the GoT. Thus, a second reconciliation report is due
to be submitted by December 2011, and the necessary corrective measures to address the
five indicators taken, for completed validation by February 2013.
2.2.5 In terms of PSD, the GoT is currently developing a PSD Policy and has adopted
the “Roadmap on the Improvement of the Investment Climate in Tanzania” in 2010.
This Roadmap, aims for an improvement in the country’s investment climate and focuses
specifically on the World Bank’s Doing Business indicators. The Roadmap provides
recommendations relating to: (a) streamlining administrative barriers for potential investors
and; (b) reviewing regulatory and legislative framework for doing business. These
recommendations fall into three categories. The first identifies procedures whose elimination
is a continuing process to simplify the processes of starting-up a business. The second
proposes medium term legislative amendments. The last category looks at legal reforms and
amendments that require longer-term policy changes.
2.3 Bank Group Portfolio Status
2.3.1 Tanzania remains the largest recipient of resources under ADF-XII. The current
projects’ portfolio (Technical Annex 5) consists of twenty-three ongoing operations. This
includes fifteen national projects, two private sector operations and six multinational
operations, amounting to a total commitment of UA 609.9 million. The disbursement rate
for ongoing operations is 22.7% as at 1st November 2011. The portfolio’s focus has been on
project financing, but there is growing emphasis on GBS and sector budget support.
23
There are 5 KRAs: (i) revenue mobilization; (ii) planning and budgeting; (iii) budget execution, transparency and accountability; (iv) budget
control and oversight and (v) cross-cutting issues. 24
Source: Tanzania: PFMRP Phase IV, Draft Appraisal Mission Report, September 12th to 23rd 2011. 25
These include: (a) non-state Actors had not been engaged effectively nor was their role defined adequately; and (b) human, institutional and organizational capacities of the key executing agencies was weak. 26
Indicators that were not met are as follows: (1) reporting templates; (2) ensuring companies report; (3) Government reporting standards; (4)
disclosure of payments and receipts.
8
2.3.2 According to the Bank’s 2011 Country Portfolio Performance Review, the
performance of the portfolio is rated satisfactory, with an assessment score of 2.2 (out
of 3). This portfolio consists of two problematic projects (in the energy and road sectors),
and one potentially problematic projects (in the agriculture sector). The main portfolio
challenges highlighted in the 2011 Country Portfolio Improvement Plan include: limited
knowledge of Bank rules and procedures by project coordination units and delays in project
start-up activities.
III. RATIONALE, KEY DESIGN ELEMENTS, AND SUSTAINABILITY
3.1 Link with the CSP, Analytical Underpinnings and Country Readiness Assessment
3.1.1 Link with CSP: The GECSP is fully aligned with the Bank’s Country Strategy
Paper (CSP) 2011-15 and consistent with the Government’s new NDS (refer to table 2). The
CSP rests on a single overarching theme of supporting Tanzania towards greater
competitiveness to achieve more inclusive growth and comprises of two pillars: (a)
infrastructure development and (b) building an enabling institutional and business
environment.
Table 2: GECSP linkages with the new NDS and the Bank’s CSP
GECSP Component NDS Pillar CSP Pillar Principal reforms supported by the GECSP
Strengthening
accountability, transparency
& oversight of public
resources Governance and
accountability Building an
enabling
institutional
and business
environment
Enhancing budget accountability &
transparency
Improving budget oversight
Increasing DRM Increasing tax revenue generation
Enhancing mineral resources management
Accelerating PSD Growth &
reduction of
income poverty
Improving the business environment and
investment climate
3.1.2 Link with Bank Group Strategies: The three components of the GECSP are
aligned with the GAP 2008-12. The third component (accelerating PSD) is also aligned with
the Bank’s PSD Strategy.27
The three components are all enshrined in the Bank’s Medium
Term Strategy 2008-2012.
3.1.3 Country readiness assessment: Tanzania meets the Bank’s general and technical
prerequisites for Development Budget Support Loan (DBSL), as per the 2004 Guidelines.28
In terms of the general prerequisites, the country has enjoyed political stability and this is
confirmed by its notable performance with respect to international indicators (refer to ¶
2.1.12). Similarly, the assessment relating to the technical prerequisites confirm that the
country remains eligible for a DBSL (refer to table 3).
Table 3: General and Technical Prerequisites for Budget Support
27
Ref: ADB/BD/WP/2004/71/Rev.1, November 2004. 28
Ref: ADF/BD/WP/2003/182/Rev.2, April 2004.
Prerequisite Conditions Technical Observations for Tanzania
GE
NE
RA
L
PR
ER
EQ
UIS
ITE
S
Political stability The country continues to be politically stable, largely peaceful,
and generally free of ethnic problems and labor disputes. The
latest elections were held in October 2010 and were considered
free and fair by international observers.
Economic stability and
Government’s commitment
Tanzania has made significant progress to achieving and
maintaining economic stability, and is regarded as one of the
best performers in Sub Saharan Africa. This economic stability
is partly associated to the reform agenda that the Government
has been implementing over the recent years.
9
Source: AfDB staff mission, July 2011
3.1.4 Analytical work and underpinnings: The design of the Bank’s budget support
operation has been guided by a number of studies and reports (Technical Annex 6)
Conclusions from these upstream studies suggest that: (i) the GoT’s commitment to
economic and financial reforms has increased compared to 2008; (ii) growth has been strong
in spite of the GFC; (iii) public spending needs to be managed and adequately prioritized in
order to protect key social and investment outlays; (iv) implementation of the investment
climate Roadmap has become critical; and (vi) an assessment of anti-corruption efforts
indicates that more progress is needed to combat corruption.
3.2 Collaboration and Coordination with other Development Partners
3.2.1 Tanzania receives GBS from three multilateral29
DPs and nine bilateral30
DPs.
Donor collaboration and coordination on GBS is guided by the “2011-16 Partnership
Framework Memorandum governing GBS”. The GBS Group is led by a Troika (the chair,
the incoming chair and the outgoing chair) that rotates every year. For 2011, the chair is the
European Union, while the incoming chair is represented by DfID and the outgoing chair is
represented by Norway. The GBS policy dialogue for 2011 to 2013 is articulated around the
2011 PAF and its four cluster working groups (Technical Annex 7). The AfDB, through its
Tanzania Field Office (TZFO), is chairing one of the Cluster Working Groups (dealing with
energy, agriculture, infrastructure, natural resources and private sector) and is actively
involved in various sector working groups (notably PFM). Combined GBS commitments for
FY 2011/2012 stand at USD 562.1 million, of which USD 121.0 million has already been
disbursed as at November 2011.
3.2.2 The Bank’s proposed GECSP will complement policy actions and measures
being supported by other DPs through GBS, notably related to PFM and PSD. This
includes for instance the World Bank’s planned support (under PRSC 9) to PPPs and DRM,
and the EU’s, Germany’s and Denmark’s ongoing support to procurement reforms and
external audit scrutiny. Annex 5 summarizes disbursement commitments and key focus
areas of all GBS DPs.
29
AfDB, the European Union and the World Bank. 30
Canada, Denmark, Finland, Germany, Ireland, Japan, Norway, Sweden and the United Kingdom.
TE
CH
NIC
AL
PR
ER
EQ
UIS
ITE
S
Existence of a well-designed
PRSP and effective
implementation mechanisms
The country approved its new NDS in 2010. While building on
its predecessor it is oriented more towards growth and
enhancement of productivity, with greater alignment of
interventions towards wealth creation. A Monitoring and
Evaluation framework is being finalized and an
implementation arrangement is in place.
Macroeconomic viability The MTEF remains viable. Further there is a continued
satisfactory implementation of the PSI program with the IMF.
Strong partnership between
RMC and donors
There is a strong partnership between Tanzania and DPs. GBS
Reviews and PAF revisions are carried out jointly and there is
a fairly smooth policy dialogue between the DPs and the GoT.
Strong partnership among donors There is a strong partnership amongst DPs, including the
AfDB, who are all signatories of the “2011-16 Partnership
Framework Memorandum governing GBS”.
Satisfactory fiduciary review of
PFM system
On the basis of the Bank’s internal FRA, although the
fiduciary risk is deemed to be ‘substantial’, the PFM system
meets the Bank’s minimum requirements for this proposed
GBS operation (Technical Annex 2). In light of the fiduciary
risks, the GECSP has been designed to include safeguard
measures (Annex 6).
