Tanzania General Budget Support Programme National Implementing

Transcription

1 PROGRAMME DOCUMENT Country: United Republic of Tanzania Title: Tanzania General Budget Support Programme National Implementing Partners: Ministry of Finance Starting date: January 2011 Duration: Overall budget: DKK 615 million Comp. budget: Budget Support 610 Technical Studies, reviews and preparation of Future programme support 5 Total 615 Signatures: On behalf of the Government of the United Republic of Tanzania On behalf of the Embassy of Denmark Signature Signature Title Title Date Date 1

2 Table of Contents Executive Summary Introduction Justification for the provision of General Budget Support Poverty reduction strategy Macroeconomic and fiscal framework Governance Public financial management system and reforms General Budget Support Experience of previous budget support Institutional set-up The GBS Group The Cluster and Sector Working Groups The Performance Assessment Framework The GBS Annual Review Reporting Danish Programme support to the implementation of the PRS The fixed tranche The performance tranches Danish participation in the GBS dialogue Audits Cross-cutting issues and priority themes Risks...28 Annexes...30 A1. Ten budget principles...30 A2. Assessment of the poverty strategy...39 A3. Assessment of the macroeconomic and fiscal framework...43 A4. Assessment of Governance...46 A5. Assessment of the public financial management system and reforms...49 A6. Annual cycle of key GBS events/tasks...52 A7. Indicative example of how to assess and calculate the MDG-tranche...64 A8. Risk assessment matrix...66 A9. Updated PAP...71 A10. Gender equality Plan...72 A11. Environmental Management Plan...76 A12. EC Programme Document for Tanzania MDG Contract...79 A13. Partnership Framework Agreement...90 A14. Performance Assessment Framework

3 LIST OF ACRONYMS APT Annual Performance Tranche CAG Controller- and Auditor General CWG Cluster Working Group DKK Danish Kroner DPG Development Partner s Group EC European Commission EU European Union GBS General Budget Support HBS Household Budget Survey HDI Human Development Index HIPC Highly-Indebted Poor Country HoC Head of Cooperation HoM Head of Mission HQ Headquarters IFMS Integrated Financial Management System IMF International Monetary Fund IRAI IDA Resource Allocation Index JAST Tanzania Joint Assistance Strategy LGA Local Government Authorities LGRP Local Government Reform Programme LSRP Legal Sector Reform Programme MAIR MKUKUTA Annual Implementation Report MDG Millennium Development Goal MTEF Medium-Term Expenditure Framework MKUKUTA National Strategy for Growth and Reduction of Poverty MKUZA National Strategy for Growth and Reduction of Poverty, Zanzibar MoFEA Ministry of Finance and Economic Affairs NAO National Audit Office NGO Non Governmental Organizations ODI Overseas Development Institute PAF Performance Assessment Framework PEFA Public Expenditure and Financial Accountability PETS Performance Expenditure Tracking Survey PER Public Expenditure Review PFM Public Financial Management PFMRP Public Financial Management Reform Programme PPRA Public Procurement Regulatory Authority PPP Public-Private Partnerships PRS Poverty Reduction Strategy SWG Sector Working Group TI Transparency International ToR Terms of References TPA Temporary Process Action TSMP Tanzania Statistical Master Plan USD US dollar WGI Worldwide Governance Indicators 3

4 Executive Summary This programme document outlines the key features of the General Budget Support (GBS) Programme for Tanzania, the context under which it will be provided, and the risks under which it will operate. A five-year GBS programme covering the period is proposed, with the overall objective to contribute to the Government of Tanzania s efforts to reduce poverty in accordance with the goals formulated in Tanzania s most recent Poverty Reduction Strategy (PRS). The feasibility of the provision of GBS to Tanzania is confirmed based on an overall assessment of the 10 Danish budget support principles, as well as an appraisal of Tanzania s achievements and the current reform outlook. The Danish GBS principles correspond with the underlying principles for the provision of GBS in the Partnership Framework Memorandum signed between budget support donors and the Government. The Partnership Framework Memorandum also describes the process, responsibilities and commitments of the donors and the Government. A comprehensive set-up for GBS management and monitoring is in place. The total amount budgeted for the GBS programme is DKK 615 million, of which DKK 5 million can be used for technical studies, reviews and preparation of future phases (see table below). The maximum amount available for the GBS component in the form of fixed and performance tranches is DKK 610 million. The fixed tranche is 80 percent of the total budget for the programme. The two performance tranches comprise additional resources above the base flows expected from the fixed tranche, and are designed to encourage and reward good performance. In total DKK 75 million are allocated for an Annual Performance Tranche (APT) and DKK 45 million are allocated for a Millennium Development Goal (MDG) based tranche. This is in line with the modality of the European Union s recently approved MDG Contract for Tanzania. Although disbursement decisions are taken bilaterally, the selection of relevant indicators and the assessments of the performance tranches will be harmonized with the EU delegation, Ireland, Germany and other potential development partners joining the approach. This will improve coherence among GBS partners in Tanzania in order to maximize the impact of a joint approach to GBS performance tranches. Budget for the Danish GBS programme (million DKK) Million DKK Total Base Fixed Tranche Potential APT Potential MDG-tranche Technical studies Total

5 1. Introduction Tanzania is one of the pioneering countries when it comes to GBS and donor harmonization. It has maintained a good track record on macroeconomic management through different programmes with the IMF since the late 1990s. The Joint Assistance Strategy for Tanzania (JAST) has been used as a model in many other countries. Under the JAST Tanzania has utilized GBS funds consistent with international commitments, such as the agenda of the Paris Declaration and DAC general principles. GBS is, according to the Government of Tanzania, the preferred aid modality. During the period , Denmark provided DKK 380 million GBS funding, and during the current budget support appropriation covering , Denmark is expected to provide DKK 460 million of GBS funding. In the fiscal year 2010/11 11 GBS donors are in total expected to provide approximately USD 507 million. Denmark will be the 8 th largest GBS donor. One of the key lessons learned is that GBS has contributed to improved social well-being through expansion of social services without resort to exaggerated deficit financing. The provision of GBS has together with increased tax revenues spurred resource mobilization and public expenditure, which in turn has allowed for a significant expansion of service delivery, particularly in health and education. In terms of income poverty, however, the Household Budget Survey 2007 and the recently published National Panel Survey point to challenges in the efforts to reduce the percentage of households classified as being below the poverty line. 1 The proposed GBS programme will support the Government of Tanzania s efforts to reduce poverty in accordance with its most recent Poverty Reduction Strategy (PRS), the so-called MKUKUTA II covering the period 2010/ /15. In the MKUKUTA II more emphasis shall be placed on pro-poor growth, in order to address some of the weaknesses of Tanzania s former PRS. In contrast to previous Danish budget support programmes, which also included support to institutional reforms, the GBS programme for Tanzania for the period will focus only on the provision of budget support. The programme will however be complemented by a new phase of the Governance Support Programme with three components: (i) democratisation and domestic accountability, (ii); access to justice and legal sector reform; and (iii) public financial management. This ensures that the support to Tanzania s PRS is complemented by the strengthening of democratic and accountable structures and systems of governance, including the rule of law and public financial management. The current level of Danish GBS will approximately be maintained with a fixed tranche of DKK million per year.. In addition two performance tranches 1 1 National Bureau of Statistics, Household Budget Survey 2007, Government of Tanzania, National Bureau of Statistics, Tanzania National Panel Survey Report , Government of Tanzania,

6 will be introduced to encourage good performance. The Annual Performance Tranche (APT) will focus on in-year remedial actions, whereas the MDG tranche will take into account and reward broader development outcomes. The decision on disbursement of the APT will be derived from the conclusions of the GBS Annual review with particular attention paid to issues related to the fight against corruption, PFM, domestic accountability and the PAF process itself. This assessment will be based on a list of PAF indicators, jointly selected by the EUdelegation, Ireland, Germany and Denmark in consultation with the Government. The selection and assessment of indicators for the MDG tranche will be undertaken with the EU delegation. This new approach departs from the previous approach, which only provided leverage for policy dialogue on one specific PAF indicator, without having the possibility of responding to broader events. The new approach for performance tranches takes broader areas of development outcomes into consideration, can potentially reward short-term remedial actions, and has the advantage of being harmonised with other donors. The GBS programme is expected to operate in a stable environment, although a number of risks that relate to the effectiveness of GBS can adversely impact its ability to reach the overall objective of poverty reduction. The conclusion from the risk assessment and the analysis of the 10 Danish criteria confirming the feasibility of the provision of GBS to Tanzania is that the most pertinent risks are fiduciary and governance, especially risks of corruption, weak PFM systems and weakening faith in Government s capacity and resolve to implement the poverty reduction strategy. But the risks are deemed to be acceptable if they are mitigated by joint actions, including close follow-up and intensified dialogue, complemented with targeted support for anti-corruption, business sector reforms, PFM reforms and governance. 2. Justification for the provision of General Budget Support The decision to continue the provision of GBS to Tanzania is based on three elements. Firstly the decision is informed by an assessment of Tanzania s eligibility which is confirmed based on an overall appraisal of the Danish Government s 10 GBS principles. Secondly, the decision to provide GBS is based on a retrospective assessment of Tanzania s results and achievements since Denmark began the provision of GBS in Finally, the decision is also based on a forward looking assessment of the macroeconomic outlook and Tanzania s capacity and potential to implement its ambitious reform agenda. The overall objective of the Danish GBS Programme is to contribute to the Government of Tanzania s efforts to reduce poverty in accordance with the goals formulated in Tanzania s PRS. Since the 1990s Tanzania has made good progress on overall macroeconomic and fiscal performance, as growth has risen from an average of 3.5 pct. to an average of over 7 pct. per year in the last decade, while Tanzania has managed to maintain macro-economic fundamentals. During the last decade, GBS together with increased tax revenues have contributed to 6

7 progress in the social sectors, where increased public spending without resorting to external borrowing, has resulted in substantial improvements without jeopardizing the macroeconomic stability. As a result, Tanzania is on track to achieve about half of the MDGs. This includes access to basic health, where infant mortality and under-five mortality rates have declined significantly and education services, where primary school rates have risen dramatically. Tanzania s implementation of the MDG Goals In spite of high growth rates, there has however only been limited progress in reducing income poverty. Although there has been progress, it is not likely that Tanzania will reach the MDGs relating to the number of births attended by skilled health workers, the percentage of the rural population with access to water, and the reduction of maternal mortality rates. While major achievements have been facilitated by the provision of GBS, there is also an appreciation that GBS has not lived fully up to the expected performance, which partly reflects Government s ambitious targets, the slow pace of reforms, and limited progress in the efficiency of public spending. Although there is still room for improvement, the dialogue between Government and GBS donors has already improved significantly, leading to clearer mutual expectations on results and actions, as evidenced by Government s acknowledgement, that more efforts are needed to focus on the reduction of income poverty in order to ensure pro-poor growth. The extent to which this translates into results will depend on Government s capacity and political will to implement its ambitious reform agenda. Challenges include the need to improve the framework conditions for the private sector, with a special emphasis on agriculture and rural areas, where more than two thirds of the population currently resides, as well as the improved use of Public Private Partnerships (PPPs), and increased investments in infrastructure. In addition, more effort must be put into the so-called core reforms underpinning Governments capacity to deliver and implement the PRS, as lack of progress on PFM-, pay-policy-, business sector- and local government reforms threatens to stifle Tanzania s ambitions. At the same time, the required fiscal space to undertake major investments might remain limited, although there are options for rationalizing spending and 7

8 enhancing revenues, which despite significant progress in recent years, remain below the estimated potential. There are currently no signs that the level of GBS will increase significantly, and as most of the development assistance to Tanzania remains tied to specific sectors such as health and education, the scope for major investments in agriculture and infrastructure remain limited. This will increase the risk that Tanzania might resort to external borrowing on a larger scale. While Tanzania currently has a good track-record with regards to debt management and macroeconomic performance this could be offset if the Government decides to seek extensive external borrowing on international capital markets, or domestic borrowing, which could crowd out credit to the private sector. The GBS groups engagement with Government currently constitutes the most effective policy dialogue in Tanzania. As a small GBS donor, Denmark will seek to play an active role in the GBS donor co-ordination and in the policy dialogue with Government in order to expand the leverage and influence of its relative size. This pro-active engagement, that took form during the Danish GBS chairmanship in will ensure, that Danish priorities and agendas will continue to feature and influence the GBS dialogue and Government policies. One of the main achievements of the Danish chairmanship was Government s recognition, that in spite of good progress on the social sectors, more effort should be made to promote pro-poor growth. It is the expectation that this will be reflected in the sector policies and work plans of MDAs supporting the MKUKUTA II. While major challenges subsist in spite of recent progress, there is real scope for moving forward and making real gains on the core reforms in a way that leads to pro-poor growth and improved service delivery outcomes. Denmark will continue to co-finance the implementation of Tanzania s PRS, acknowledging the results achieved as well as Tanzania s potential to accelerate reforms given Government s resolve to emphasize pro-poor growth. Recognizing Tanzania s continued need for financing service delivery and increased emphasis on investments in infrastructure and the importance of predictability, Denmark will approximately maintain its current annual level of Danish GBS with a fixed annual tranche of DKK million over the period However, in order to encourage and reward good performance, Government will be able to access an additional DKK 15 million per year, subject to a satisfactory follow-up on the outcomes of the policy discussions at the GBS Annual Review. Finally, subject to good performance on the MDGs, Tanzania will have the possibility of accessing up to DKK 15 million per year for the period (see section 3.3.2). In this regard, Denmark will not only co-finance the implementation of the PRS, but will also contribute to holding Government focused on critical and strategic issues related to the reform process such as the need to stress pro-poor growth, strengthen the fight against corruption, improve the business climate, and ensure better equity and efficiency in service delivery, as well as the need to accelerate pay-policy and PFM reforms. 8

9 2.1 Poverty reduction strategy The most recent PRS, the MKUKUTA II, is the third to be implemented in Tanzania since Like its predecessor, the MKUKUTA I, it has three main components relating to: (i) income poverty; (ii) social well-being; and, (iii) governance. A separate poverty reduction strategy, the MKUZA II, exists for the semi-autonomous Zanzibar. The MKUZA focuses on the same three main components, with emphasis on the poorest and vulnerable groups. The Tanzanian PRS also links to the MDGs, although Tanzania has traditionally been even more ambitious in its goal for reducing income poverty. Whereas the MDG aims at halving poverty by 2015, Tanzania had an earlier ambition to have it halved already by Although the implementation of Tanzania s previous PRS has not been without problems, GBS donors have rated it as satisfactory for the last 8 years. A wellfunctioning monitoring system is in place and the share of PRS spending in the national budget was estimated at a high 71 percent in 2009/10, which was in line with previous years share. 2 Spending on the social sectors have yielded results in progress towards the MDGs. Total enrolment rate in primary school increased from 53 percent in 2000 to 98 percent recorded for 2008, according to a summary produced by the World Bank (See Table A2-1 in Appendix A2). Positive trends have also been recorded in the decline of infants and under five s mortality rates, nutrition, gender equality, and a decline in the HIV/AIDS prevalence rate as from In addition, Tanzania has improved its ranking of the UN s Human Development Index 3 from a performance below average for Sub-Saharan African countries to above average since Poverty figures from the latest Household Budget Survey (2007) and the recently published National Panel Survey suggest, however, that progress in reducing income poverty has been limited. The proportion of the population classified as living below the poverty line fell from 35.7 in 2001 to approx percent in At the same time as the headcount poverty rate fell by 2.1 percentage points, real economic growth averaged 7 percent annually. It appears that the growth has mainly taken place in telecommunication, construction, mining and financial services, while the relative size of agriculture in the economy has declined. In that respect, the earlier PRS goal of reducing poverty to 19 percent by 2010 proved unattainable. The MDG objective to reduce it to 19 percent by 2015 may still be feasible, but will require high annual broad-based real consumption growth, which is in contrast to the past, and which would require a total redirection of the pattern of growth. The MKUKUTA II places greater emphasis on investments in infrastructure as well as private sector led growth and employment, including in agriculture, with the aim of promoting pro-poor growth, 2 See Government of Tanzania, Draft Annual National Policy Dialogue Report 2009, February The UN uses an index that looks beyond GDP to a broader definition of well-being. The HDI is a composite measure of three dimensions of human development: living a long and healthy life (measured by life expectancy), being educated (measured by adult literacy and gross enrolment in education) and having a decent standard of living (measured by income adjusted by purchasing power parity). 9

10 while retaining the gains in the social sectors. This, however, necessitates addressing significant capacity constraints to fully succeed. Please see Appendix A2 for more details. 2.2 Macroeconomic and fiscal framework Tanzania has been successful in pursuing its programmes with the IMF since the late 1990s. At present a Policy Support Instrument (PSI) Art. IV agreement with the IMF is in place. Reforms have yielded strong macroeconomic performance, with high GDP growth, relatively low inflation and ample international reserves. GDP grew in line with the Government s targets of 6-8 percent per year, allowing for an increase in per capita GDP from about 213 USD in 1995 to 509 USD in The pattern of growth, however, has been unbalanced with the fastest growing sectors being the capital intensive, while the slower growing sectors such as agriculture have been labour intensive. Mining and quarrying, which employs 1 percent of the workforce, was the fastest growing sector, followed by construction, telecommunication, and financial intermediation. These three sectors grew well above average GDP growth and employed respectively 2.2 percent, 3 percent and 0.2 percent of the labour force. The service sector, which is the largest part of the economy, grew in line with GDP growth. Agriculture and fishing where more than two thirds of the labour force is engaged, registered a growth rate below average GDP growth. After a decade of strong performance, economic growth slowed to about 6 percent in the face of the global financial crisis in The average inflation rate reached about 12 percent, up from about 6.5 percent annually in But drought and flooding also contributed to a slow-down of the economy through lower agricultural output and declined food supplies. This in turn affected the fiscal framework and budget execution negatively through weak revenue performance and new spending priorities. The strong performance has been the result of the overall high growth of the economy in combination with reforms that have improved the effectiveness of the tax administration. Domestic resource mobilization has surpassed the growth rate of GBS and has, together with significant increases in the overall level of ODA, allowed Government to expand fiscal spending with only limited recourse to domestic financing. At the same time, better budget formulation and expenditure execution have improved the composition of spending, although the quality of public spending remains an issue. The formalization of the Government s economic strategy in the PRS, the development of a medium-term expenditure framework, and the conduct of GBS Annual Reviews have contributed to a redirection of spending towards priority areas, most notably education and health. In addition, debt relief under the Highly-Indebted Poor Country (HIPC) Initiative, a precursor to the current GBS modality, freed up extra resources for spending and reforms of public services. 10

11 The infrastructure gap remains a severe constraint on growth and development. Despite its geographic advantages as a potential transit country to its landlocked neighbouring countries, there is clear evidence to suggest that Tanzania s lack of infrastructure (energy, ports, railways and roads) is acting as a constraint on the expansion of trade and economic activity in both the country and the region. This includes constraining growth in potentially pro-poor sectors such as agriculture, tourism, and private businesses. Finding the necessary resources to increase infrastructure spending is therefore a key challenge for fiscal policy in Tanzania. Please see Appendix A3 for more details. 2.3 Governance Since independence in 1961, Tanzania has developed one of the strongest track records of political stability in Africa. In recent years, Tanzania has experienced a significant increase in political freedoms and the government is increasingly held accountable by Parliament, the opposition and civil society, including the media. A number of ambitious reform programmes are under implementation with the aim of advancing a more efficient public administration, including public financial management and decentralisation. However, problems with respect to corruption and inefficiency in the public sector still persist, particularly within the police and the judiciary. Tanzania s ranking in Transparency International s Corruption Perceptions Index improved from 126 in 2009 to 116 in 2010, which is still better than the ranking of Uganda (127) and Kenya (154). It is encouraging that in recent years the anticorruption debate has intensified, with several high profile corruption cases surfacing. In 2008 then Prime Minister Edward Lowassa publicly resigned after a parliamentary report citing his interference in the awarding of a public contract, and a high ranking senior official from the Bank of Tanzania (BoT) was sentenced in a case relating to overspending in connection with the construction of the BoT Head Quarter. However, the political determination to fight corruption may still be questioned. Furthermore, even though parliament and the media are taking on a higher level of scrutiny than in the past, the overall capacity of the institutions tasked with investigating, prosecuting and adjudicating corruption cases remains weak. Anticorruption initiatives will need to be stepped up in order to address a perception that the anti-corruption agenda is not progressing at a sufficiently fast pace. Please see Appendix A4 for more details. 2.4 Public financial management system and reforms A Public Finance Act (2001, revised 2004 and 2010) is in place and provides the legal framework for the budget process. Tanzania has a clear budget preparation calendar, encompassing (i) macro-fiscal studies; (ii) MTEF planning exercise; (iii) annual budget policy analysis; (iv) budget preparation circular issuance; and (v) budget discussions between ministries, departments, and agencies on one side and 11

12 the Ministry of Finance and Economic Affairs on the other side. The Parliament is provided with comprehensive budgetary documentation, which provides a reasonably good opportunity for the legislature s scrutiny of the budget. Tanzania scored 45 percent out of a possible 100 percent on the Open Budget Index 4 for 2010 an improvement over two years from a score of 36 in The latest rating was based on the assessment that the general public received minimal information on the central Government s budget and financial activities during the course of the budget year. This makes it still difficult for citizens to hold Government accountable for its management of the public funds. Neighbouring countries such as Uganda scored 55 percent, Kenya 49 percent and Malawi 47 percent. Procurement standards are in line with international practice, following the enactment of the Procurement Act in The procurement function has been decentralized to procurement entities, and an autonomous Public Procurement Regulatory Authority (PPRA) has been established and fully staffed. Capacity is still weak particularly at the level of Local Government Authorities (LGAs). In his reports for the fiscal year 2007/08, the Controller and Auditor General (CAG) noted that many procurement audits did not comply with procurement laws and regulations. Compliance with procurement regulations has however seen a steady increasing trend from 39 percent in 2007 to 50 percent in The National Audit Office (NAO) has been on a steady trend towards meeting international audit standards. It is, however, not expected to meet the target of growing from AFROSAI level 1 in 2008 to AFROSAI level 3 by For several consecutive years, the CAG has submitted his annual reports in time to Parliament. An important catalyst has been the enactment of the Public Audit Act in It has de facto strengthened the autonomy and authority of the NAO in several important ways, although it has not formally allowed NAO statutory independence from the executive branch. The CAG continues to be appointed by the President. Tanzania s Public Financial Management (PFM) systems are considered to be better than those in place in most sub-saharan African countries. However, over the last 3-4 years Tanzania has seen a lack of progress on several PEFA indicators relating to the PFM system and the credibility of the budget. The challenge to speed up reforms within the on-going PFM Reform Programme (PFMRP) was discussed at the 2009 GBS Annual Review meeting. Based on the discussions Government presented an action plan to improve Tanzania s PFM systems. A joint review mission in September 2010 assessed that 15 out of 24 short term actions were fully implemented and 1 was partially implemented. Please see Appendix A5 for more details. 4 See The Open Budget Initiative measures the transparency and public availability key budget documents. 12

13 3. General Budget Support The overall objective of GBS, according to the Partnership Framework Memorandum, is to contribute to Tanzania s economic growth and poverty reduction in all its dimensions by supporting the financing, implementation and monitoring of PRS, with the following intermediate objectives: Provide financial resources to the public sector to be used to promote growth and poverty reduction; Improve aid effectiveness and country ownership of the development agenda, reducing transaction costs, and enhancing predictability of aid flows; improving public expenditure and financial management; enhancing national planning and budgeting process and shifting accountability from donors to citizens; Improve monitoring and evaluation and ensuring mutual accountability; Engage in policy dialogue aimed at enriching the country s strategies for growth and reduction of poverty, and Strengthen and use the national planning and budgeting process, and strengthen the capacity of Local Government Authorities (LGAs), which are the front-line implementers of the PRS. In 2010/11 11 donors provided GBS to Tanzania. Table 1 below gives an overview of the GBS donors and their relative contribution, based on their disbursements in the current fiscal year, 2010/11. Table 1. GBS expected disbursements in 2010/2011 Development Partner Disbursements (million USD) Percent of total GBS United Kingdom World Bank EC Sweden Norway Japan Finland Denmark Ireland Germany Canada Total disbursement

14 3.1 Experience of previous budget support The latest GBS evaluation 5 dates back to 2005, when the Overseas Development Institute (ODI) undertook a joint external evaluation on behalf of donors and Government. The experiences up to 2004, as documented by ODI were mixed, with progress in the policy environment, macroeconomic developments, and supply of social services. The per-capita spending on PRS priority sectors, particularly health and education, doubled between 1999 and 2003 in an environment of stable and high macroeconomic growth and low price increases. The increase in the social spending resulted in a quantitative expansion of education and health services, but there was no clear indication that the quality of such services improved. The combination of high growth and better policies on the revenue side increased domestic resource mobilization, which surpassed the growth in foreign aid. Budget support also increased and expanded the scope of the policy dialogue, advanced reform programmes, spurred harmonization and strengthened alignment to Government led processes. The evaluation noted that progress was mainly driven by a strong internal political commitment to change, but added that achieving such progress would have been considerably more difficult if GBS funding had not been available - together with its associated dialogue - or if such funding had been channelled through other aid modalities than budget support. A recently published evaluation of the overall British and Irish aid programmes to Tanzania concludes that General Budget Support and increasing tax revenues have enabled a dramatic expansion in the scale of service provision in education, health, water and sanitation, infrastructure (roads) and agriculture. Transaction costs have remained manageable and disbursements predictable. The evaluation finds it inconceivable that such a significant contribution to spending in these areas could have been made through other aid modalities. However, challenges remain in terms of quality of social services. A key lesson is that although GBS has been a successful instrument that can contribute to a stable macroeconomic environment with high growth, more efforts are needed to ensure that growth is broad-based and pro-poor. Another lesson is the increasingly important role of the policy dialogue with Government. The quality of the dialogue has been strengthened over the last years, both with regards to the on-going dialogue throughout the year, and with regards to the GBS Annual Review. Another lesson is that GBS and its supporting dialogue may have had an enabling effect on domestic accountability. While GBS was mainly the domain of the Ministry of Finance and Economic Affairs (MoFEA) in the past, more actors, such as line ministries, civil society and parliamentarians now participate and take part in the dialogue. The conclusions from the assessment of the 10 Danish criteria for the provision of GBS, is, that although the majority are progressing satisfactorily and the provision of GBS remains feasible, some arenrated as less than satisfactory. Those 5 ODI, Preliminary Assessment of Efficiency and Effectiveness of Budget Support and Recommendations for Improvements, September