The 2010 PFM-RP, using the PEFA methodology, showed that
Tanzania obtained scores of ‘C’ or above in 20 indicators
(Technical Annex 1). The Public Finance Bill was enacted by
Parliament in June 2010 enhancing accountability and
transparency in PFM processes.
10
3.3 Outcomes of Past and On-going Similar Operations and Lessons
3.3.1 The Bank has approved five Policy Based Loans (PBLs) for Tanzania: two
Structural Adjustment Loans (SALs) and three budget support operations totaling
over UA 400 million. The three budget support operations (PRSL I, PRSL II and PRSL III)
were implemented over the period, May 2005 to August 2009. According to the Projection
Completion Reports (PCRs) of these three predecessor GBS operations, the targeted
outcomes were achieved in the areas of: strengthening PFM, improving the business
enabling environment and enhancing DRM (refer to Annex 7). In addition, PRSL I focused
on policy actions within the energy and water sectors, PRSL II focused on micro-finance
and PRSL III on the roads sector.
3.3.2 The GECSP aims to consolidate and deepen reforms supported by the previous
GBS operations. Annex 8 shows the interventions areas of the GECSP compared to the
previous PRSLs, whilst highlighting the greater selectivity in choice of the reform priorities
and the additionality that this fourth operation brings. Moreover, the GECSP’s intervention
areas have taken into account lessons learned (refer to table 4) from the previous PRSLs.
Table 4: Key lessons learned from past operations and related improvement in design of the GECSP
Key lessons learned Key Design principles of GECSP
PR
OJ
EC
T C
OM
PL
ET
ION
RE
PO
RT
&
EV
AL
UA
TIO
N O
F P
BO
s
The conditionality framework should
focus on urgently needed reforms to be
implemented
The conditionality framework focuses on urgent reforms
to be implemented. These have been drawn mainly from
the 2011 PAF.
There is need to deepen the reform
process in the areas of combatting
corruption, improving the private sector
and the investment climate and PFM
The GECSP’s components have been selected to broaden
reforms. Further, the program addresses anti-corruption
reforms as a cross-cutting issue, addressed under each
component.
Budget support operations should be
implemented in parallel to Institutional
Support Projects (ISP) targeting common
priority reforms
The Institutional Support Project for Good Governance31
(ISPGG II) was launched in May 2011. As highlighted in
§3.4, the GECSP & the ISPGG II target common priority
reforms.
Predictability of disbursement from year
to year and in year needs to be improved
since it is important for the GoT’s budget
planning.
Disbursement predictability does not depend only on the
AfDB, but is also subject to fulfillment of disbursement
conditions by the GoT & satisfactory assessment, by the
IMF, of the country’s macroeconomic framework.
3.4 Relationship to On-going Bank Operations
The GECSP will be closely linked with the Bank’s second Institutional Support Project
for Good Governance (ISPGG II) that was launched in May 2011. This project aims to
build the capacity of the GoT in the areas of public procurement, internal and external audit
and DRM. In so doing it will strengthen the institutional capacity required to implement the
PFM reforms supported by the GECSP. The M&E manual for the PFMRP-IV, to be
financed under the ISPGG II, will also help in tracking the GECSP’s expected outcomes,
which are aligned to the GoT’s PFM reform agenda. Moreover, this program will also be
linked to the ongoing Electricity V Project32
, by promoting a more conducive regulatory
environment. Direct synergies will be also be created with the Support to the Strategic
Action Plan for and Vocational and Technical Education Project (TVET)33
, as one of its
objectives is the strengthening of PPPs for delivery of TVET.
3.5 Bank’s Comparative Advantage and Value-added
Intervention areas under the proposed GECSP are areas where the Bank continues to
exercise a leadership role in its Regional Member Countries, in terms of its mandate and its
capacity to deliver. Since adopting the GAP in 2008, the Bank has also streamlined its
approach to its work on governance, anchoring its focus on PFM. In so doing, it has scaled
31
Source: ADF/BD/WB/2010/86, September 2010. 32
Source: ADF/BD/WP/2007/112, approved in 2007. 33
Source: ADF/BD/WP/2002/35, approved in 2002.
11
up its resources and reoriented its policy and institutional actions to respond to the
challenges in key PFM reform areas. In addition, with regards to PSD, the Bank’s proposed
GECSP will bring significant value addition since the World Bank is thus far the main DP
focusing in this area and requires support from other DPs to accelerate implementation of
reforms. The private investment financing experience of IFIs in Tanzania (including the
Bank’s own) also underscores the significance of achieving gains in PSD.
3.6 Application of Good Practice Principles on Conditionality
Overall, the design of the GECSP is in line with the principles on conditionality:
Reinforce ownership: The reform program is fully owned by the GoT and built
around the new NDS and its various reform programs (refer to §2.2).
Agree on coordinated framework: The coordinated framework on which DPs,
including the AfDB, articulate their GBS interventions is the Performance Assessment
Framework (PAF).
Customize accountability framework and modalities of Bank support to country
circumstances: Country systems and monitoring mechanisms will be used for the
implementation of the GECSP. Under the GBS framework, GoT and DPs carry out joint
supervision missions and carry out a review of the PAF’s implementation annually.
Select only actions critical for achieving results as conditions of disbursement: Only
actions that are deemed critical for achieving results have been selected for disbursement
conditions. The 2011 and 2012 disbursement conditions have been selected from the 2011
PAF. For the 2013 disbursement conditions, these have been agreed with the GoT and
would be included in the 2012 PAF.
3.7 Application of ADB policy on non-concessional borrowing
Tanzania is classified as an ADF country, eligible for ADF financing only. Thus, the public
sector has restricted its funding request from the Bank to the ADF window only.
IV. THE PROPOSED PROGRAM AND EXPECTED RESULTS
4.1 Program’s Goal and Purpose
4.1.1 The GECSP’s overarching development objective is to contribute to maintaining
an accelerated growth by strengthening the accountability and transparency of PFM
systems at both the local and national level as well as accelerating PSD. This will be
achieved by improving public sector performance, efficiency and effectiveness in
administration, leading to better service delivery and development results for the population.
4.1.2 The rationale for the GECSP is to support Tanzania in accelerating the
implementation of its reform agenda in PFM, deepen structural reforms to accelerate
private-sector led growth and provide financial resources. The operation will provide the
GoT with financial resources that will contribute in addressing the fiscal imbalances, and
addressing the challenges to poverty reduction, in line with the NDS. In addition, through the
GECSP, the Bank will help Tanzania in diversifying its sources of revenue by focusing on
private sector development.
4.2 Program Components, Operational Objectives and Expected Results
4.2.1 The GECSP will have three components as follows: (a) strengthening the
accountability and transparency of public resources (component 1); (b) improving
DRM (component 2) and (c) accelerating PSD (component 3). The rationale for the
choice of these components is that they are areas in which the GoT needs to urgently
accelerate the implementation of reforms. Further, this will contribute to reducing
Tanzania’s aid dependence by increasing DRM potential, and investment opportunities.
12
4.2.2 Strong complementarity between the GECSP and the Bank’s ongoing ISPGG II, as
indicated in § 3.4, will contribute to reaching these operational objectives. Anti-corruption is
addressed as a cross-cutting theme in the three components since it has an impact both on
the public sector (by increasing the fiduciary risk) and the private sector (by deterring both
domestic and foreign investors). Furthermore, it should be noted that Components 1 and 2
of the GECSP were focus areas under the predecessor GBS (PRSL-III). This strategic choice
was made since it is essential that the Bank continues to support the GoT in maintaining its
momentum to strengthening the accountability and transparency of public resources
(Component 1); and improving DRM (Component 2). In spite of the progress made, there
remain further policy actions that need to be implemented.
Component 1: Strengthened Accountability, Transparency and Oversight of
Public Resources
4.2.3 The first component focuses on the broad area of budget accountability,
transparency and oversight of public resources. The expected outcomes of this component
are articulated around: (i) enhanced budget accountability and transparency and (ii) improved
budget oversight. This will be achieved by focusing specifically on: (i) compliance and
value-for-money in procurement; and (ii) internal and external audit functions.