15 include Anti-corruption (no.2), where limited progress on tackling grand corruption cases and the upward trend in petty corruption signals a strong need for strengthened efforts, as well as Poverty (no.3), where progress in reducing income poverty and boosting private consumption has been limited in spite of the strong economic growth. Although Tanzania s procurement legislation is of international standard (No. 6), compliance herewith, while improving, is still a challenge. Please see Chapter 5 (Risk), and the Risk Assessment Matrix in Annex A Institutional set-up All GBS donors operate under the Partnership Framework Memorandum, which spells out objectives and underlying principles for the provision of GBS, as well as mutual responsibilities of the Government and donors. It operationalises and links various international and domestic commitments, including the Paris Declaration on Aid Effectiveness (2005) and the Tanzania Joint Assistance Strategy (JAST). The Danish GBS will also be complemented by a bilateral Government Agreement between Denmark and Tanzania. Five underlying principles that must be respected according to the Partnership Framework Memorandum are: 1. Sound macroeconomic policies and management 2. Commitment to achieving the PRS objectives and MDGs 3. Sound budgeting and PFM 4. Continued peace and respect for human rights, the rule of law, democratic principles and the independence of the judiciary 5. Good governance, accountability of the Government to the citizenry and integrity in public life, including the active fight against corruption (in accordance with commitments of the signatories in the New Partnership for African Development, and other international agreements). A comprehensive set-up for management and monitoring is in place. Following this, joint GBS management and monitoring takes place above all within the GBS Group and the dialogue structure comprising of cluster and sector working groups. Below follows a description of the institutional set-up and responsibilities for the different parties involved. For a more detailed summary of key tasks and responsibilities assigned to each party involved (Denmark, the Government, and jointly), please see Annex A The GBS Group All GBS donors participate in the GBS group, where activities are managed and coordinated. The group has existed since 2000, and Denmark has been an active partner since its inception, and has twice chaired the group, most recently in While the GBS Group initially concentrated on key elements of macroeconomic reforms, public financial management and strategic budget 15

16 allocations to priority sectors, the dialogue today covers all relevant aspects of the PRS. Institutionally the GBS Group consists of two subdivisions, at the economist and the HoM/HoC levels. The GBS economists form a Coordination Group to support the HoM/HoC at the technical level. A small GBS Secretariat with one economist and one support staff currently supports the Coordination Group. The HoM/HoC level includes the GBS Heads of Mission/Heads of Cooperation and is primarily responsible for setting the strategic direction and conducting highlevel policy dialogue with the Government. This group meets monthly. It provides guidance to the Troika+ Group, which is responsible for leading budget support donor coordination. The Troika+ is a smaller group with membership limited to the incoming, current and out-going chair of the GBS Group and with the World Bank as permanent member. This ensures harmonisation and strengthens the role of small donors. Normally, a donor assumes the chairmanship from April one year to April the next year, but there are attempts to move towards the start of the calendar year. The chair of the Troika+ Group is the main interlocutor - on behalf of all GBS donors - with senior Government officials and ministers on policy issues. Interwoven with the structure for the GBS group is the Government representation. The Ministry of Finance and Economic Affairs (MoFEA) is the main counterpart. It chairs all meetings with the GBS Group and coordinates all activities. A Government GBS secretariat is in place for support. When there are meetings in joint forums, it is chaired by MoFEA and co-chaired by the current donor GBS chairperson. The highest joint donor/government decision-making body is the meetings between Government and the Troika+ Group, where issues of substantial importance, including Government reforms and policies are discussed. These meetings normally take place at Heads of Missions and Permanent Secretary or minister-level. This set-up is also formally responsible for approving the PAF each year, as well as planning the GBS Annual Review, and approving the cluster working groups proposals for key issues to be discussed at the GBS Annual Review. Figure 1. The Dialogue Structure of the GBS Group GBS Group Cluster 1 Growth and Reduction of Income Poverty Cluster 2 Quality of Life and Social Well-Being Cluster 3 Governance and Accountability Cluster 4 Macro economy, Budget and PFM Sectors/Thematic Areas The Cluster and Sector Working Groups 16

17 The GBS Group links with a comprehensive network of Cluster- and Sector Working Groups, which has been established to facilitate and provide support to the implementation of the PRS, Government s budget cycle and the GBS annual review process. Figure 1 above represents the dialogue structure including Sector Groups, Cluster Working Groups (CWGs) and at the top the GBS group represented by the Troika+ and Government. The Sector Groups form the underlying structure of the national level dialogue. These are made up of members from line ministries, donors and CSOs that are active within a particular sector or thematic area, e.g. health. While each sector is grouped into one main cluster, relating to each of the main areas of the PRS, in order to utilize synergies it may also provide input to other clusters. The CWGs consolidate information from the sectors into quarterly updates on progress of the Performance Assessment Framework (PAF) indicators. There are four CWGs that consist of representatives from all line ministries involved, donors, civil society and the Parliament (even if the latter s representation could evolve further). Government officials chair all CWGs with donors as co-chairs. The CWGs are structured along the lines of the PRS: (1) Growth and reduction of income poverty, (2) Quality of life and social well-being, (3) Governance and accountability, and (4) Macro economy, budget and public financial management. Quarterly CWG meetings take stock of issues of importance to GBS, such as the progress on PAF indicators, or crosscutting issues that could be raised to the GBS level. As the GBS Group is in charge of the overall monitoring of the PAF, it is dependent on quality input from the CWGs in its dialogue with Government. And, when the GBS Group submits its yearly work plan, it is responsible for inputs into the Terms of References for the CWGs. The CWGs submit an annual progress report for the GBS annual review meeting, as well as proposal for potential key issues that could be discussed at the GBS Annual Review The Performance Assessment Framework As mentioned above, the jointly agreed Performance Assessment Framework (PAF) is a tool for monitoring and dialogue on performance in achieving the targets set out in the PRS and associated documents. Its indicators serve as a proxy for measuring the degree of implementation of the PRS and reforms. The PAF is a 3-year rolling plan, updated each year in order to reflect short-term constraints to implementation and revision of plans. In a sense, the PAF can also be viewed as an introductory first step towards performance budgeting, as it signals whether expenditure over the state budget is spent effectively, at least considering the 71 percent of total spending that is PRS-related. The current PAF is strategic and marks a shift from micro to macro monitoring. It contains three types of indicators grouped into the four cluster working groups. That is, each CWG must monitor indicators for: (i) outcomes, (ii) main and 17

18 underlying processes, and (iii) Temporary Process Actions (TPA). Outcome indicators serve as a basis for monitoring progress towards the MDGs, as well as progress on issues such as access to energy, improvements in the business climate, etc. The TPAs are interim short-term remedial actions suggested in areas that need special attention, such as approving an irrigation policy and submission of a revised Public Audit Act to Parliament. These actions are temporary in the sense that they will be removed from the PAF when credible, robust underlying processes have been established, or when the issue in question has been resolved. Indicators for underlying processes (i.e. sectoral, macroeconomic, PER/budget process, PFM, anti-corruption, etc.) help to monitor progress in processes that are essential for reaching results in poverty reduction. One challenge ahead is how to disaggregate PAF indicators to allow for assessments of gender and regional effects of PRS implementation. 4.5 percent of the GBS funds are channelled to Zanzibar via intergovernmental transfers. But currently there are only a few indicators in PAF that allow for monitoring of progress in Zanzibar The GBS Annual Review While the monitoring of PAF indicators is undertaken throughout the year, the final assessment of the jointly agreed indicators in the PAF takes place at the GBS Annual Review. The purpose of the GBS Annual Review is to jointly take stock of performance, to highlight progress in reform, and to discuss challenges ahead. Based on the discussions of the central challenges, the donors and Government jointly agree on the follow-up with regards to a limited number of pre-determined key issues that constrain the implementation of PRS or have a negative impact on the functioning of GBS. The GBS Annual Review meeting is scheduled to take place towards the end of each calendar year in order to ensure proper sequencing and alignment with Government s planning, budgeting, and PRS review cycles. The key outputs from the GBS Annual Review are the joint assessments of the PAF implementation and of the review itself the GBS Annual Review Report and an updated PAF for the next GBS cycle. In accordance with the Partnership Framework Memorandum, the GBS donors communicate indicative three-year disbursements to the Government within three weeks after the GBS Annual Review as an input to the Medium-Term Expenditure Framework. And, within six weeks of receipt of the GBS Annual Review Report, donors confirm their disbursement for the upcoming fiscal year as an input to the preparation of Government s annual budget. The ambition is to disburse in the first quarter of the Tanzanian fiscal year. All current budget support donors utilize the same account in the Bank of Tanzania and receive the same audit reports and statements from MoFEA and the National Audit Office (NAO). At the GBS Annual Review 2009 the joint assessment was that the overall review had been moderately satisfactory. There had been good progress in the social 18

19 sectors, but strong measures were required to ensure equitable delivery of quality services. The Government and the GBS donors recognized the importance of accelerating the agenda for inclusive growth and poverty reduction Reporting Government is responsible for regular reporting that feeds into the GBS monitoring system. This includes performance reports and financial reports, which are part of Government s MKUKUTA Monitoring System (MMS) that monitor the implementation of the PRS with regards to the MDGs. As part of the MMS the Government produces a yearly report (in alternate years either the Growth and Poverty Status Report, or the Poverty and Human Development Report ) to measure progress towards the PRS indicators. These feed into the Government s MKUKUTA Annual Implementation Report the MAIR. In addition to the MAIR, annual performance reports from sector and cluster working groups are the main source of information for following up on the PAF at the GBS Annual Review meeting. A process of improving national monitoring and evaluation systems is ongoing and supported by major capacity building efforts over the medium term through the Tanzanian Statistical Master Plan (TSMP) which will be supported by e.g. DfID, and the World Bank. The TSMP identifies how data needs for performance monitoring can be met. It is recognized that the Household Budget Surveys that are undertaken every 5-6 years need to be complemented with surveys that can provide updated data within shorter time intervals. The National Bureau of Statistics recently started to pilot yearly National Panel Surveys (NPS), that will supplement the information from larger censuses and surveys relating to health and agriculture. These are annual panel surveys that collect data from the same sources over time. They will therefore be useful for analysis about changes in the poverty situation at household, individual and regional levels. This will allow annual updates of key PRS and PAF outcome indicators such as poverty, enrolment, access to safe water, roads and electricity, but also on agricultural production, consumption and income dynamics. Donors also receive quarterly budget execution reports and bank statements of movements in the GBS account. The budget execution reports are compiled into the Rapid Budget Analysis, which is a joint exercise and takes place annually before the GBS Annual Review meeting. 3.3 Danish Programme support to the implementation of the PRS The total amount budgeted for the GBS programme is DKK 615 million. Of this, DKK 5 million is reserved for technical studies, reviews and preparations for future programme support. The total amount available for GBS in the form of fixed and performance tranches is DKK 610 million. Out of this, DKK 490 million is budgeted for the fixed tranche and DKK 120 million for the performance tranches. This ensures a high level of predictability, as the lion s 19

20 share of GBS disbursements in the form of DKK million per year, will not be conditioned on performance related to a limited set of indicators. The two performance tranches comprise additional resources above the base flows expected from the fixed tranche, and are designed to be incentives for performance above average. Equal amounts are allocated for an Annual Performance Tranche (APT) and a Millennium Development Goal (MDG)- tranche. This is in line with the modality of the European Union s recently approved MDG Contract for Tanzania. Although disbursement decisions are taken bilaterally, other arrangements for the two performance tranches are harmonized. This will strengthen coherence in order to maximize the impact of a joint approach to GBS performance tranches, as other partners might align with this approach. The programme s proposed budget is detailed in Table 2 below. Throughout the duration of the programme, Tanzania would receive a base flow of GBS amounting to DKK million per year from the fixed tranche. In addition to this, and dependent on performance above average, Tanzania would have the possibility of assessing DKK 15 million per year as Annual Performance Tranches during the first five years, and up to DKK 15 million per year in the form of MDG tranches during the last three years. Table 2. Budget for the Danish GBS (million DKK) Fixed Tranche APT tranche MDG tranche Min. total Max. total Technical studies Total Total 80% 12% 7% 80% 99% 1% Conditioned on minimum annual increase in the annual country frame corresponding the level of inflation The fixed tranche The fixed tranche is the largest part of Danish GBS, amounting to 80 percent of the total budget for GBS. Disbursements of the fixed tranche will be in an all or nothing form. That is, the Danish disbursement decision will be based on the joint assessment of the GBS Annual Review process. If the assessment is satisfactory and if the underlying principles of the Partnership Framework Memorandum are not breached, and the overall assessment of the 10 GBS criteria is satisfactory, the full amount of the fixed tranche will be disbursed. 20

21 3.3.2 The performance tranches The GBS Programme will use two performance tranches with indicators drawn from the PAF. The selection and assessment of PAF indicators will be undertaken together with the EU delegation. This approach is a departure from the previous GBS programme, which relied on a single PAF indicator for its variable tranche. The previous approach provided leverage for policy dialogue on a specific PAF indicator. The new approach that takes broader areas of development outcome into consideration will have the advantage of being harmonised with the EU delegation, and other aligning partners, without jeopardizing options for a bilateral stance, as each agency will retain its bilateral disbursement decision. In this regard the APT will be harmonised and coordinated with the EU delegation, Ireland and Germany, whereas the MDG-tranche will be harmonised with the EU delegation. The two performance tranches differ in design and focus. The APT focuses on inyear actions such as the fight against corruption; the improvement of PFM systems; domestic accountability; and the PAF process itself, whereas the MDGtranche focuses on development outcomes. The two tranches vary also in terms of the disbursement profile. The specific criteria for disbursement of the APT and MDG-tranche are described in detail in the following sub-sections. In case of eligibility, the performance tranches will be disbursed together with the fixed tranche in one single transfer to MoFEA. If Tanzania does not fulfil the criteria for the disbursement of the fixed tranche, none of the performance tranches may be released. Release of the performance tranches will always be contingent on a positive overall assessment, in addition to the specific criteria. The Annual Performance Tranche (APT) The APT is envisaged for the period The decision on disbursement of the APT will be derived from the conclusions of the GBS Annual review with particular attention paid to issues related to the fight against corruption, PFM, domestic accountability and the PAF process itself. This assessment will be based on a list of PAF indicators, jointly selected by the EU-delegation, Ireland, Germany and Denmark in consultation with the Government. The set of APT indicators will consist of Temporary Process Actions (TPA) complemented by outcome indicators. The selection of indicators for each year s APT will be subject to the annual updates to the PAF. The focus will be on short-term remedial actions to ensure adequate follow-up to the key issue discussions at the GBS Annual Review. Table 3 below summarises the selection of PAF indicators for the APT based on the current 2010 PAF, according to EU s Tanzania MDG Contract. Table PAF indicators underpinning APT PAF indicators underpinning APT 1. GoT will present a time bound ROADMAP to improve the Business Environment in Tanzania and implement selected critical short term priority actions detailed in this plan 21

22 2. GoT shall reduce overall expenditure on duty facilitating allowances and honoraria in Ministries, Departments and Agencies and promote positive use of allowances in underserved areas in line with the principles of the Medium-Term Pay Policy 3. Implementation of the agreed time-bound action plan derived from the NAO audit of IFMS 4. Average level of compliance of procuring entities with the Procurement Act to reach 65% by Introduce regionally disaggregated targets for a number of indicators on key social sectors (health and education at least one each) into PAF 2011 The joint identification and selection and updating of APT indicators will take place together with the EU-delegation, Ireland, and Germany - and other potential partners, each year following the GBS Annual Review and the finalisation of the latest PAF. Each of the selected APT indicators will undergo a separate assessment to verify whether the targets have been met. These assessments will be based on the joint assessment at the GBS Annual Review. However, each agency may assign different indicators different weights and therefore arrive at different conclusions regarding the release of the APT. The annual amount available for Tanzania through the Danish APT would be DKK 15 million. Based on an overall assessment of the APT indicators, it will either be disbursed in full or withhold. Withheld APT disbursements are permanent and cannot be utilized within the country frame for Tanzania. If the overall assessment of APT indicators would be positive, the APT tranche would be released in full at the same time as the fixed tranche. That is, after the embassy has received the Government s request for disbursement, which normally takes place in the first quarter of the Tanzanian fiscal year. The MDG-tranche The MDG-tranche would complement the APT for the last three years of the duration of the GBS Programme. In contrast to the interim actions (TPAs) that form the basis for the APT tranche, the 10 outcome indicators underpinning the MDG-tranche would include a subset of MDG-related outcome indicators, in order to allow for an overall assessment of the implementation of the PRS over time. The purpose of the MDG tranche is to highlight and emphasize development outcomes contributing to Tanzania s implementation of the MDGs. Table 4 below shows the selected PAF indicators for the MDG-tranche. Table 4. MDG-related outcome indicators in PAF 2011 Focus areas for the outcome indicators underpinning the MDG-tranche MDG1: Eradicate extreme poverty and hunger. Indicators: 1. Access to electricity 22

23 2. Quality of rural roads MDG 4: Reduce child mortality & MDG5: Improve maternal health. Indicators: 3. Proportion of births at Health facilities 4. Nurses and Nurse midwives per 10,000 population 5. Total number of enrolment in health institutes MDG2: Achieve universal primary education. Indicators: 6. Exam pass rate, Standard VII 7. Transition rate, Form IV 8. Total enrolment in Degree Programmes MDG7 (target 3): Halve, by 2015, the proportion of the population without sustainable access to safe drinking water and basic sanitation. Indicator: 10. Percentage of the population that has access to clean and safe water from a piped or protected source Eligibility for the MDG tranche would depend on an assessment of a sub-set of 10 outcome indicators from the PAF for the years 2010, 2011 and There will be an individual assessment of each indicator, and with the help of a transparent scoring system, the degree of performance will determine the annual size of the MDG-tranche. The assessment of the three year period will be undertaken only once, at a mid-term review planned to take place by late 2012, with the participation of the EU delegation. As the EU delegation is one year ahead of Denmark in its GBS cycle, it will invite the Danish Embassy to take part in its corresponding mid-contract review in late This should ensure congruence between the two assessments, as the years 2010 and 2011 will be included in both agencies mid-term review. The aim is to seek to align the midterm reviews for EU and Denmark in the next phase of the respective programmes. The scoring system ascribes equal weights to all 10 indicators, although the assessment of the year 2012 will be assigned greater weight in order to emphasise the medium term perspective of the performance measurement. Such an approach may be more realistic and suitable for assessing outcomes as it recognises that development goals materialise over time, sometimes in a stop-go fashion. Based on the mid-term review of the MDG indicators in late 2012, a decision will be taken regarding Tanzania s eligibility and subsequently the actual size of the MDG tranche for the period Disbursements will be fully predictable after the mid-term review in late 2012, as this review will guide disbursement decisions for all three fiscal years (2013/2014, 2014/2015, and 2015/2016). If Tanzania is eligible, the MDG tranche will be released annually at the same time as the fixed tranche. In this regard, Tanzania would be rewarded for good performance, and the disbursement of the MDG tranche would de-facto augment the fixed tranche for the last three years. The increased focus on results can help stimulate demand and interest for quality data on the results in reduction of poverty. In order to monitor the MDG tranche indicators properly, the EU is earmarking considerable funds to the new Tanzania Statistical Master Plan (TSMP). (See section on Reporting). 23

24 For a detailed example of assessment and calculation of the MDG tranche, please see Appendix A Danish participation in the GBS dialogue. Denmark will take part in the GBS dialogue at two levels. At the technical level, the Embassy will take part in the dialogue in the Coordination Group, and at the policy level, the Embassy will also be present at the Head of Cooperation (HoC)/ Head of Mission (HoM) level, where the more strategic and policy oriented discussions take place (see section above for further information about these groups). In the Coordination Group much of the underlying work of the GBS group is being prepared, analysed or coordinated. This work is then filtered through to the HoC/ HoM levels, where much of the more political and policy oriented work is being discussed. This includes the selection of key issues and themes for the GBS Annual Review, as well as the identification of new indicators for the PAF, and the agendas and mandates for the regular Troika+ meetings with Government. Active participation at all levels will ensure that the Embassy will be able to assert its influence, and ensure that Danish priorities will influence the GBS agenda and the policy discussions with Government. In this regard, the Embassy will seek to influence the selection of key issues and themes for each year s GBS Annual Review, and ensure that adequate follow-up and monitoring with regards to the policy discussions take place through the inclusion of relevant PAF indicators. In addition, the Embassy will work to ensure that Danish priorities, areas or concerns that warrant special interest and attention are adequately featured in the GBS dialogue. This will not only ensure that the pledging and provision of Danish funds are always based on the right set of indicators, but also that appropriate follow-up is highlighted and monitored through the inclusion of relevant PAF indicators. The Embassy will also follow the debates and the ongoing work of the Sectorand Cluster Working Groups, in order to ensure that areas of special interest is also dealt with in these forums, or alternatively to ensure that strategic discussions are also reflected in the GBS group. In terms of the Danish provision of GBS, the main priority will be to ensure an adequate, timely and satisfactory implementation of the PRS. In this regard, the overarching objective is to make sure that any existing or arising challenges or obstacles to the PRS implementation are duly identified and addressed. At present, the slow pace of PFM-, judicial-, local government-, business sector- and public service reforms- as well as the need to improve pro-poor growth and the equity and efficiency of service delivery constitute some of the main challenges for Tanzania s reform agenda. The list of challenges is dynamic, and subject to both domestic (severe draught in 2006 affecting agriculture and energy supply from hydropower ) and external circumstances (rising food and energy prices in

25 09), and will need to be monitored continuously. In case of identified challenges to Tanzania s reform agenda such as the slow pace of the core reforms, Denmark along with other GBS donors would raise the issues in the relevant GBS forums (e.g. at CG, HoC/HoM or Troika+ level). Where relevant, the Embassy will also draw upon Denmark s comparative advantages and areas of expertise with regards to issues such as health, HIV/Aids, private sector development or environment, in order to ensure the involvement and knowledge of the relevant groups in the preparation of an issue for the GBS dialogue. The Embassy will also make sure that internal coordination takes place in order to ensure that the Danish engagement in the Sector Working Groups is informed of any relevant developments in the GBS group and vice versa. If an arising or persistent issue or challenge cannot be solved as part of the ongoing GBS dialogue with Government, the next step would be to propose that a certain challenge be elevated as a key issue or theme at the GBS Annual Review. Depending on the potential outcome of the policy discussions, the next step would be to ensure, that any agreement on follow-up actions would be included as an indicator in the updating of the PAF. This will ensure that the PAF is strategic and monitors issues of importance to Denmark and other GBS donors, and that Denmark s GBS provision is pledged and subsequently disbursed against credible and strategic indicators and targets in the PAF. In addition, Denmark in cooperation with the EU, Ireland, and Germany, will use the APT to ensure that the annual updating of the APT indicators reflects and stresses PAF indicators that monitor the outcome of the policy discussions at the GBS Annual Review. This will not only ensure that the APT indicators reflect strategic indicators, but will also add to Government s incentive to follow-up on the GBS discussions. 3.5 Audits The Danish GBS is disbursed into a special GBS foreign exchange account held by MoFEA at the Bank of Tanzania. On the same day the Danish GBS provision is deposited at the BoT account (in USD) it is transferred to the development revenue account (in TSH) in MoFEA after which it is finally transferred to the Exchequer development account in order to eliminate exchange rate gains or losses. In accordance with the provisions of the Partnership Framework Memorandum and its updated addendum entitled Technical Note on GBS, MoFEA provides the GBS donors with quarterly internal audit reports, and the annual external audit reports of GBS accounts (deposits in GBS forex account and transfers to consolidated revenue fund) undertaken by the National Audit Office. In line with the Partnership Framework Memorandum, GBS donors may undertake an independent external audit of the GBS foreign exchange account at any time at their own cost. In addition, MoFEA also provides GBS Partners with a copy of the annual audit report of the CAG on the Public Accounts of Tanzania after its submission to Parliament, which is due 9 months after the end of the fiscal year. The annual audit report consists of three reports covering spending by Government MDAs, LGAs, and parastatals. 25

26 The new Public Audit Act (2008) has greatly enhanced the autonomy and capacity of NAO, and the CAG has for the fourth year in a row submitted his reports in time to Parliament. Although not all of the CAG s recommendations are followed-up, there are signs, that several of the key oversight bodies in Parliament, such as the Public Accounts Committee (PAC) are playing a more assertive role in the scrutiny of public expenditures. Under the new Public Audit Act, MoFEA is now required to provide a so-called structured response, outlining Government s intended remedial actions to the findings and observations in the CAG s reports, which is expected to improve the overall follow-up to the audit reports. This has introduced a new feed-back mechanism that represents a departure from the previous practice. In March, nine months after the end of the fiscal year, the CAG will forward his annual audit reports (for MDAs, LGAs and parastatals) to MoFEA. One week later, the reports are tabled in Parliament by the Minister of Finance (MDAs and parastals), and by the Minister for Local Government (LGAs). The Paymaster General (PMG the Permanent Secretary for Treasury at MoFEA), then issues a circular requesting all Accounting Officers in charge of agencies having received observations by the CAG that requires follow-up to prepare remedial action plans. These are then forwarded to the CAG and copied to the PMG. In September the PMG collects all the action plans from the concerned MDAs and formally forwards it to the CAG, a procedure known as Government s structured reply to the CAG reports. Having examined all the intended follow-up actions, the CAG will then forward his comments to the structured reply to the relevant oversight committees of Parliament, including the Public Accounts Committee (PAC), the Local Accounts Committee (LAC), and the Public Organizations Accounts Committee (POAC). Based on the CAG s comments to the structured reply, the oversight committees then summons the PMG along with the relevant Accounting Officers (the Permanent Secretaries) to appear before the committees. The table below provides a timetable of the audit cycle in Tanzania. Table 5. Overview of the audit cycle in Tanzania Step 1: (End June) Step 2: (March) Step 3 (March/April) Step 4 (March/April) Step 5 (August/ September) Step 6 (September) Step 7 (September/October) By the end of the fiscal year, the CAG prepares the annual audit of Government s accounts for all MDAs, LGAs and parastatals. Nine months after the end of the fiscal year the CAG forwards his audit reports (Government MDAs, LGAs as well as parastatals) to MoFEA. Seven days later the reports are tabled in Parliament by the Minister of Finance (MDAs and parastatals) and by the Minister for Local Government (LGAs). Upon publication in Parliament the PMG issues a circular to all concerned Accounting Officers requesting them to submit their intended follow-up to the observations of the audit reports to the CAG. The PMG compiles the remedial action plans for the relevant Government entities and forwards them to the CAG (the structured reply ). The CAG forwards his comments to the structured reply to the relevant oversight committees of Parliament. Based on the observations of the CAG on the structured reply, the PAC, LAC and POAC summon the PMG and the concerned Accounting Officers 26

27 (permanent secretaries, CEOs of parastatals etc.) to appear before the committees. 4. Cross-cutting issues and priority themes The Partnership Framework Memorandum explicitly lists respect for human rights, the rule of law, democratic principles and independence of the judiciary as underlying principles for the provision of budget support. Special attention is also paid to anti-corruption measures. In addition, human rights, democracy and good governance feature prominently in the PRS and in the cluster working groups 3 (governance and accountability) and 4 (PFM, budget). Several PAF indicators relate also to human rights, democratization, and good governance. There is an increased focus on environment in the PRS, and within GBS dialogue structure cluster working group 2 (social well-being) a review of environment focusing on water catchment and land degradation has taken place in In addition, the PAF traditionally has one or more environmental indicators. Where relevant, the Embassy will continue to emphasize and ensure that environment is adequately addressed by national processes. Gender is systematically mainstreamed in the PRS and in the dialogue structure underlying the GBS Annual review process. With the overall objective of formulating a gender policy, a three-year master plan has been developed. Government addresses gender disparities in employment and income. The implementation of the PRS addresses gender issues at various levels. For instance, advocacy and sensitisation on gender issues is carried out, equal-employment initiatives are undertaken and women s access to higher learning institutions is supported. There has been progress in gender-based indicators underpinning the MDG on gender equality (See Table A2-1 in Appendix A2). The 2010 PAF-matrix has three outcome indicators relating to gender, out of which two are in education and one in HIV/AIDS. There is gender disaggregated data in higher education, and the target for girls transition rate from primary to secondary schooling was met in Where relevant, the Embassy will continue to work through other channels and entry points, such as the new Gender Programme ( ) to ensure that gender is adequately addressed by national processes. As part of this programme the Embassy is financing, on behalf of the all Development Partners, a new National Gender Diagnostic Study, with the overall aim of assessing the gap between Tanzania s gender equality policies and their implementation. HIV/AIDS is mainstreamed into the PRS. The HIV/AIDS prevalence rate has dropped steadily since Within the cluster working group 2, a HIV/AIDS sector review will take place during There is only one PAF indicator that relates to HIV/AIDS and it was not met in