Budget accountability & transparency: Compliance and value-for-money in procurement
4.2.4 Context & Challenges: the Public Procurement Bill was enacted in 2004. The latter
led to the creation of the Public Procurement Regulatory Authority (PPRA). Institutionally,
the PPRA’s Medium Term Strategic Plan has identified “political interference” from “other
government organs of power” as a challenge that needs to be urgently addressed. In terms of
oversight, the PPRA is mandated to: (i) conduct procurement audits, designed to take account
of the value for money aspect: (ii) undertake administrative reviews of individual tenders at
the request of the bidders and: (iii) conduct detailed investigations on the basis of complaints
received. Alleged anomalies relating to the tender process can be submitted to the PPRA by
bidders (from whistleblowers), or through the CAG on the basis of procurement audits. In the
recent past, there has been criticism of the PPRA regulations, at times, deemed to be
inadequate for ensuring prompt and efficient procurement. Furthermore, although the level of
compliance of Procuring Entities (PEs) to the Public Procurement Act (PPA) and its
regulations, which was an expected outcome under PRSL III, has improved (from 39% to
69% in FY 2006/7 and FY 2011/12), no PE is yet to achieve a 100% compliance level. It
should be noted, that a new PPA was approved on November 14 2011.
4.2.5 GoT policy actions: The PFMRP supports PPRA and significant improvements have
been reported, since 2005, with respect to the key performance indicator for PPRA. This
indicator focuses on ‘competition, value for money and controls in procurement’, and the
three dimensions of this indicator suggest improved behavior in procurement, and thus
enhanced accountability. However, a supportive political environment that facilitates action
to be taken on the basis of PPRA reports will be critical going forward.
4.2.6 Outstanding reforms: The revised 2011 PPA, inter alia, is intended to strengthen
PPRA’s independence and support its efforts in fighting corruption by empowering it to
terminate procurement processes when this happens. More specifically, the amended
procurement legislation is expected to facilitate PPRA’s ability to respond to complaints that
arise from whistle-blowers. Indeed, certain aspects of the Bill raised concerns among by
various stakeholders, and DPs, including the Bank.34
There is also need for the GoT to make
stronger progress on the level of compliance of PEs. In addition, the GoT needs to focus on
legislation that will facilitate a reduction in the incidence of perceived corruption in public
procurement processes.
34
Key concerns relate to provisions allowing: (i) procurement of used items; (ii) contract negotiation of procurement of goods and services; and (iii)
domestic preferences only applied for national bidding.
13
4.2.7 GECSP measures: The Bank will support the GoT in ensuring effective
implementation of the revised 2011 PPA. This will be achieved notably by building the
institutional capacity of PPRA under the ongoing ISPGG II, which in turn will help in
strengthening the compliance levels of PEs in MDAs and LGAs. Thus, under the GECSP, the
PAF outcome indicator relating to compliance levels of PEs shall be monitored. Furthermore,
so as to support PPRA’s role in reducing the misuse of funds and incidence of corruption in
procurement, the Bank will support the GoT in defining the measures needed to finalize and
submit the Whistle-blowers Bill to Parliament (benchmark).
4.2.8 GECSP Expected Outcomes: the average level of compliance of PEs to the PPA
improves from 69% in 2011 to at least 80% in 2014 (PAF indicator).
Budget Oversight: Internal & External Audit Functions
4.2.9 Context & challenges: in Tanzania, the National Audit Office (NAO) is responsible
for auditing all public funds. In recent years, there has been a broad adherence by the NAO to
international auditing standards. Nonetheless, it remains at level 2 (out of 3 levels) on the
audit maturity scale. The legal constraints, which are inconsistent with the standards
established in AFROSAI-E level 3 include: (i) the CAG is appointed by the President not by
the Parliament and; (ii) the NAO operates like any other MDA, and (iii) the NAO’s functions
relating to its budget and human resources’ capacity are not fully autonomous. According to
the 2010 PFM-PR, limited independence and effectiveness of external audit and legislative
scrutiny, remains one of the key fiduciary risks in Tanzania.35
Moreover the scale, scope and
coverage of audits conducted, has increased: the number of entities whose accounts were
submitted for audit, increased from 51 to 167, in FY 2008/09 and FY 2009/10 respectively.36
In addition, the introduction of structured responses, by the Paymaster General, to the audit
recommendations, is a positive step.
4.2.10 GoT policy actions: the GoT has strengthened budget oversight functions through
enactment of the 2008 Public Audit Act (No 11), which empowered and enhanced
operational independence of the CAG and the functions of the Parliamentary Accounts
Committees (PAC). In 2010, the GoT set up the Internal Audit Office in order to provide
technical guidance to internal auditors across all MDAs and LGAs. Recently, an Internal
Auditor General was also appointed. Furthermore, the CAG has taken measures to improve
external audit performance through the introduction of a risk based audit methodology. The
steps taken by to automate the audit process should, in addition, contribute to increased
compliance to financial legislation and regulations.
4.2.11 Outstanding reforms: The quality of the structured responses to audit
recommendations, and the extent of implementation of these recommendations37
is deemed to
be inadequate. This puts into question the value added of the audit exercise and the
effectiveness of the oversight function. Further, and as indicated in ¶ 4.2.8, the limited
independence and effective of external audit and the legislative scrutiny remains a concern.
4.2.12 GECSP measures: For enhanced budget oversight and transparency, the proposed
program will continue to promote legislative scrutiny of external audits, in particular the
timeliness of examination of audit reports by the legislature, which has worsened since 2005
(refer to 2009 PEFA score in Technical Annex 1). This comes in continuity to the support
provided under PRSL III. This will be achieved by building on the gains from the Pubic
Audit Act and complemented by the training activities earmarked for the PAC (benchmark),
under the ISPGG II.
35
External audit and scrutiny is rated as ‘substantial’. 36
Source: 2009/10 CAG Report. 37
During FY 2009/10, 71% of the previous year audit recommendations had not been implemented and the remaining 29% were still in the process
of being implemented (source: 2009/10 CAG Report).
14
4.2.13 GECSP Expected Outcomes: (a) the start of the examination of audit reports by the
Legislature decreases from 6 months to 3 months in 2014 after receipt of the NAO reports in
2010 and 2014 respectively; and (b) CAG audit recommendations increase from 29% full
implementation in FY 2008/09 to more than 50% in FY 2012/13.
4.2.14 In addition, under Component 1 of the GECSP, the Bank will support the GoT’s
overarching PFM reform program, namely the PFMRP-IV. The Bank will maintain a
regular dialogue with the GoT and provide the necessary technical advice to ensure that this
critical Reform Program is successfully launched in January 2012. The policy actions
envisaged under the GECSP are fully aligned to PFMRP IV’s reform priorities, and thus will
significantly contribute to its implementation.
Component 2: Improved Domestic Revenue Mobilization (DRM)
4.2.15 The second component focuses on two areas: (i) improving tax revenue
generation and; (ii) enhancing mineral resource mobilization. Tanzania made steady
progress in DRM, with domestic revenues increasing from 11.2% to 16.2% of GDP between
2002/03 and 2008/09 respectively. However this trend was reversed partly as a result of the
financial crisis and has since stagnated. It is estimated that actual revenue collection (on the
basis of the existing tax structure) fell short of potentially an estimated 6% of GDP in 2008.
Improved Tax Revenue Generation
4.2.16 Context and challenges: There are various challenges that remain to be addressed
with regards to effective and transparent tax policy and administration. This is the reason for
which the GECSP, like its predecessor program (PRSL III), will focus on improved tax
revenue generation. The potential to expand the tax net, for instance by adopting innovative,
and easier to comply with tax regimes for Small and Medium Enterprises (SMEs) and the
informal sector, has not been fully met. In terms of tax exemptions, there is need to ensure
that these benefits are granted efficiently and effectively. It should be noted that between July
2008 and April 2009, tax exemptions led to revenue losses by the Tanzania Revenue
Authority (TRA) of Tsh. 587 billion (USD 403 million). Recommendations from the studies
conducted by the TRA that focus on revenue lost will need to be implemented in order to
improve transparency in the tax regime. Overall, linkages between tax policy and national
development objectives need strengthening and re-alignment, for Tanzania’s industrialization
agenda to be achieved. For higher returns, reforms in tax administration relating particularly
to tax registration, and updating of information systems need to be pursued more rigorously.
4.2.17 There is also considerable revenue to be generated at the local level, where a large
proportion of the Tanzanian population resides38
, and where public service delivery is not as
efficient. Expenditure at the local level represents 20% of the GoT’s total expenditure.