28 5. Risks The GBS programme is expected to operate in a stable environment, although a number of risks that relates to the effectiveness of GBS can negatively impact its ability to reach the overall objective of poverty reduction. Most of these risks are linked to the 10 budget support criteria, and can broadly be categorised into fiduciary risks (#5, 6, 7, 8), governance risks (#1, 2, 3, 4, 9, 10), and macroeconomic risks. Naturally, these risks overlap and interact. Below is a summary assessment of the most significant risks. Please see Annex A8 for a full risk assessment matrix covering all 10 budget support criteria and macroeconomic risks. Risks that the embassy has assessed as possible to happen and with a major impact Criterion 2. Risk of corruption. A number of grand corruption cases have been revealed in recent years. Even if the Government has taken actions against corrupted individuals, including ex-ministers, senior Bank of Tanzania officials, and senior civil servants, it is a real threat to the effectiveness of GBS. Moreover, it is a reputation risk that threatens the use of GBS as an aid modality if it is seen as being linked with inefficient or fraudulent use of public resources. The underlying process in the PAF referring to anti-corruption was rated unsatisfactory in the Annual Review The embassy, through its engagement in the GBS Group is following up closely, including having organized regular meetings with key Government interlocutors, including the President s Office, on anti-corruption measurements. A national action plan is being worked out based on the National Governance and Corruption survey. Criterion 8. Weak PFM systems. Tanzania s PFM system is considered to be better than the system in place in most sub-saharan African countries. But over the last 3-4 years, there has been a decline in several of the PEFA indicators relating to the PFM system and the credibility of the budget. During the same time, the PFM reform programme (PFMRP) stalled. At the 2009 GBS Annual review, donors rated the underlying process in the PAF referring to PFMRP as unsatisfactory for the fourth year in a row. However, at the 2010 Annual Review it was rated moderately satisfactory. Still, the inability to reconcile and verify transactions in time could lead to systemic misuse of public funds. The GBS group is therefore deeply involved in dialogue on PFM improvements and support to the PFMRP basket, which is receiving support from the new Danish Governance Programme. The APT will provide an incentive for PFM improvements. Suspension, revision or abandon of the provision of GBS by a donor (this risk is not part of the 10 GBS principles). If a donor suspends, revisits or ultimately abandons the use of GBs as a modality, either due to a bilateral issue (e.g. a political, trade-related or commercial dispute), or due to a lack of faith in Government s capacity to implement its PRS, it would lead to discussions at 28

29 HoC/HoM level in the GBS group. There are precedents both in Tanzania and in other countries receiving GBS, and this scenario cannot be excluded. Two important factors determining Denmark s and the rest of the GBS groups response will be the reason behind such as decision, as well as the size and relative weight of the GBS donor in question. If a small donor is withdrawing due to a bilateral issue, the impact upon the rest of the group will be easier to absorb, whereas the case of a larger donor abandoning GBS due to a lack of faith in Government s capacity to deliver results, could have a very damaging effect on the remaining GBS donors, including Denmark. Risks that the embassy has assessed as possible to happen and with a moderate impact Criterion 4. Poor development results. Despite a decade of high economic growth and successful implementation of PRS, surveys have shown meager results in reducing income poverty. These weak results could be an indication of serious constraints to the effectiveness of GBS. A closer analysis of the surveys, however, renders many question marks and inconsistencies. Therefore, it is of utmost importance to come to grips with the situation and analyze why the expected results did not materialize. It is widely acknowledged that growth has primarily been driven by construction, telecommunication, mining, and financial services, and only to a lesser degree by labour-intensive sectors such as agriculture. In response the MKUKUTA II will focus more on pro-poor growth policies. Moreover, increased focus on developing capacity for quality data production is taking place within the TSMP. Criterion 6. Ineffective public procurement. Framework for procurement is in line with good international practice, following the enactment of the Procurement Act in In spite of recent and consistent improvements, compliance with procurement rules is generally low and with slow progress. This may partly be due to procurement functions being decentralized to procurement entities without sufficient capacity. This risks that GBS funds do not achieve value for money or are misused. The embassy, both through its engagement in PFMRP WG and the GBS Group follows developments closely. The GBS programme will help to focus on improvements in procurement through the APT tranche. In addition PPRA receives direct support through the PFMPR basket. Insufficient progress on core reforms. (This risk is outside of the 10 budget support criteria). At the GBS annual review 2009, there were 20 core processes to be rated in the PAF. Out of those, 75 percent were rated as satisfactory. Some very important core reforms, such as PFM, PER/budget, legal sector, and private sector, were rated as unsatisfactory. Weak progress in such important sectors would pose a risk to the goal of poverty reduction. The embassy, through its engagement in the GBS Group, is pursuing a dialogue on how to foster progress. The design of the MDG tranche will also help to focus on results. 29

30 Annexes A1. Ten budget principles Assessment of Country Programme 2010 Representation Tanzania Period covered: October 2009 December 2010 A. COUNTRY CONTEXT Rating a/ Satisfactory: The technical preconditions for continuing with - or considering - general budget support are in place. Rating b/less satisfactory: There is political will and capacity for reform. General budget support may be continued or applied - within a well defined framework of conditionality and/or technical safeguards. Rating c/unsatisfactory: Technical preconditions for General Budget Support are not in place. Rating: a [x] b [ ] c [ ] Good governance, encompassing a minimum respect for human rights, a free press, pluralistic democracy and rule of law, including independence for the judiciary. 1. Good governance The general election in October 2010 underlined the deepening of democracy in Tanzania, since the reintroduction of the multiparty system in A sounder regulatory framework has been established, increased political freedoms are present and the government is to a larger extent held accountable by the opposition, civil society, media, the parliament and improved audit reports from the controller and auditor general. In particular, the parliament and media outlets have played a much more active role in domestic politics during recent years leading to increased scrutiny of the government. Tanzania went to the polls on 31 October 2010 and gave a second and last mandate to the Union president, Jakaya Kikwete, from the CCM party, which has been the ruling party since the reintroduction of the multi-party system in In Zanzibar, the CCM presidential candidate was elected in a remarkable peaceful and generally orderly election highlighted by the quick acceptance of the election results by the opposition candidate. It was noticeable that after violent and troubled electoral processes in the islands in previous elections, the two main rivals, CCM and CUF, went to the streets to jointly celebrate the election results on Zanzibar and subsequently formed the first Government of National Unity mandated by the Zanzibaris in a referendum held in July The main opposition party, CHADEMA, gained 26% of the vote in the presidential election. In the parliamentary elections the opposition doubled its share of representation from 10% in the last parliamentary seating to 20% in the new parliament. It should also be noted that the opposition in particular has gained grounds in the larger cities and has won mayor posts in some of them. The gradual evolution of the opposition is a sign of more open political environments in Tanzania, although the ruling party continues to control the assemblies on both the mainland and in Zanzibar. The opposition party CHADEMA is still questioning election results. CHADEMA has, however, recently announced their recognition of President Kikwete as the rightful president of the Union in accordance with the constitution. The EU and other election observation missions have not questioned the overall results. The EU election observation mission has deemed 30

31 the election day to be peaceful and generally orderly and voting to be conducted in a calm manner with only a few incidents of minor nature in 549 observed polling stations. President Kikwete has as a follow-up to the election made a commitment to setup a constitutional reform team to start work on a new constitution which hopefully can help strengthen the role of the legislative vis-à-vis the executive. Media in Tanzania are viewed as partly free by the US-based advocacy organization, Freedom House. The constitution provides for freedom of speech and media outlets have played a much more active role in domestic politics during recent years leading to increased scrutiny of the government. An independent Media Council of Tanzania (MCT) can be used to settle media disputes. However, some laws still provide excessive powers to the executive to ban media outlets, e.g. the Newspaper registration act. The judiciary remains largely independent, but reports of incidences of nonadherence to international standards of a fair trial cause concern and corruption in the judiciary is a major challenge. Government policy continues in general to be favorable towards the protection of human rights and the fundamental rights are protected by the constitution (pls. see section F and the annex for a detailed description of Tanzania s accession and compliance with international human rights conventions). Events in relation to Albinos and to land and human rights for pastoralists are still of particular concern in connection with human rights. In recent years civil society has been given more room to voice its dissenting opinions, sometimes directly influencing the policy discourse. This development has further confirmed that civil society can act as an agent for policy change in Tanzania. However, challenges remain particularly in terms of a fragmented and detached civil society with limited capacity. Self-censorship in critical research and advocacy for democratic development is of concern. Rating: a [ ] b [x] c [ ] Anti-corruption with implementation of prevention and control measures, as well as follow-up with a view to improving the country s standing in the international corruption league table. 2. Anti-corruption Tanzania s performance in international corruption surveys over the last five years shows a somewhat mixed picture, despite the fact that Tanzania climbed upwards in the most recent perception survey from Transparency International. Limited progress on tackling grand corruption cases. On petty corruption the statistics on cases investigated and convictions has shown an upward trend since 1995 but there is still a need to tackle petty corruption in particular in the traffic police, the judiciary and the health sector as highlighted by a recent survey. The passing of the Election Expenses Act in early 2010 was an important element in investigating allegations of bribes in connection with the recently held elections. Corruption in Tanzania is a serious governance and developmental challenge. It is a major problem affecting all sectors of the national economy from service delivery to natural resources exploitation, industrial production, environmental protection, business and commerce. Tanzania s performance in international corruption surveys over the last five years shows a somewhat mixed picture. However, in the 2010 Transparency International Corruption Perception Index Tanzania climbed to a ranking of 116 compared to 126 in This new ranking places Tanzania above Kenya (154) and Uganda (127). Tanzania was ranked second best in the 2010 East Africa Bribery index with a 28.6% bribery incidence vis-à-vis Kenya (31.9%), Uganda (33.0%), Burundi (36.7%) and Rwanda (6.6%). In the most recent 2008 Afrobarometer survey 56% of the public believed that government was fighting 31

32 corruption (albeit a fall from 61% in 2005). While Tanzania has demonstrated willingness to tackle a number of grand corruption cases in the last few years the general view among development partners is that the prosecution and judicial process is taking too long and prevent the discontinuation of a culture of impunity for the most well-connected culprits. The Embassy shares this concern but also acknowledges that investigation, prosecution and conviction processes for cases of economic crime are extremely complicated and lengthy and that the robustness of the Tanzanian system to prosecute people involved in these corruption scandals is still being tested. In such times it is important to continue to support the anti-corruption system, which in a number of other African countries has been sidelined for the prosecution of high-ranking officials. The statistics on cases investigated and convictions of petty corruption have shown an upward trend since However, according to the official case statistics of the anti-corruption bureau only 6% of completed investigations files have led to conviction or acquittal. This underlines the limited capacity of the anti-corruption bureau, the prosecution authority and the judiciary. A recent governance and corruption survey financed by DANIDA shows that petty corruption is widespread in the traffic police, the judiciary and the health sector. Formal response and action plan to follow-up on these findings are still awaited. Tanzania has passed several important laws to combat corruption such as the Public Procurement Act (2004), the Election Expenses Act (2010), the Anti- Money Laundering Act (2006), the Prevention and Combating of Corruption Act (2007) and the Public Audit Act (2008). Other important pieces of legislation are, however, still awaited, including a new media act, a new code of ethics act for public officials and a whistleblowers act. The passing of the Election Expenses Act in early 2010 was an important achievement. The act was used by the anti-corruption bureau to investigate individuals using bribes in the election process. It also helped opening a public dialogue on corruption in connection with elections, which in itself has a potential preventive impact. Rating: a [x] b [x] c [ ] Solid poverty reduction strategy and the will to implement it( e.g local ownership and PRS integrated in national budget), including assessment of progress in the country s PRS process during 2009 based on the latest PRS review. 3. Poverty The Poverty Reduction Strategy (PRS) for Tanzania (2005/ /11), known by its acronym MKUKUTA, delivered good results in the social sectors while progress in reducing poverty was limited. New PRS for 2010/ /15 (MKUKUTA II) signed by President in 2010 with greater focus on private sector-led growth through well functioning institutions and markets; efficient use and development of factors of production; provision of infrastructure and prudent economic governance. In the past decade Tanzania has experienced strong annual GDP growth rates, and improvements in tax administration, consistent provision of foreign aid and debt relief has enabled an expansion in public spending. Spending on the social sectors has yielded results in progress towards the MDGs, and Tanzania has improved its ranking on the UN s Human Development Index from below to above average for Sub-Saharan African countries. However, progress in reducing income poverty and boosting private consumption has been limited and the earlier goal of halving poverty by 2010 has proved unattainable. 32