Generally, LGAs receive over 90% of their funds through Central Government transfers.
Since the intergovernmental flow of funds is deemed to be complex, it is critical for LGAs’
revenue generation potential to increase. Currently collection targets are often not met, and
low levels of LGAs’ revenue sources subsequently undermine the need for local
accountability. There are, however, opportunities to raise LGAs’ own resources, for example
through taxation of commercial agriculture, and business related taxes. Ensuring effective
accountability in the management of these resources remains critical.
4.2.18 GoT policy actions: The TRA is currently rolling out its third Corporate Plan
(2008/09-2012/13), with the objectives of: (i) increasing revenue collection; (ii) modernizing
TRA operations; (iii) providing high quality a responsive customer service; (iv) promoting
voluntary tax compliance and; (v) enhancing staff performance. In addition, the GoT’s final
draft of the PFMRP IV includes revenue management as one of its pillars, and focuses
specifically on tax administration and external resource management, and donor
38
In 2010, 73.6% of the population lived in rural areas and the remaining 26.4% in urban areas.
15
coordination. Regarding tax exemptions, TRA is carrying out a study to assess the impact of
revenue loss and beneficiaries. Prioritization of DRM reforms is expected to contribute
significantly to greater predictability and control in budget execution.
4.2.19 Outstanding reforms: The tax system and rate structure does not engender tax
compliance. Although existing legislation defines penalties for non-payment of tax, they are
not adequately harmonized and the penalty thresholds are too low. Absence of guidelines for
issuing penalties, further contributes to inconsistencies in their application. In addition, it is
essential for LGAs to increase mobilization of own resources, which could be done with
amendments to the legislation.
4.2.20 GECSP measures: The Bank will support policy measures, initiated by the TRA,
aimed at supporting transparency of tax payer obligations and liabilities. Specifically this
pertains to the GoT’s plans to review and harmonize taxation laws and non-compliance
sanctions that should enhance compliance to tax regulations, and thus mitigate tax evasive
practices. This exercise will be complemented by the GoT’s efforts to elaborate a
comprehensive taxpayer communication strategy and awareness campaign (benchmark),
targeting civil society, the private sector and secondary schools under PFMRP IV. At the
local level, the GECSP will support the review of LGA legislation (benchmark), aimed at
strengthening the capacity of LGAs for revenue collection.
4.2.21 GECSP Expected Outcomes: Ratio of tax revenues as a percentage of GDP increases
from 16.3% in 2010 to at least 18% in 2014.
Enhanced Minerals Resource Management
4.2.22 Context and challenges: As indicated earlier in ¶ 2.1.7, Tanzania is endowed with
natural resources that are yet to be fully exploited to provide the country with more revenue.
Revenue from the mining sector has thus far had little net fiscal impact on the economy. The
2010 Tanzania Mineral Agency Audit Annual Report indicates that in spite of the volume of
gold produced being worth Tsh 2.2 trillion, the GoT only collected Tsh 61.94 billion in
royalties. Since subscribing to the EITI (¶ 2.2.4), Tanzania has been striving towards greater
transparency in the management of its natural resources, so as to increase revenues.
According to the first EITI reconciliation report, payments made by the main mining and gas
operating companies to the GoT for the FY 2008/2009 and revenues received by government
entities, revealed some significant discrepancies. Notably, mining companies reported having
paid USD 135 million, and government entities reported having received only USD 99
million. In this context, the GoT needs to implement measures that minimizes such
discrepancies, and strengthens accountability in this process.
4.2.23 GoT policy actions: In 2010, Tanzania’s Parliament passed a Mining Bill that
increases royalties paid on minerals to 4% from 3%. In addition, the Mining Act requires
mining companies to be listed on the Dar-es-Salaam stock exchange. This Act was a response
to challenges faced and experiences gained during twelve years of implementing the 2008
Mining Act. In parallel, the GoT continues to work with the support of DPs on rolling out the
EITI work plan. This is expected not only to further integrate principles of transparency in
the NRM value chain, but also to contribute to achieving the broader goals articulated in the
“Africa Mining Vision 2050”.
4.2.24 Outstanding reforms: There is need to establish an enabling and legal framework for
EITI implementation. Corrective measures need to also be put in place by the GoT to
eliminate existing discrepancies between the payments made by the mining companies and
what the GoT effectively receives in terms of revenue. Furthermore there is a need to review
Mining Development Agreements, and ensure that more revenue is generated from the sector
directly to better contribute to maintaining an accelerated economic growth.
4.2.25 GECSP measures: Although it is recognized that Tanzania’s natural resource wealth
is vast, the proposed program will be selective by focusing exclusively on the management of
16
revenue from the mining sector. The program will build on the support that the Bank has
been providing to the TEITI secretariat39
, most recently by financing a stakeholders
workshop for the draft Legal Framework Review Report. To this end, the program will
support the GoT’s efforts to establish an enabling legal and institutional framework for EITI
implementation, and produce in a timely manner, its next reconciliation report. Objective
being to improve the management of revenues from extractive industries, in the medium and
long term.
4.2.26 GECSP Expected Outcomes: variation between payments made by mining
companies and GoT revenues received decreases from 42% in 2010 to less than 10% in 2012.
Component 3: Accelerated Private Sector Development (PSD)
4.2.27 The third component of the GECSP focuses on assisting the GoT’s ongoing
efforts to improve the enabling environment for PSD. All Tanzanian entrepreneurs face
significant infrastructure bottlenecks, an underdeveloped financial sector, a legal and
regulatory framework that remains restrictive as well as weak human and institutional
capacity. In addition, persisting energy crises continue to be one of the key disablers to
accelerating PSD. The current installed power generation capacity amounts to only MW
1,006. This has led to daily load shedding of approximately of MW 275. The main reasons
for this include failed rains, lack of investments in power generation, transmission and
distributions systems in line with demand, legacy effects from earlier emergency responses
and uncertainty over electricity tariff regimes. In this context, under the PSD component, the
expected outcome will be improving the enabling environment and investment climate, with
focus areas on taxation; PPPs and the energy sector.
Improved enabling environment and investment climate
4.2.28 Context and challenges: The GoT defined the Investment Roadmap in 2010 (refer to
¶ 2.2.7) to address the current challenges to PSD. The GoT recognizes the importance of
entrepreneurship and private investment for service delivery and infrastructure development.
Significant changes are underway in the area of PPPs and private sector participation in the
infrastructure sector. In addition, the extent of infrastructure and energy regulatory reform
and restructuring has not been fully implemented. Slow regulatory reform in the energy
sector, despite the 2008 Electricity Act that mandates the Energy Ministry to “restructure the
electricity supply industry with a view to attracting private sector participation” creates a
disincentive to private sector development and reduces investor confidence.
4.2.29 GoT policy actions: The GoT is currently elaborating a PSD policy. In the area of
PPPs, new laws have come into effect and the GoT intends to set up new structures and
processes to promote PPPs. Indeed, PPP legislation was enacted in July 2010 and its
objective is to leverage private sector resources for investment in large scale infrastructure.
Under the forthcoming PFMRP IV, the GoT is planning to elaborate a PPP policy, aimed at
supporting procurement management and financing of infrastructure projects in the public
sector.
4.2.30 Outstanding reforms: There are still significant institutional gaps that exist for a
more robust and responsive PPP framework such as: (i) insufficient alignment between the
PPP legislation and sector legislation relating to institutional mandates for initiating and
managing procurement for PPPs; and (ii) insufficient internal knowledge on the PPP modus
operandi at the MoF’s and sector Ministries’ levels. Linked to factors that affect the PPP
framework, is also the lack of Government capacity to effectively undertake strategic
investment planning, prepare projects for PPP investment, even before undertaking the
tendering and selection processes, which often results in unsolicited bids. These unsolicited
39
Under the Bank’s administrative budget, financial support, amounting to UA 55,000 is provided for the period July 2010 to June 2012.
17
bids result in higher project costs for private sector investors, whereby even the undertaking
of a feasibility study can cost as much as 10% to 15% of total project costs.