33 The new PRS for Tanzania, the MKUKUTA II, covering the period 2010/ /15 provides an operational framework for achieving the MDGs and Tanzania s Development Vision 2025, which aims to transform Tanzania into a middle income country. (A separate poverty reduction strategy, the MKUZA II, exists for the semi-autonomous Zanzibar.) The new poverty reduction strategy has a results-based approach focusing on three clusters: (i) income poverty; (ii) social well-being; and, (iii) governance. It focuses to a larger degree than its predecessor on enhancing productivity and growth in order to eradicate poverty. It identifies selected growth drivers, such as agriculture, and outlines sectoral strategies to promote productivity and private sector activity in these areas. The strategy signals a shift toward a greater role for the private sector in economic growth and establishes five platforms: well functioning institutions and markets; efficient use and development of factors of production; provision of infrastructure; ensuring good economic governance; and resource mobilization and financing. An implementation and monitoring plan for the new poverty reduction strategy is currently being developed. Comments on Danish effort to the development and implementation of PRS (not part of rating) The central risks for the poverty reduction strategy for Tanzania include insufficient financing, delays of structural reforms and unclear prioritization. The budget for the new strategy is ambitious and among other things based on very ambitious domestic revenue projections. This urges better prioritization of implementation of the different components in the event that the resource envelope will be smaller than envisaged. Significant political will is needed to implement the structural reforms, which are necessary for improving e.g. the business environment. Denmark has through its GBS programme contributed to the expansion of social services and an increased focus on results. Such support needs in accordance with the priorities for the new PRS to be complemented by e.g. investments in infrastructure and creation of a stronger private sector. This is currently being addressed through the Danish roads and business sector programmes. Rating: a [x] b [ ] c [ ] Positive experiences with development cooperation generally and budget support specifically, as well as ongoing documentation of concrete development results. 4. Track record ODA, and GBS in particular, has helped spur investments and delivered results in the social sectors, where quality constraints are still to be addressed. Efficiency of public spending must be further improved and a consistent drive for reforms to improve the investment climate is needed to shift the growth drive from the public to the private sector. Tanzania has been at the forefront of the global move toward enhancing the effectiveness and efficiency of external assistance. A central element of this was the move toward the use of general budget support (GBS) based around the priorities identified in the 2000 poverty reduction strategy (PRS). From its genesis in 2000/01 general budget support has moved forward, linked to Tanzania s Poverty Reduction Strategy, since 2005 with currently 12 DPs providing general budget support. General budget support has contributed 18 20% of total public spending over the last 5 years. The increase in general budget support has together with increasing domestic revenues led to a doubling of public spending. A recently published evaluation of the overall British and Irish aid programmes to Tanzania concludes that General Budget Support and increasing tax revenues have enabled a dramatic expansion in the scale of service provision in education, health, water and sanitation, infrastructure (roads) and agriculture. Transaction costs have remained manageable and disbursements predictable. The evaluation finds it inconceivable that such a significant contribution to spending in these areas could have been made through other aid modalities. The spending increase 33

34 has e.g. contributed to an increase in primary school enrolment rates from 59% in 2000 to 96% in 2009 and to falling infant and under-5 mortality rates. However, challenges remain in terms of quality of social services. An evaluation process focusing solely on GBS to Tanzania has been initiated, through the initiative from Denmark and other partners. The final results from the evaluation are expected to be published in General budget support is not perceived to have had substantial effects on the efficiency of spending. Still too large a percentage of the budget is used for recurrent spending. Only 15% of the total budget in 2009/10 was allocated for capital spending e.g. in infrastructure. A consistent drive for implementation of business reforms and other core reforms is still awaited. The Danish country programme for Tanzania complements the provision of General Budget Support with support to institutional reforms for the private sector, better access to financial services, support to labour market institutions, environmental strengthening, improved access to health services and provision of road infrastructure, most recently through mixed credits. Danish ODA has amongst other helped build a relatively well-functioning medicine supply system in Tanzania, has helped make the Tanzania road network the best in East Africa, instituted environmental laws in Tanzania and been instrumental in developing the financial sector. Rating: The Finance Act process, with publication of budget and accounts, a [x ] b [ ] c [ ] as well as parliamentary consideration. 5. Finance Act Transparency of the National Budget is strengthened. However, still a need for the Government to improve access to information about the implementation of the budget. A substantial fiscal financing gap in the 2010/11 budget has emerged which the Government needs to address during its mid-year budget review. According to the internationally recognized Open Budget Index the Tanzanian government provides the public with some information on the central government s budget and financial activities assessed by the Survey. The last two years did see progress as Tanzania s Open Budget Index score increased from 36 in 2008 to 45 in This is largely because the government and the National Audit Office started publishing a more comprehensive Budget Proposal and Audit Report. There is, however, still room for improvement, and the Government should improve information on the central Government s budget and financial activities during the course of the budget year inter alia by producing and publishing a mid-year review and year-end budget report and publishing a timetable for the entire budget process. The main scrutiny of the budget takes place at parliamentary sessions, before the national budget is finally approved by Parliament and the budget is made public. Apart from the involvement of domestic and foreign stakeholders in the budget preparation, the main weakness of the Finance Act process is that parliamentary consideration and scrutiny of the budget could be more critical since the ruling CCM-party has a confident majority in Parliament. Although the capacity of the legislature to scrutinize the budget is low there are encouraging signs with regards to the parliamentary oversight bodies, as all three Parliamentary oversight committees are chaired by the opposition and are becoming increasingly involved in the oversight of public expenditures. The foundation for oversight function has also been strengthened with the revised Public Finance Act of 2010, which provides the Accountant General with greater oversight powers over local government finances. This is expected to be further enhanced when the draft Local Government Finance Act will be passed by parliament, hopefully in

35 Tanzania is still blessed with sound macroeconomic fundamentals as has been the case in the last decade. However, a substantial financing gap has emerged in the 2010/11 budget due to overly ambitious domestic revenue targets. A midyear budget review has been undertaken but it is still to be seen whether suggested spending cuts will be sufficient to bridge the gap and which specific consequences less spending might have on social service delivery. Rating: Rules for public procurement broadly in accordance with a [ ] b [x] c [ ] international standards. 6. Public Procurement Tanzania procurement legislation is of international standard. Compliance with the legislation is improving, although still a challenge. A new Public Procurement Act has been submitted to parliament but is still waiting to be discussed. The new draft Act provides greater autonomy to Tanzania s Public Procurement and Regulatory Authority to exercise its functions but on the other hand suggests a change in the approval authority of tenders from the Tender Board to the Chief executive of the procuring entity. Tanzania s Public Procurement Regulatory Agency (PPRA) is rather weak in terms of manpower and capacity but has been given additional resources to enforce its mandate. PPRA continues to monitor the average level of compliance of procuring entities through procurement audits. Previous audits showed an average level of compliance among public institutions in 06/07 of 39% increasing to 43% in fiscal year 07/08. A review in late 2010 showed that the average level of compliance of public entities with the Act and its Regulations has reached 73% based on follow-up audits. Several of the major cases of corruption and of misuse of power that surfaced during the last few years have dealt with deviations from the procurement rules and regulations. This has both highlighted that procurement remains opaque and not effectively monitored and has led to new calls for better monitoring and enforcement of public procurement rules, the incremental results of which are already starting to show. Rating: Presence of an independent National Audit Office or similar a [x] b [ ] c [ ] functioning inspection body. 7. Audit Tanzania has the ambition of moving upwards in the ranking of the so-called AFROSAI international audit standards by reaching level 3. Several measures have been taken to achieve this target and a peer review on the extent to which the National Audit Office (NAO) fulfils AFROSAI 3 standards were undertaken by auditors from the Supreme Audit Institutions of Norway and the Netherlands in The overall assessment of the peer review was the following: Through the new Public Audit Act 2008, steps were taken in the direction of a fully independent organisation. For example, the independence of the Controller and Auditor General has been improved and NAO has a mandate to perform all kinds of audits at its own discretion. NAO has improved communication with stakeholders, and auditees are kept much better informed during the audit process. In addition, the office has established fruitful cooperation with the three parliamentary committees with oversight functions for the use of public funds. NAO has made great progress in relation to compliance with AFROSAI- E level 3, but there are areas that need to be addressed in order to reach AFROSAI-E level 3. The Peer Review came up with a number of suggestions for NAO to consider in its efforts to reach AFROSAI international audit standards. Among them is to strengthen the independence of the Controller and Auditor General. The general 35

36 impression is that NAO works in an independent and free manner. However, the President appoints the Controller and Auditor General. AFROSAI-E level 3 clearly states that the head of the supreme audit institution should be appointed by the legislature. Pursuant to AFROSAI-E level 3, removal from office should also be the responsibility of the legislature. Under Tanzanian law, removal from office is decided by a tribunal appointed by the President. This to some extent ensures that the President himself is not able to remove the Controller and Auditor General, but it does not comply with AFROSAI-E level 3. Rating: Expert appraisal of quality and capacity in public finance a [x] b [ ] c [ ] management 8. PFM Tanzania s public financial management (PFM) systems score better than most African countries. Important and highly praised efforts made by Tanzania in the decade up to 2005 resulted in major improvements in the areas of cash management, an integrated financial management system and policy based budgeting. The years after 2005 saw however a slowdown in reform which led to a drop in Tanzania s performance on PFM compared to other countries and a decline in several of the PEFA indicators relating to PFM systems and the credibility of the budget. Comments on progress in public sector reform Particular concerns on PFM relate to transparency of intergovernmental activities, oversight of public entities and a number of control risks concerning the payroll, fund flows, reporting and the integrated financial management system. In addition, there were concerns about cash management and bank reconciliation. On this basis the challenge to speed up reforms again was a Key Issue at the GBS Annual Review 2009 and reform activities were designed to improve especially the quality of reporting, effective budget management, cash management, flow of funds and the effectiveness of Tanzania s Integrated Financial Management System. A joint (sector) review in October 2010 assessed that genuine progress had been made in several of these areas since 2009 but nevertheless that some, in particular flows of funds, were still facing serious challenges. The current 3rd phase of the Public Financial Management Reform Programme (PFMRP III, officially started in July 2008) focuses on improvements in cash management, payment systems, coverage and integration of the Integrated Financial Management System (IFMS), and budget classification. In spite of progress on a wide set of issues the PFMRP III has not yet yielded the expected results. At the 2009 GBS Annual Review, donors rated the socalled underlying process in the Performance Assessment Framework relating to PFMRP as unsatisfactory for the fourth year in a row and the lack of progress on PFM reforms was discussed as a Key Issue. Government presented the following steps to address the challenges to PFM reforms in Tanzania: Prepare a new phase of the PFMRP Prepare a public financial management action plan with clear priorities for improving (i) the scope and coverage of the financial management system; (ii) cash management; (iii) flow of funds; (iv) quality of reporting; (v) budget management. Update the Acts for Public and Local Government Finance Increase the Accountant General s oversight function over local Government finances. A joint review mission in October 2010 assessed that 15 out of 24 short term actions were fully implemented and 1 was partially implemented, and that 4 out of 7 milestones for the programme was reached. On the basis hereof the rating of PFMRP was improved to moderately satisfactory at the 2010 GBS Annual Review. Phase 3 of the PFMRP has been extended until June 2011 and the preparations 36

37 for a new PFMRP IV Strategy has commenced. Rating: Mutual observance of agreed obligations. a [x] b [ ] c [ ] 9. Partnership Underlying principles for cooperation still being observed although concerns about limited progress on follow-up to a number of corruption cases continues to be discussed between Government and development partners and poses a risk to the partnership. The agreed obligations as stipulated in the Partnership Framework Memorandum for General Budget Support and in the bilateral Government Agreement (2006) between Denmark and Tanzania have been observed by both parties. This includes the stipulations in the Partnership Framework Memorandum, which sets out the conditions for the commitment and disbursement of general budget support. The Government is clearly taking the lead in the dialogue with development partners but the predictability of budget support and Government s implementation of actions agreed in the Performance Assessment Framework for budget support needs to be strengthened. The issue of limited progress in the fight against corruption, ref. section 2, has meant that corruption was a key issue during the GBS annual review 2010 and a continuous high-level dialogue with Ministers to ensure that the underlying principles for the cooperation remain on track has been reinvigorated after the 2010 elections. This is a follow-up to the emergence of several cases of corruption and of misuse of power surfacing in 2007/08. Rating: a [x] b [ ] c [ ] Consensus among all budget support donors regarding approach (incl. rules for transfer and monitoring) and conditions for general budget support. 10. Harmonisation Tanzania has been one of the pioneering countries in terms of donor coordination. The Joint Assistance Strategy for Tanzania (JAST) is the model for many other countries, but implementation speed provides room for improvement. All 12 GBS donors operate under the Partnership Framework Memorandum signed with the government, which describes the process, the information requirements and the commitments of both partners. The Partnership Framework Memorandum operationalises and links various international and domestic commitments, including the Paris Declaration on Aid Effectiveness (2005) and the JAST. All budget support donors, except the African Development Bank, provide funds through the same account in the Bank of Tanzania, and receive the same audit reports and statements from the Ministry of Finance and the National Audit Office. The fact that different budget support partners maintain different types of conditionalities for disbursing part of their budget support, including potential bonus tranches, does to a certain extent affect the comprehensive assessment of performance and risks sending mixed signals to the Government of Tanzania. However, a group of donors, including Denmark, are now aligning their selection of criteria for bonus tranches. Description of joint donor-govt. coordination structure and the Danish participation (not part of rating) A comprehensive set-up for joint donor-government coordination, management and monitoring is in place, including a dialogue structure comprising of cluster and sector working groups. The Troika+ group, which consists of the incoming, current and out-going chair of the GBS Group and the World Bank as permanent member, is responsible for leading budget support donor coordination. The IMF does not provide GBS but provides technical input to the Troika discussions with Government. The meetings between the Troika+ Group and Government of Tanzania are the highest joint donor/government 37

38 decision-making body, where issues of substantial importance, including Government reforms and policies are discussed. As chair of the GBS group in Denmark headed this coordination and in this context made efforts to improve the efficiency and dialogue between development partners and Government. Throughout the year there is a continuing dialogue between the donors, the Ministry of Finance and Economic Affairs and other partners assessing progress against the jointly identified targets and indicators in the so-called Performance Assessment Framework (PAF). The final assessment of the PAF takes place at an Annual Review, which also aims to highlight progress in reform and discuss challenges ahead. On the basis of this joint assessment of progress, each budget support donor will decide on its planned funding level for the upcoming fiscal year, which is then to be disbursed in the beginning of the fiscal year. 38