4.2.31 GECSP measures: The Bank will provide, through its own resources, technical
assistance to the MoF’s PPP-Unit for the elaboration of PPP manuals40
. The Bank, through
the GECSP will also support the GoT, in defining a PPP Finance Regulation, in order to
grant a clear mandate to the PPP Unit for the management of contingent liabilities (for both
solicited and unsolicited bids). Further to this, the GECSP will support policy reforms aimed
at facilitating tax administration procedures for private sector entities, so as to accelerate and
render more efficient the process, thus contributing to reducing barriers to doing business. In
particular the finalization and adoption of the General Electronic Filing & Payment
Regulations (benchmark) will be prioritized. This will allow increased compliance to tax
payments and minimize incidence of corruption. The Bank through GECSP, also intends to
support the GoT’s planned Energy Sector Review (benchmark), whose scope would include
a power sector performance audit, promoting a more conducive investment climate.
4.2.32 GECSP Expected Outcomes: (a) Total electricity installed capacity in MW increases
from 1,077 MW in 2011 to at least 1,247 MW in 2014 and (b) the time it takes investors in
paying taxes decreases from 172 hours per year in 2010 to 160 hour s per year in 2014.
4.3 Financing Needs and Arrangements
4.3.1 Table 5 presents the Government’s financing needs for fiscal year 2011/12 and
projections through FY 2013/14.
The GBS resources being
provided by DPs amount to Tsh
465 billion in FY 2011/12, of
which the Bank’s contribution
represents 13%. For FY 2012/13
and 2013/14 the Bank’s
contribution to total GBS
resources will be 13% and 16%,
respectively.
4.4 Beneficiaries of the
Program
4.4.1 The beneficiaries of the
program will be the citizens of
Tanzania. They will gain from
more accountable and
transparent PFM systems, and
better service delivery resulting
from increased DRM. The
comprehensive taxpayer
communication strategy and
awareness campaign will
directly benefit civil society and
the private sector, and provide
greater clarity on tax liabilities. Tanzanian entrepreneurs of all sizes will be better able to
contribute to the country’s inclusive growth and development trajectory, by operating within
a more conducive business enabling environment, with more effective economic
infrastructure and with less bureaucratic procedures, in particular pertaining to how they pay
40
The Bank is financing this activity through its administrative budget. As of November 2011, a consultant is
being recruited to carry out this exercise.
Table 5: GoT Financing needs for FY 2010/11 to FY 2013/14
18
their taxes. Both foreign and local investors will also be incentivized to pursue investment
opportunities in an environment where there is more transparency and less risk of corruption.
As a result of a more robust PPP institutional set up and policy environment, the Tanzanian
youth, targeted through the TVET project, will also gain from better quality in vocational
education.
4.5 Impact on Gender
4.5.1 The GoT has demonstrated commitment through its PAF, to ensuring progress
in health services especially for women (maternal health care) and education. By
including the satisfactory GBS annual review (that assesses the PAF performance) as a
disbursement condition, the GECSP is indirectly supporting gender development. Further,
through the GECSP, women entrepreneurs will benefit from greater access to business
opportunities. In addition, as they comprise 20% of professional staff engaged in accounting
and procurement, enhanced implementation of reforms will lead to strengthened capacity,
and increased exposure of best practices in PFM amongst women.
4.6 Environmental Impact
4.6.1 The GECSP has been classified under Category III in June 2011, in line with the
Bank’s procedures for the environmental and social impact assessments. Given that the
GECSP is a GBS operation, the policy reforms it will support will not have any direct
negative impact on the environment.
V. IMPLEMENTATION, MONITORING AND EVALUATION
5.1 Implementation Arrangements
5.1.1 Responsible institution: The overall responsibility for the implementation of the
program lies with the Ministry of Finance (MoF).
5.1.2 Disbursement: The proceeds of the loan, amounting to UA 100 million, will be
disbursed in three tranches. The first tranche, of UA 25 million, is expected to be disbursed in
FY 2011/12, followed by the second tranche of UA 35 million in FY 2012/13. The last
tranche of UA 40 million would be disbursed in FY 2013/14. This tranching approach is
being adopted as a ‘fiduciary’ safeguard measure. Each disbursement is conditioned upon the
satisfactory assessment of the macroeconomic environment by the IMF as well as satisfactory
achievement of specific disbursement triggers by the GoT. The loan resources shall be
transferred to the treasury account at the Bank of Tanzania. The Borrower shall transmit,
within seven working days following each disbursement, a written certification from the
MoF, confirming receipt, in the treasury account, of the exact amount of disbursed funds.
5.1.3 Procurement: National country systems, including for procurement will be applied.
5.1.4 Audit: the loan proceeds’ utilization will be audited in conformity to the “2011-2016
Partnership Framework Memorandum”. Hence the GoT will provide all GBS DPs, including
the AfDB, with the CAG’s annual audit report on the Public Accounts of Tanzania. This
report will be presented to the GBS DPs promptly after submission to the Parliament, due
nine months after the end of the fiscal year covered. The NAO will, where it determines that
the general audit report is unlikely to be available within the specified time, commission a
financial or performance audit by a local independent qualified and recognised auditor to
carry out an audit of selected components or samples from the National Budget in order to
allow an overall assessment of compliance to financial management regulations.
5.2 Monitoring and Evaluation Arrangements
5.2.1 The MoF will be responsible for the monitoring and evaluation of the GECSP.
Specifically, it will be in charge of collecting the data necessary to assess implementation
progress. In addition, the Bank will monitor program implementation through joint
19
supervision missions and the GBS Annual Review Reports, in coordination with other DPs
and by maintaining a regular dialogue with the GoT, mainly through TZFO.41
VI. LEGAL DOCUMENTATION AND AUTHORITY
6.1 Legal Documentation
A Loan Agreement between the United Republic of Tanzania (“Borrower”) and the African
Development Fund (“Fund”), for the maximum amount of UA 100 million.
6.2 Conditions Associated With Bank’s Intervention
A. Prior Actions for presentation of the Program to the ADF Board
6.2.1 The GECSP shall be presented to the ADF Board upon the fulfillment of the
following conditions:
The Borrower shall obtain a Satisfactory 2010 General Budget Support (GBS) Annual
Review from GBS Partners (¶ 5.2.1)
[Evidence required: Copy of the 2010 GBS Annual Review Report and a letter confirming overall
satisfactory review of the Performance Assessment Framework (PAF) from the Chair of the GBS
Partners.]
B. Conditions precedent to entry into force of the Loan Agreement
6.2.2 The entry into force of the Loan Agreement shall be subject to the fulfillment by the
Borrower of the provisions of section 12.01 of the General Conditions Applicable to Loan
Agreements and Guarantee Agreements of the African Development Fund (Sovereign
Entities).
C. Conditions precedent to the disbursement of the first tranche in FY 2011/12
6.2.3 The obligation of the Bank to disburse the first tranche of the Loan in the amount of
UA 25 Million shall be conditional upon the entry into force of the Loan Agreement and the
fulfillment of the following conditions:
The Opening of an Account at the Bank of Tanzania (BoT) into which Loan proceeds will be
disbursed;
The Borrower shall have obtained an endorsement of its Fourth Public Financial Management
Program (PFMRP IV) from the PFM Steering Committee (¶ 4.2.14).
[Evidence required for first tranche disbursement: (1) Original letter from BOT with bank account details; (2) Copy of final version of the endorsed PFMRP IV; and (3) Letter of
endorsement of PFMRP IV document from PFMRP Steering Committee Chair.
D. Conditions precedent to the disbursement of the second tranche in FY 2012/13
6.2.4 In addition to the evidence of the satisfactory review of the IMF PSI, the
disbursement of the second tranche in the amount of 35 Million will be effected upon
fulfillment of the three conditions hereafter:
The Borrower shall have obtained a satisfactory review of 2011 GBS Annual Review from
the GBS Partners (¶ 5.2.1);
The Borrower shall have submitted to the Extractive Industry Transparency Initiative (EITI)’s
International Secretariat the second EITI reconciliation report (¶ 4.2.25); and
The Borrower shall have established an operational Private Public Partnership (PPP) unit
within the MoF (¶ 4.2.31).
[Evidence required for second tranche disbursement: (1) IMF Press Communiqué; (2) Copy of
2011 GBS Annual Review Report; (3) Letter confirming overall satisfactory review of the 2011
PAF from the Chair of the GBS Partners; (4) Copy of 2nd
EITI reconciliation Report; (5) Copy of letter transmitting EITI reconciliation Report to the International EITI Secretariat; (6) Copies of
PPP procedures manual; and (7) Letter from MoF confirming staffing composition of PPP unit.
41
Program supervision is to take place during the GBS Annual Review when the GoT’s progress in achieving PAF indicators is monitored.