39 A2. Assessment of the poverty strategy The most recent PRS, the MKUKUTA II, is the third to be implemented in Tanzania since It covers the period 2010/ /15 and has a result-based approach focusing on three clusters: I: Raising economic growth for reducing income poverty; II: Improving the quality of life and social well-being; and III: Improving governance and accountability. MKUKUTA II focuses more than its predecessor on enhancing productivity and growth in order to achieve greater success in reducing income poverty. It identifies selected growth drivers, such as agriculture, and outlines sectoral strategies to promote productivity and private sector activity in these areas. The strategy signals a shift toward a greater role for the private sector in economic growth and establishes five platforms: well functioning institutions and markets; efficient use and development of factors of production; provision of infrastructure; ensuring good economic governance; and resource mobilization and financing. A separate poverty reduction strategy, the MKUZA II, exists for the semi-autonomous Zanzibar. It focuses on the same main components, with emphasis on the poorest and vulnerable groups. An implementation and monitoring plan for the new poverty reduction strategy is currently being developed. MKUKUTA Annual Implementation Reports (MAIR) and Poverty and Human Development Reports (PHDR) monitors the implementation of the PRS with regards to the MDGs. A Joinf IDA-IMF Staff Advisory Note of January, 2011 assessed that the key for the MKUKUTA II include insufficient financing, delays of structural reforms and unclear prioritization. The budget for the new strategy was deemed ambitious and among other things based on very ambitious domestic revenue projections. This urges better prioritization of implementation of the different components in the event that the resource envelope will be smaller than envisaged. Significant political will shall be needed to implement the structural reforms, which are necessary for improving e.g. the business environment. The budget support partners co-financing the strategy have regarded the actual implementation of Tanzania s previous poverty reduction strategy as satisfactory. A well-functioning monitoring system is in place and the share of PRS spending in the national budget was estimated at a high 71 percent in 2009/10, which was in line with previous years share. 6 In spite of 7 percent annual average GDP growth rates, income poverty has not decreased significantly between 2000 and The proportion of the population classified as living below the poverty line was 35.7 percent in 2001 and 33.6 percent in 2007, a decline by 2.1 percentage points that is not statistically significant. This corresponds to a poverty-to-growth elasticity of -0.2, indicating that 1 percentage point of economic growth reduces the poverty headcount (poverty in percentage of total population) by 0.2 percent only. 6 See Government of Tanzania, Draft Annual National Policy Dialogue Report 2009, February

40 The dynamics of income-poverty were driven mainly by low growth in real private consumption, which increased by only 5 percent in per capita terms over the whole 6 year period. Taken into consideration that price increases for the basic needs consumption basket was higher than the GDP deflator, this would imply a decline of the real value of consumption. 7 Household surveys 8 indicate that the poor have become even poorer. Per-capita consumption, measured in constant 2001 prices, declined 2 percent between 2001 and 2007 for people in the poorest quintile. In particular the very poor, living in urban areas, appear to be worse off than before. However, it is important to note that the weak connection between growth and poverty reduction is not unique for Tanzania. The same poverty-to-growth elasticity (-0.2) has for example been reported for Honduras in , Brazil in , and Peru in , and the elasticity for China at -0.3 over the period is only slightly better. In Tanzania, however, data seem to paint a contradictory picture of high economic growth and unchanged income inequality, while the headcount index remained more or less unchanged. Under such circumstances, poverty would be expected to decline. Studies of data quality have indicated some weaknesses that could affect poverty analyses and, at least partly, explain the weak link between growth and poverty in Tanzania 9 : 1. Production data is unreliable and economic growth might have been overestimated. This mainly concerns data on agriculture, fishing, mining, public services, and informal sectors. For example, GDP estimates of Government final consumption and Government investment is based on budget projections and not actual spending (and actual investment is usually significantly less than projected in the budget). 2. Household surveys, the base for the poverty headcount, probably underestimate the value of household consumption (and thereby overstate poverty). This mainly concerns the consumption of durable goods and housing as well as publicly provided goods such as water, education, and health. For example, free primary education has improved access to education for the poor, but this is not reported as consumption (and a benefit for the poor) as the service is provided for free. The two bullets above indicate that the National Accounts, on the one hand overestimates GDP, while the Household Budget Surveys, one the other hand underestimates consumption. It may also be interesting to look at a more multidimensional measure of poverty, such as the Human Development Index (HDI). Over the same period, from 2000 to 2007, the HDI increased from to 0.530, overtaking some few countries in 7 See World Bank, Program Document for the Seventh PRSC, May 11, See Household Budget Surveys 2002 and This is well summarized in Mkenda, A., Luvanda, E., and Ruhinduka, R., Growth and Distribution in Tanzania Recent Experience and Lessons, Interim report submitted to REPOA, February 4,

41 the Sub-Saharan Africa. Since development has to be evaluated in terms of its multidimensional extent, it is significant that while income poverty seems to have remained stagnant from 2000 to 2007, a more multidimensional evaluation records some progress in Tanzania, albeit a modest one. The previous PRS objective to reduce poverty to 19 percent by 2010 was shown to be clearly unattainable, while the Millennium Development Goals (MDG) objective to reduce it to 19 percent by 2015 may still have a chance to be met. According to the latest HBS, a relatively large part of households have consumption levels just below the poverty line. If economic growth were to nudge these households across the poverty line, the MDG objective could still be met. But in order for that to happen, Tanzania would require an annual broad-based real consumption growth of 3.2 percent per capita (or a 29 percent increase between 2007 and 2015). This is an ambitious objective, which would require a total redirection of the present pattern of growth. Other MDG targets have progressed. Total enrolment rate in primary school increased from 53 percent in 2000, to 98 percent recorded for 2008, according to the summary Table A1 below produced by the World Bank. Positive trends have also been recorded in the decline of infants and under five s mortality rates. Other achievements are in nutrition, gender equality, and a decline in the HIV/AIDS prevalence rate as from

42 Millennium Development Goals Goal 1: Eradicate extreme poverty and hunger Employment to population ratio, 15+, total (%) Employment to population ratio, ages 15-24, total (%) GDP per person employed (annual % growth) Income share held by lowest 20% Malnutrition prevalence, weight for age (% of children under 5) Poverty gap at $1.25 a day (PPP) (%) Poverty headcount ratio at $1.25 a day (PPP) (% of population) Prevalence of undernourishment (% of population) Vulnerable employment, total (% of total employment) Goal 2: Achieve universal primary education Literacy rate, youth female (% of females ages 15-24) Literacy rate, youth male (% of males ages 15-24) Persistence to last grade of primary, total (% of cohort) Primary completion rate, total (% of relevant age group) Total enrollment, primary (% net) Goal 3: Promote gender equality and empower women Proportion of seats held by women in national parliaments (%) Ratio of female to male enrollments in tertiary education Ratio of female to male primary enrollment Ratio of female to male secondary enrollment Share of women employed in the nonagricultural sector (% of total no Goal 4: Reduce child mortality Immunization, measles (% of children ages months) Mortality rate, infant (per 1,000 live births) Mortality rate, under-5 (per 1,000) Goal 5: Improve maternal health Adolescent fertility rate (births per 1,000 women ages 15-19) Births attended by skilled health staff (% of total) Contraceptive prevalence (% of women ages 15-49) Maternal mortality ratio (modeled estimate, per 100,000 live births) Pregnant women receiving prenatal care (%) Unmet need for contraception (% of married women ages 15-49) Goal 6: Combat HIV/AIDS, malaria, and other diseases Children with fever receiving antimalarial drugs (% of children under Condom use, population ages 15-24, female (% of females ages Condom use, population ages 15-24, male (% of males ages 15-24) Incidence of tuberculosis (per 100,000 people) Prevalence of HIV, female (% ages 15-24) Prevalence of HIV, male (% ages 15-24) Prevalence of HIV, total (% of population ages 15-49) Tuberculosis cases detected under DOTS (%) Goal 7: Ensure environmental sustainability CO2 emissions (kg per PPP $ of GDP) CO2 emissions (metric tons per capita) Forest area (% of land area) Improved sanitation facilities (% of population with access) Improved water source (% of population with access) Marine protected areas, (% of surface area) Nationally protected areas (% of total land area) Goal 8: Develop a global partnership for development Aid per capita (current US$) Debt service (PPG and IMF only, % of exports, excluding workers' rem Internet users (per 100 people) Mobile cellular subscriptions (per 100 people) Telephone lines (per 100 people) Other Fertility rate, total (births per woman) GNI per capita, Atlas method (current US$) GNI, Atlas method (current US$) (billions) Gross capital formation (% of GDP) Life expectancy at birth, total (years) Literacy rate, adult total (% of people ages 15 and above) Population, total (millions) Trade (% of GDP) Source: World Development Indicators database Figures in italics refer to periods other than those specified. Page: Country: Tanzania Row: Series Column: Time 42

43 A3. Assessment of the macroeconomic and fiscal framework 10 Macroeconomic stability Tanzania has been successful in pursuing its programmes with the IMF since late mid-1990s. Currently, it has a Policy Support Instrument (PSI) agreement in place. Reforms have yielded strong macroeconomic performance, with high GDP growth, relatively low inflation and ample international reserves. Tanzania experienced an average annual GDP growth of 6,8 percent per year in the previous decade, allowing for an increase in per capita GDP from about 213 USD per capita in 1995 to 509 USD in After this decade of strong performance, economic growth slowed somewhat in the face of the global financial crisis in Tanzania was mainly affected through lower earnings from export and tourism, as well as reduced access to foreign direct investment. In addition, drought and flooding in northern Tanzania and neighbouring countries adversely affected agricultural output and food supplies, leading to increased food insecurity and high food price increases. Average inflation rate reached about 12 percent in 2009, up from about 6.5 percent annually in Economic growth did, however, recover relatively quickly, and reached 6,5 percent in the fiscal year 2009/2010. The inflation rate was back 7.2 percent year-on-year in June Monetary policy was eased significantly in 2009, with interest rates falling sharply. Interest rates have firmed since the beginning of 2010 following central bank efforts to contain further liquidity expansion, but remain negative in real terms. Monetary policy has remained accommodative and in spite of very low interest rates, banks have continued to hold to high excess reserves. The exchange rate has remained stable during most of the year but depreciated by nearly 10 percent over April-September International reserves have risen due to the combined influence of growing exports (noticeably gold but also travel receipts) and large foreign financing inflows, including from bilateral and multilateral donors. International reserves grew to just over 5 months of imports by end-june Economic growth in Tanzania is primarily driven by earnings from mining and tourism and donor-funded infrastructure development in roads and the energy sector, which in turn is fuelling demand for services and investment in commercial and residential property. Key bottlenecks, capping even faster economic growth, are poor energy and transport infrastructure, low productivity in agriculture, and excessive bureaucracy. There are signs of a weakening reform momentum, with potentially negative effects for economic growth over the medium term. Tanzania s ranking in the annual Doing Business Survey has declined in recent years and several major infrastructure concessions have been terminated or are facing financial or operational challenges. 10 Source: IMF WEO April All prices are in USD current prices. 43

44 Domestic revenue raising Tanzania has made impressive progress in increasing tax revenues since Efforts to reinforce revenue administration have boosted domestic revenues from 11 percent of GDP in 2002/03 to 16 percent in 2008/09. The contribution of Tanzania s Large Tax Department (LTD) has been particularly notable, and the Tanzanian Revenue Authority s latest corporate business plan aims to bring domestic revenue collection to 20 percent of GDP over the medium term. With the recent improvements, domestic revenue mobilization in Tanzania is now in line with comparable countries. However, there is still a need to enhance domestic tax revenues through changes in tax policy and improved administration. Revenue gains are expected to come from further capacity enhancement of the LTD and adopting best practices for dealing with medium-sized taxpayers. Reforms to the fiscal regime for natural resources, including mining, also hold the prospect of revenue gains over the medium term. A substantial financing gap has emerged in the 2010/11 budget due to overly ambitious domestic revenue targets. A mid-year budget review has been undertaken but it is still to be seen whether suggested spending cuts will be sufficient to bridge the gap, and which specific consequences less spending might have on social service delivery. Fiscal analysis in some detail Solid growth in tax revenues and substantial donor support has allowed the Government to expand fiscal spending rapidly since 2000, with only limited recourse to domestic financing. During the same period, better budget formulation and expenditure execution have improved the composition and effectiveness of spending. The formalization of the Government s economic strategy in the PRS, the development of a medium-term expenditure framework, and the conduct of annual budget support reviews (jointly with the development partners and civil society organizations) have contributed to a redirection of spending towards priority areas, most notably education, health, and key economic infrastructure, such as roads and water facilities. In addition, debt relief provided through HIPC and the Multilateral Debt Relief Initiative (MDRI) have freed up extra resources for productive spending and reforms to public services, increased devolution of Government functions to local Governments, and a stronger public financial management system have made public spending more effective. The infrastructure gap remains a severe constraint on growth and development in Tanzania. Despite its geographic advantages as a potential transit country to its landlocked neighbors Burundi, Rwanda, Uganda and Zambia, as well as the D.R. Congo, there is clear evidence to suggest that Tanzania s lack of infrastructure is acting as a constraint on the expansion of trade and economic activity in both the country and the region. While the availability of comprehensive and timely data is limited, public spending on infrastructure and development in Tanzania appears to have risen rapidly as a share of national income in recent years, though it remains low in absolute and per capita terms. 44