20
E. Conditions precedent to the disbursement of the third and last tranche in FY 2013/14
6.2.5 In addition to the evidence of the satisfactory review of the IMF PSI, the
disbursement of the third tranche in the amount of 40 Million will be effected upon
fulfillment of the three conditions hereafter:
The Borrower shall have obtained a satisfactory review of its 2012 GBS Annual Review from
the GBS Partners (¶ 5.2.1);
The Borrower shall have submitted to its Parliament an Extraction Industry Transparency
Initiative (EITI) Bill and related regulations (¶ 4.2.25); and
The average level of compliance by the Borrowers’ Procuring Entities with the Public
Procurement Act shall have met the 2012 PAF target. (¶ 4.2.7 & 4.2.8).
[Evidence required for third tranche disbursement: (1) IMF Press Communiqué; (2) Copy of 2012 GBS Annual Review Report; (3) Letter confirming overall satisfactory review of the 2012 PAF
from the Chair of the GBS Partners; (4) Copy of EITI Bill; and (5) Letter from MoF evidencing
compliance of PEs with the Public Procurement Act (PPA).
6.3 Compliance with Bank Group policies
6.3.1 The objectives of the GECSP are in line with all applicable Fund policies; especially,
those pertaining to budget support operations as stipulated in the Guidelines on Development
Budget Support Lending (28 April 2004).
VII. RISK MANAGEMENT
7.1 The risks and mitigation measures for the program are presented in table 6:
Table 6: GECSP risks and mitigation measures
Risk Mitigation measures
Increasing fiscal challenges: Continued difficulties in
meeting revenue collection targets, declining GBS as
well as external shocks arising from rising commodity
prices pose significant fiscal uncertainties.
The Bank will pursue its efforts to further coordinate
its policy dialogue with other DPs. Support will also
be given to developing enhanced interventions
targeted in key reform areas, notably through this
proposed operation and the ISPGG II.
Corruption: delays in the adoption of essential anti-
corruption legislation risks diminishing GoT credibility
and perceived commitment to tackling corruption, and
undermining efforts at enhancing transparency and
accountability in the management of public finances.
The GoT has recently put in place its NACSAP M&E
Framework, key to tracking reforms and actions
aimed at reducing incidents of corruption in both the
public and private sectors. The GECSP is prioritizing
policy measures to that mitigate corruption in PFM (in
particular in PFM and tax collection and
administration)
Lack of Government capacity to implement reforms: this
could undermine efforts in improving financial and
economic governance in Tanzania.
The Bank has approved the ISPGG II, which will help
in building the capacity of key PFM institutions.
Slow approval of legislation by Parliament: Parliament
has a track record of taking long to approve pieces of
legislation, leading to delays in implementation of key
reforms.
The GECSP is supporting reforms that will accelerate
legislative scrutiny in particular of audit reports. The
ISPGG II in addition will be training members of the
PAC.
The GECSP does not include triggers or benchmarks
that rely on parliament approval, only submissions to
parliament from the executive.
VIII. RECOMMENDATION
8.1 Management recommends that the Government of the United Republic of Tanzania
be granted an ADF loan not exceeding UA 100 million, in the form of GBS, based on the
conditions, stipulated in the present report.
I
Annex 1: Letter of Development Policy
II
III
IV
V
VI
VII
VIII
IX
X
Annex 2 : Operations Policy Matrix
Note: Triggers for disbursement are in bold
Strategic Reform Measures
Time
Frame
Responsible
Agency
Bank CSP Pillar
1. Strengthened Accountability Transparency and Oversight of public resources
BUILDING AN
ENABLING
INSTITUTIONAL
AND BUSINESS
ENVIRONMENT
Enhance
budget
accountability
and
transparency
1. The average level of compliance by
the Procuring Entities with the Public
Procurement Act shall have met the
2012 PAF target
December
2013
PPRA
2. Complete preparation of Whistleblowers
Bill and present to Parliament
March 2012 PCCB
Improve
budget
oversight
3. CAG audit recommendations increase
from 29% full implementation in FY
2008/09 to more than 50% in FY 2012/13.
December
2012 MoF
1. Improved Domestic Resource Mobilization
Increased tax
revenue
generation
4. Review of tax legislation and non-
compliance sanctions
December
2012
TRA
5. Review of Local Government Legislation December
2013
PMORALG
Improved
natural
resource
management
6. Second Reconciliation report submitted December
2011
EITI/MoF
7. TEITI law and regulations finalized December
2012
MoF
3. Accelerated Private Sector Development
Improved
enabling
environment
and investor
confidence
8. Operationalization of PPP unit within
MoF
December
2011
MoF
9. PPP Finance Regulation endorsed by GoT December
2012
MoF
10. General Electronic Filing and Payment
Regulations published as Government’s
notice
December
2012
MoF
11. Energy Sector Review December
2011
Ministry of
Energy and
Mining
XI
Annex 3: IMF Press Release on Completion of Tanzania’s Second PSI Review
Concluding Statement by the IMF Mission to Tanzania
Press Release No.11/401
November 7, 2011
An International Monetary Fund (IMF) mission, led by Mr. Peter Allum, visited Dar es Salaam during
October 26–November 7, 2011 to conduct discussions for the third review under the Policy Support
Instrument (PSI). The mission met with Finance Minister Mkulo, Bank of Tanzania Governor Ndulu, and
other senior officials, as well as representatives of the private sector, civil society, and development
partners. The mission wishes to thank the authorities for their warm hospitality, close collaboration, and
the high quality of the discussions.
At the conclusion of the mission in Dar es Salaam, Mr. Allum issued the following statement:
“Despite recent power shortages, Tanzania’s economy continues to grow strongly, expanding 6.3 percent
in the first half of 2011. Core inflation, measured excluding food and energy components, remains in
single digits, while headline inflation has approached 17 percent (year-on-year), boosted by global
energy prices, food price effects from the drought in the Horn of Africa, and the recent depreciation of
the shilling. Public spending has risen as a share of gross domestic product (GDP) in recent years to
deliver significant growth in local government health, education and other social programs as well as
scaled up investments in roads and other infrastructures. However, overall recurrent spending has
outpaced revenue and grant financing, contributing to growing fiscal deficits and a rising public debt
stock.
“Under the PSI program through June 2011, the Bank of Tanzania’s reserve money targets were met and
foreign commercial borrowing was kept well within program limits. However, partly due to the shortfall
in commercial borrowing, domestic financing of the budget was higher than planned and the target for
accumulating net international reserves was missed. Structural reforms are moving forward, notably to
strengthen debt management capacity.
“Discussions during the mission focused on ensuring that public spending does not exceed the available
fiscal space; setting the right policy mix for reducing inflation; and the financial implications of
Tanzania’s emergency power plan.
“It was agreed that the budget deficit in 2011/12 should be allowed to exceed the earlier programmed
level (6 percent of GDP) to help finance the emergency power plan and accommodate expanded social
spending. At the same time, savings will be implemented in non-priority programs, ensuring that the
deficit is reduced from year-ago levels to around 6½ percent of GDP. This fiscal tightening will also help
the disinflation effort.
“The authorities intend to pursue prudent fiscal policies in 2012/13 and beyond to stabilize Tanzania’s
rising public debt, projected to end this year at close to 42 percent of GDP. The government has agreed
that recurrent spending in the 2012/13 budget should not exceed the financing provided by revenues and
grants. This will require continuing efforts to prioritize spending and/or increase revenue collections.
“The authorities will maintain tight liquidity conditions to help reduce the demand for foreign exchange
and stem inflationary pressures. The floating exchange rate regime will be maintained, and the
accumulation of international reserves will benefit in the coming months from new donor funding and
other credits.
“The government’s emergency power plan combines public and private investment in new thermal
power capacity, with initial investments having already reduced the frequency of load-shedding. The
purchase cost to the state power utility of the new power supplies is relatively high, and the government
recognizes that early steps will be needed to strengthen the power utility’s finances.
“Reflecting discussions in these and other areas, the authorities and the mission reached understandings,
ad referendum, on economic policies and reforms that could be supported under the PSI. The IMF
Executive Board is expected to take up the third PSI review in January 2012.”
XII
Annex 4: Tanzania’s Comparative Socio-Economic Indicators
Year Tanzania AfricaDeveloping
Countries
Developed
countries
Basic Indicators Area ( '000 Km²) 945 30 323 80 976 54 658Total Population (millions) 2010 45.0 1,031.5 5,659 1,117Urban Population (% of Total) 2010 26.4 39.9 45.1 77.3Population Density (per Km²) 2010 47.7 34.0 69.9 20.4
GNI per Capita (US $) 2009 500 1 525 2 968 37 990Labor Force Participation - Total (%) 2010 48.9 40.1 61.8 60.7Labor Force Participation - Female (%) 2010 49.3 41.0 49.1 52.2Gender -Related Dev elopment Index Value 2007 0.527 0.433 0.694 0.911Human Dev elop. Index (Rank among 169 countries) 2010 148 n.a n.a n.aPopul. Liv ing Below $ 1 a Day (% of Population) 2007 67.9 42.3 25.2 …
Demographic Indicators
Population Grow th Rate - Total (%) 2010 2.9 2.3 1.3 0.6Population Grow th Rate - Urban (%) 2010 4.7 3.4 2.4 1.0Population < 15 y ears (%) 2010 44.7 40.3 29.0 17.5Population >= 65 y ears (%) 2010 3.5 3.8 6.0 15.4Dependency Ratio (%) 2010 91.8 77.6 55.4 49.2Sex Ratio (per 100 female) 2010 99.5 99.5 93.5 94.8Female Population 15-49 y ears (% of total population) 2010 22.8 24.4 49.4 50.6Life Ex pectancy at Birth - Total (y ears) 2010 56.9 56.0 67.1 79.8Life Ex pectancy at Birth - Female (y ears) 2010 57.7 57.1 69.1 82.7Crude Birth Rate (per 1,000) 2010 40.9 34.2 21.4 11.8Crude Death Rate (per 1,000) 2010 10.7 12.6 8.2 8.4Infant Mortality Rate (per 1,000) 2010 59.8 78.6 46.9 5.8Child Mortality Rate (per 1,000) 2010 96.5 127.2 66.5 6.9Total Fertility Rate (per w oman) 2010 5.5 4.4 2.7 1.7Maternal Mortality Rate (per 100,000) 2008 790.0 530.2 290.0 15.2Women Using Contraception (%) 2005-08 … … 61.0 …
Health & Nutrition Indicators
Phy sicians (per 100,000 people) 2006 1.0 58.3 109.5 286.0Nurses (per 100,000 people)* 2006 16.8 113.3 204.0 786.5Births attended by Trained Health Personnel (%) 2005-08 43.4 50.2 64.1 …Access to Safe Water (% of Population) 2008 54.0 64.5 84.3 99.6Access to Health Serv ices (% of Population) 2005-08 … 65.4 80.0 100.0Access to Sanitation (% of Population) 2008 24.0 41.0 53.6 99.5Percent. of Adults (aged 15-49) Liv ing w ith HIV/AIDS 2007 6.2 4.9 0.9 0.3Incidence of Tuberculosis (per 100,000) 2009 183.0 294.9 161.0 14.0Child Immunization Against Tuberculosis (%) 2009 93.0 79.9 81.0 95.1Child Immunization Against Measles (%) 2009 91.0 71.1 80.7 93.0Underw eight Children (% of children under 5 y ears) 2005-08 16.7 30.9 22.4 …Daily Calorie Supply per Capita 2007 2 032 2 465 2 675 3 285Public Ex penditure on Health (as % of GDP) 2008 5.1 5.7 2.9 7.4
Education Indicators
Gross Enrolment Ratio (%)
Primary School - Total 2009 104.9 102.7 107.2 101.3 Primary School - Female 2009 104.9 99.0 109.2 101.1 Secondary School - Total 2009 27.4 37.8 62.9 100.1 Secondary School - Female 2009 24.1 33.8 61.3 99.6Primary School Female Teaching Staff (% of Total) 2009 49.1 47.0 60.5 81.4Adult literacy Rate - Total (%) 2008 72.6 64.8 80.3 98.4Adult literacy Rate - Male (%) 2008 79.0 74.0 86.0 98.7Adult literacy Rate - Female (%) 2008 66.3 55.9 74.8 98.1Percentage of GDP Spent on Education 2008 6.8 4.6 3.8 5.0
Environmental Indicators
Land Use (Arable Land as % of Total Land Area) 2008 10.8 7.8 10.6 10.9Annual Rate of Deforestation (%) 2005-09 … 0.7 0.4 -0.2Annual Rate of Reforestation (%) 2005-09 … 10.9 … …Per Capita CO2 Emissions (metric tons) 2009 0.2 1.1 2.9 12.5Last update: May 2011
Sources : AfDB Statistics Department ; World Bank: World Development Indicators;
UNAIDS; UNSD; WHO, UNICEF, WRI, UNDP; Country Reports.
Note : n.a. : Not Applicable ; … : Data Not Available.
XIII
Annex 5: Tanzania’s Development Partners and Commitments for FY 2011/12
Development Partner
Total Commitments Annual Performance
Tranche
Tanzanian Shillings*
USD equivalent*
Key Focus Areas under GBS & complementary with the GECSP
Own
Currency Amount Amount of
Total Commitments
AfDB
UA 25,000,000 59,404,582,500 40,008,000
Public Financial Management Private Sector Development
World Bank
USD 75,000,000 94,742,368,906 75,000,000
Public Financial Management Private Sector Development
European Union
EUR 73,000,000 24,000,000 169,686,269,675 103,780,473
Public Financial Management
Canada
CAD 30,000,000 51,052,772,329 31,223,981
Public Financial Management
Denmark
DKK 90,000,000 28,072,204,088 17,169,018
Anti-corruption Public Financial Management
Finland
EUR 15,000,000 34,868,260,274 21,325,500
Anti-corruption Public Financial Management Natural Resources Management
Germany
EUR 10,000,000 2,100,000 23,245,506,850 14,217,000
Local Governance and Decentralization
Ireland
EUR 10,000,000 1,200,000 23,245,506,850 14,217,000
Public Financial Management
Japan (1)
JPY 1,500,000,000 23,341,261,824 18,477,421
Anti-corruption Public Financial Management Private Sector Development
Sweden
SEK 375,000,000 97,090,174,087 59,380,551
Public Financial Management
Norway
NOK 200,000,000 59,443,386,571 36,355,698
Public Financial Management
United Kingdom
GBP 80,000,000 214,086,919,276 130,936,002
Anti-corruption Public Financial Management
TOTAL 878,279,213,230 562,090,644
* Exchange rate used to convert own currencies to Tsh and then to USD is the Bank of Tanzania buying rate of May 12th 2011.
(1) Strictly non-committal
XIV
Annex 6: Fiduciary Risks and Safeguards under GECSP
Key Findings Recommendations GECSP safeguards Budget
Risk of controlling expenditure
against approved budget, and effectiveness in collection of tax payments is substantial
Extent of unreported government operations and transparency of inter-government fiscal relations show deterioration.
Adhering to budget
ceilings and having realistic revenue forecasts
Intervention through reforms programs under PFMRP IV.
Supporting endorsement and
implementation of PFMRP IV.
Supporting DRM reforms and tax collection efforts that should improve medium term budget predictability.
Capacity building of MoF policy analysis department for better revenue forecasting (ISPGG II)
Audit and reporting
Quality and timeliness of annual financial statements, remains a challenge
Despite structured response to recommendations from paymaster general, action appears limited.
Strengthening the Internal and external audit committee functions.
Follow up on procurement of ICT to upgrade IFMIS under PFMRP III, and roll out to other districts.
Monitoring improvements in capacity of Public Accounts Committee (PAC) members (ISPGG II)
Procurement Improvements in compliance to legal and regulatory requirements noted.
Anecdotal evidence however stills questions the integrity of the actual selection process at both central and local government
Enforce contract management.
Supporting changes to procurement indicators to reflect more accurately the evaluation process and value for money issues
Corruption Some evidence that petty corruption is being addressed, but incidence of bribery and petty corruption is still high.
The 2009 corruption survey shows lack of control and accountability of public funds by officials is one of the main causes of corruption
Gap analysis and corruption strategy using the 2009 Anti-corruption survey.
Review of NACSAP II finalized by October 2011, and NACSAP III started in early 2012.
Reducing incidence of corruption in procurement by supporting legislation that empowers PPRA to end incorrect procurement processes.
Supporting review tax legislation, that will strengthen non-compliance sanctions, and increasing tax payer awareness to mitigate the tax evasion culture.
XV
Annex 7: Achievements under PRSL I, PRSL II and PRSL III
Expected Outcome Actual Outcomes
(as per Project Completion Reports )
PO
VE
RT
Y R
ED
UC
TIO
N S
UP
PO
RT
LO
AN
I
Promotion of an enabling environment for private sector development
Review and implementation of a new business licensing environment, easing of the regulatory burden and simplification of costly procedures as contained in the Business Licensing Act No. 25, 1972
Approval of Position Paper on New Business Licensing System
Development of microfinance services
GoT gazetting the regulations that will govern implementation of the Microfinance Act passed by Parliament in February 2003
Financing and gazetting of the microfinance regulations
Strengthening PFM
Establishment of PFMRP Management Structure
GoT to take measures to improve the procurement system on the basis of the findings of the 2003 CPAR.
Manager and Coordinator appointed and PFMRP secretariat established.
Submission of amended Procurement Bill to Parliament in November 2004 & its enactment in February 2005
Issuance of Gazette instructing local authorities to reconstitute District Tender Boards in line with new procurement regulations.
PO
VE
RT
Y R
ED
UC
TIO
N S
UP
PO
RT
LO
AN
II
Growth and reduction of Income poverty
Completion of infrastructure review encompassing roads, communication and transport.
Strengthened institutional governance structures, for the Energy and Water sectors.
Submission of a bill for the “Roads Act” to Parliament
Appointment of the Director General and members of the Board of Directors of the Energy, Water, and Utilities Regulatory Authority (EWURA)
Water Sector review undertaken
Enhance Private Sector Development
More conducive business enabling environment and regulatory framework
The undertaking of a review of the Business Environment Strengthening for Tanzania Program (BEST)
Submission of a draft report on the ongoing reforms of the Regulatory Licensing Regime.
Enhanced Public Financial Accountability and Transparency
Strengthened PFM information systems for improved predictability of flow of funds.
A computer-based Integrated Financial Management System (IFMS) is in operation and has helped the tracking of the flow of resources from the Treasury to spending units in Ministries and districts.
A new legislation against corruption was enacted and the anti-corruption Unit in the Office of the President became highly visible and helped sustain the gains made in economic governance.
XVI
PO
VE
RT
Y R
ED
UC
TIO
N S
UP
PO
RT
LO
AN
III
Enhance revenue mobilization
Improved reporting systems for transparent and accountable systems of license allocation
Non-tax revenue to increase to 3% of GDP by the end of the Corporate Plan Period
Developed an action plan to improve accountability and transparency in managing natural resources.
A Study on non-tax revenue has been finalized and recommendations being considered by GoT.
Non-tax revenues in the course of FY 2008/09 amounted to Tsh 138 million compared to the target of Tsh 121 million. The amount collected represented about 5% of GDP.
Procurement Strengthening
Progress in level of PE compliance to increase from 39% to 49%
Greater predictability and availability of medium-term resources to PEs for more financial autonomy and accountability to MDAs and LGAs by 2010
Compliance levels improved from 39% and 43% in FY 2006/07 and FY 2007/08 respectively to about 66% in FY 2008/09
Greater predictability and availability of medium-term resources to PEs is ensured through the multi-year rolling MTEF and through the submission of annual procurement plans with the budget estimates
Strengthen Audit Functions
Transition of NAO from level 1 to level 3 AFROSAI-E capability model
Timely preparation of audit reports and increase in unqualified audit reports
The NAO has fulfilled the conditions for attaining level 3 of AFROSAI, through submission of the Audit Bill (Feb. 2008)
For the third consecutive year, the audited GoT accounts for FY 2006/07 were released within the statutory nine months.
Improve governance structures and accountability systems of the road sub-sector
Appointment of TANROADS Board members and establishment of Independent Board
Increased capacity within the agency and better supervision and implementation of road projects
Enhanced performance of Bank portfolio of infrastructure projects
Improvement in the quality and maintenance of road networks
Reduced time taken to implement road projects
Improved autonomy of TANROADS is anticipated over the medium-term to improve the efficiency and reduce the cost of road transportation in the country. It is also expected that the quality of the Bank’s portfolio of the road sub-sector be improved.
The Bank’s previous PRSLs: have been consistently focused on policy reforms in the areas of Private Sector Development (PSD)
and Public Financial Management (PFM). On PSD the focus has been on assessing and strengthening ongoing regulatory reforms for
a more conducive business enabling environment. On PFM, the focus has been on supporting the framework and institutional
arrangements under which PFM reforms can be carried out. This also included establishing the necessary management information
systems. Consistent themes within PFM have been procurement, internal and external scrutiny of the budget and revenue
mobilization. Anti-corruption efforts have also been supported, but by looking to improve governance and accountability systems of
the road sub-sector, and as such reduce leakages.
GECSP is more selective in its intervention areas: Its value added in this context: lies in how it (i) consolidates previous gains
achieved in reform areas related to PSD and PFM; (ii) deepens and expands reforms by focusing on different aspects of previously
supported reform priorities (e.g. support to revenue mobilization under PRSL III emphasized non tax revenue, whereas under the
GECP the focus is tax revenue and revenue from mineral resources) and : (iii) introduces new policy measures to pursue that reflect
national priorities at the time of appraisal (e.g. by mainstreaming corruption throughout all components, especially focusing on
procurement, and focusing on PPPs and the energy sector which is an important PSD enabler).
XVII
Annex 8: Intervention Areas of GECSP Compared to the Bank’s predecessor GBS Operations
PRSL I PRSL II PRSL III GECSP
INTERVENTION AREAS
Strengthening PFM
Enhanced Public Financial
Accountability and Transparency
Strengthening PFM Strengthening the accountability and
transparency of public resources
- PFMRP Management Structure
- Procurement systems
- PFM information systems for
predictability of flow of funds.
- Internal Audit functions
- Procurement systems
- Internal and External Audit
- Compliance and value-for-money in
procurement (also focusing on reducing
corruption)
Enabling environment for PSD Enhance PSD Accelerated PSD
Business licensing environment - Regulatory licensing regime - PPP environment
- Improving payment of taxes by investors
(also focusing on reducing corruption)
- Energy Sector Review
Enhance Revenue Mobilization Improved Domestic Revenue Mobilization
(DRM)
- Reporting systems for
transparent and accountable
systems of license allocation
- Improved tax revenue generation
- Enhanced mineral resources management
(also focusing on reducing corruption)
Development of microfinance
services
Growth and reduction of income
poverty:
Improve governance structures
& accountability systems of the
road sub-sector (also focusing
on reducing corruption)
- Water sector Review
- Energy Sector (focus on the
Regulatory authority)
TANZANIA
GOVERNANCE AND ECONOMIC COMPETITIVENESS SUPPORT PROGRAM (GECSP)
CORRIGENDUM
Page 15, paragraph 4.2.23, 3rd sentence:
Instead of: “GoT policy actions: This Act was a response to challenges faced and experiences gained during twelve years of implementing the 2008 Mining Act”.
Read: “GoT policy actions: This Act was a response to challenges faced and experiences gained during twelve years of implementing the 1998 Mining Act”.
Page 19, paragraph 6.2.3:
Conditions precedent to the disbursement of the first tranche in FY 2011/12
Instead of: “The Opening of an Account at the Bank of Tanzania (BoT) into which Loan proceeds will be disbursed”;
Read: “The Borrower shall have submitted to the Fund the details of the treasury account at the Bank of Tanzania destined to receive GBS Partners’ financial contributions for the program”.
Evidence required for first tranche disbursement
Instead of: “(2) Copy of final version of the endorsed PFMRP IV; and (3) Letter of endorsement of PFMRP IV document from PFMRP Steering Committee Chair.”
Read: “(2) letter of endorsement of the PFMRP-IV Strategy from the PFMRP Steering Committee Chair and a copy of the endorsed document.”
All the other conditions precedent to disbursement and the evidence required remain the same.
Page 20, paragraph 6.2.5:
Evidence required for third tranche disbursement:
Add: (6) Copy of the transmittal letter from the GoT to the Parliament submitting the EITI Bill
All the other conditions precedent to disbursement and the evidence required remain the same.
Page vii, Table 1: Results Based Logical Framework – outcome1.1 enhanced budget accountability and transparency:
Instead of: baseline - 69% 73%
Read: Baseline – 69%