45 Finding the necessary resources to increase infrastructure spending is therefore a key challenge for fiscal policy in Tanzania. Given limited domestic resources, the Government is considering alternative financing options to advance infrastructure spending. Promoting private sector participation in infrastructure development, either through direct investment or Public-Private Partnerships (PPPs), is one option. Borrowing on commercial terms is another option. However, these options are not without risks for the macroeconomic stability. PPPs can create significant contingent liabilities explicit or implicit for the Government, while non-concessional external borrowing is more expensive and would imply greater risks for the economy and make public and external debt profiles less favorable. Borrowing externally on commercial terms would also create higher refinancing and debt service risks. 45

46 A4. Assessment of Governance Since independence in 1961, Tanzania has developed one of the strongest track records of political stability in Africa. It has been a stable multi-party democracy for almost two decades. However, the ruling party has a strong majority in Parliament and is using it to influence the legislative and the executive branches of Government. Still, opposition parties enjoyed marked progress in some areas in the October 2010 general elections, which were largely peaceful. The results of the elections represent an increase in competition with respect to the political space in Tanzania, including in the urban areas. There is, however, still a long way for the opposition, which is inferior to the ruling party in terms of resources and organisation. With respect to Zanzibar where previous elections had been characterized by violence, the new Government of National Unity represents a very important step in the peace- and reconciliation process. In general, the Government shows respect for human rights, democratic values and principles. It has promoted an increased freedom of expression and allowed media to grow exponentially during the past decade. However, some laws still provide excessive powers to the executive to ban media outlets, e.g. the Newspaper registration act. In Zanzibar press freedom is more restricted. The 2001 NGO Act provided improvements toward an enabling environment for civil society organisations (CSO), and like media, civil society was re-born. The number of CSOs grew quickly, and is increasingly focussed on policy analysis and advocacy. Still, compared to most neighbouring countries, civil society remains weak and is periodically subject to state restrictions. The progress in press freedom and civil society has together with an improvement in Parliament s oversight of the budget, contributed to improvements in domestic accountability. Although the capacity of the legislature to scrutinize the budget is still low, several of the Parliamentary Committees are increasingly involved in the oversight of public expenditures. In relation to human rights, there have been recent events of concern regarding land and human rights for minorities. The judiciary remains largely independent, but reports of incidences of non-adherence to international standards of fair trials, in particular in relation to land rights cases, have caused concern. Reforms in the judicial system need increased attention. Targeted measures to improve the judicial integrity must be introduced. Tanzania s score on the Open Budget Index 11 increased between 2008 and As Tanzania scored 45% out of a possible 100% score on the Open Budget Index 2010, it still shows that the Government provides its citizens with only some information on the central Government s budget and financial activities assessed by the survey. This makes it challenging for citizens to hold Government 11 See The Open Budget Initiative measures the openness of seven key budget documents for each and every citizen. 46

47 accountable for its management of the public s money. Neighbouring countries such as Kenya scored 49% and Uganda 55%. Tanzania s ranking in Transparency International s Corruption Perceptions Index improved from 126 in 2009 to 116. Clientelism is embedded in the Tanzanian political culture and a number of grand corruption cases have been revealed in recent years. The nature of the corruption cases varies, but they have involved senior civil servants or politicians in influential positions. The corruption cases have put the focus on public procurement, which appears to be especially vulnerable to grand corruption, and administrative collusion between providers of goods and services and public servants at lower levels. Revenue collection is also known to be exposed to corruption, especially in the natural resources sectors and customs administration. It is however encouraging that in recent years the anti-corruption debate has intensified, with Parliament and the media taking on a higher level of scrutiny than in the past. The Government s Anti-Corruption legislation of June 2007 has strengthened the Prevention and Combating of Corruption Bureau (PCCB), which is pursuing several high profile cases. But overall the capacity of the institutions tasked with investigating, prosecuting and adjudicating corruption cases remains weak. Anti-corruption initiatives will need to be stepped up in order to address a perception that the anti-corruption agenda is not progressing at a sufficiently fast pace (having in mind that investigation, prosecution, and conviction processes in cases of economic crime generally are extremely complicated and lengthy). 47

48 48

49 A5. Assessment of the public financial management system and reforms The Finance Act process A Public Finance Act (2001, revised 2004 and 2010) is in place and provides the legal framework for the budget process. Tanzania has a clear budget preparation calendar, encompassing (i) macro-fiscal studies; (ii) MTEF planning exercise; (iii) annual budget policy analysis; (iv) budget preparation circular issuance; and (v) budget discussions between ministries, departments, and agencies on one side and the Ministry of Finance and Economic Affairs on the other side. The Parliament is provided with comprehensive budgetary documentation that provides a reasonably good opportunity for the legislature s scrutiny of the budget. Tanzania scored 45 percent on the Open Budget Index for 2010, based on the assessment that the Government provides the general public with minimal information on the central Government s budget and financial activities during the course of the budget year. There are also several other key weaknesses: The budget is formally tabled about two weeks before the start of the budget year and as a result, the time for analysis, inquiry, and meaningful debate is insufficient. The Government has all authority to make changes within the approved total expenditure of each ministry, department, and agency. The MTEF process is weak, as evidenced by the fact that each year s budget ceilings deviate significantly from projected ceilings in previous year s MTEF. The oversight and monitoring of autonomous Government agencies and public enterprises is inadequate. Budget documents and execution reports are not in line with internationally accepted functional classifications and standards. At the latest GBS Annual Review, the underlying process relating to the PER/budget process was scored jointly as moderately satisfactory. Budget execution was one of the five key issues that had jointly been selected to top the agenda of the discussions. Public procurement Procurement standards are in line with good international practice, following the enactment of the Procurement Act in 2004, and the Public Procurement Regulatory Authority and the Public Procurement Appeals Authority monitor procurement. However, several high-profile corruption cases in recent years have put the focus on public procurement and the actual implementation and compliance to procurement rules. In its report for the fiscal year 2007/08, the Controller and Auditor General noted that many procurement audits are not compliant with procurement laws and regulations. One reason may be that procurement functions have been decentralized to procurement entities with 49

50 insufficient or weak capacity. This is particularly true in local Government authorities, which is increasingly important for rural growth and poverty levels through district development plans and a system of capital development grants. This said, there have been improvements in compliance, albeit slow and from a low basis. The PAF performance indicator for compliance of procuring entities was jointly assessed as on-track at the GBS Annual Review The compliance rate had improved to 73% based on follow-up audits. The Public Procurement Regulatory Authority (PPRA) receives support to Government s plan to strengthen the autonomy and powers, notably with respect to enforcement of procurement regulations in large infrastructure contracts. But donors and the Government alike concluded at the 2009 GBS Annual review that the PAF indicator on required amendments to the Public Act on increased PPRA autonomy had not been met. Audit Tanzania has the ambition to meet international audit standards. Several measures have been taken to achieve the target to reach AFROSAI level 3 by 2010, of which enactment of the Public Audit Act in 2008 is the most significant. However, the target is not expected to be met by the 2010 GBS Annual Review. The 2008 Public Audit Act strengthened the independence of the National Audit Office (NAO). For many years, the main weakness of NAO was its lack of autonomy and authority. Although the new Public Audit Act has not given NAO a statutory independence from the executive branch, as the head of the agency, the Controller and Auditor General (CAG) continues to be appointed by the President, it has greatly enhanced its autonomy. The Public Audit Act has enabled NAO to upgrade the financial audit capacity and quality of audit reports. In addition, the Act has allowed the CAG to appoint and decide the remuneration of its staff, and the CAG now has the full freedom to decide on the type and scope of NAO s audits. While its budget is still submitted to the National Assembly by the Minister of Finance and Economic Affairs, the Minister now needs to pay regard to the advice of the Public Accounts Committee (PAC). And, the CAG has for the fourth year in a row submitted its reports in time to Parliament. Although not all of the CAG s recommendations are followed-up, there are signs, that several of the key oversight bodies in Parliament are playing a more assertive role in the scrutiny of public expenditures. Despite progress, the PEFA pointed to some challenges: The annual audits by the NAO cover spending by all central Government ministries, departments, and agencies and local Government agencies but only part of autonomous Government agencies and public enterprises. The reports are focused on compliance and give little attention to performance audit. 50

51 The Parliament is examining the annual reports of the NAO with a significant delay and there is little evidence that the executive branch takes actions following recommendations by the Public Accounts Committee. PFM system Tanzania s PFM system is considered to be better than the system in place in most sub-saharan African countries. But over the last 3-4 years, Tanzania has seen a lack of progress on several of the PEFA indicators relating to the PFM system and the credibility of the budget. The public expenditure management system has many remaining weaknesses with: (i) unreliable monthly cash flow projections (often the annual allocation is simply divided by twelve); (ii) insufficient internal quality controls of payroll data and non-salary expenditure; (iii) inefficient cash management (with more than 30,000 Government bank accounts); and (iv) understaffed and ineffective internal audit units. The reconciliation and verification of transactions is also incomplete. For example, transactions through the central Government s main bank accounts are reconciled with Government accounting records at the end of each month but this is done with substantial delays and result in large un-reconciled items. In spite of progress on a wide set of issues, the Public Financial Manamgement Reform Programme (PFMRP) has so far not yielded the expected results. At the 2009 GBS Annual Review, donors rated the so-called underlying process in the PAF relating to PFMRP as unsatisfactory for the fourth year in a row. The lack of progress on PFM reforms was discussed as a Key Issue at the 2009 GBS Annual Review, where Government presented the following actions to address the challenges to PFM reforms in Tanzania: Prepare a new phase of the PFMRP Prepare a PFM action plan with clear priorities for improving (i) the scope and coverage of IFMS; (ii) cash management; (iii) flow of funds; (iv) quality of reporting; (v) budget management. Update the Acts for Public and Local Government Finance Increase the Accountant General s oversight function over local Government finances. In the course of 2010 the functioning of the PFMRP secretariat and its cooperation and dialogue with the donor PFM sector working group has improved. A joint review in September 2010 of the agreed Action Plan assessed that 15 out of 24 short term actions were fully implemented and 1 was partially implemented. 51

52 A6. Annual cycle of key GBS events/tasks Partnership framework Denmark Tanzania 2010 January-March CG meeting Confirm (in coordination with EC, DE and IRL) choice of TPA/outcome indicators for CWG meetings on GBS and PAF fiscal year 2010 guiding APT disbursement for 2011/12 (February) Joint GBS Secretariat meeting MoFEA/Troika+ Meeting Draft Programme Document ToR Appraisal Mission GBS Annual Review Report 2009, including new PAF 2010 Preparation of sectoral budget submissions and MTEFs Annual Audited Account of the Controller and Auditor General for FY 2008/09, incl. audit of the PRBS account [The Exchequer/MoFEA] April-June CG meeting CWG meetings on GBS and PAF Joint GBS Secretariat meeting Appraisal mission in Tanzania Appraisal report Final Programme Document Preparation of 2010/11 Budget in MoFEA and presentation to the Parliament Preparation for IMF PSI mission July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Discussion of 2010/11 Budget in Parliament and approval Joint GBS Secretariat meeting MoFEA/Troika+ Meeting 52

53 October- November SWG review meetings CG meeting Assessment of performance including underlying principles for disbursement of fixed tranche Work on budget guidelines for 2011/12 Call circular issued to ministries and districts CWG meetings on GBS and PAF Rapid Budget Analysis GBS Annual Review - review 2009/10 performance - agree PAF Conclusion/joint overall assessment Joint GBS Secretariat meeting MoFEA/Troika+ Meeting Joint DK/EU/IRL/DE assessment of the selected indicators for APT disbursement 2011/12 Within three weeks after the end of the GBS AR: Planned disbursements for 2011/ /14 Board presentation of Danish programme document Adoption of new MKUKUTA covering Preparation for IMF PSI mission Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Annual Implementation Report Poverty and human development report Quarterly budget execution PRBS account statement December CG meeting Minutes for the Board 12 PAF indicators are agreed for 1 year, although there is a rolling revision/update of the outer-year targets of the outcome indicators, to ensure that there are always 3 years. For the TPAs and the underlying processes it is only 1 year. 53

54 Partnership framework Denmark Tanzania 2011 January-March CG meeting Signing of Government Agreement on GBS (January) [See PAP in Concept Note] April-June CWG meetings on GBS and PAF Joint GBS Secretariat meeting MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Joint GBS Secretariat meeting Confirm (in coordination with EC, DE and IRL) choice of TPA/outcome indicators for fiscal year 2011 guiding APT disbursement for 2012/13 (February) Within six weeks of receipt of GBS Annual Review Report: Confirmed disbursement for 2011/12 GBS Annual Review Report 2010, including new PAF 2011 Preparation of sectoral budget submissions and MTEFs Annual Audited Account of the Controller and Auditor General for FY 2009/10, incl. audit of the PRBS account [The Exchequer/MoFEA] IMF PSI mission Preparation of 2011/12 Budget in MOF and presentation to the Parliament July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Release of 2011/12 disbursement after compliance with PFM underlying principles is reconfirmed Discussion of 2011/12 Budget in Parliament and approval Joint GBS Secretariat meeting MoFEA/Troika+ Meeting 54

55 October- December SWG review meetings CG meeting Assessment of performance including underlying principles for disbursement of fixed tranche Budgetary requirements 2012/13 Work on budget guidelines for 2012/13 CWG meetings on GBS and PAF Rapid Budget Analysis GBS Annual Review - review 2010/11 performance - agree PAF 2011 Conclusion/joint overall assessment Joint GBS Secretariat meeting MoFEA/Troika+ Meeting Assessment of the selected indicators for APT disbursement 2012/13 undertaken in coordination with EC, DE and IRL. DK Participation in EC s Mid-Contract Review for MDG-tranche eligibility consisting of an individual assessment of 10 key PAF outcome indicators for 2009, 2010, Within three weeks after the end of the GBS AR: Planned disbursements for 2012/ /15 Call circular issued to ministries and districts Preparation for IMF PSI mission Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Annual Implementation Report Quarterly budget execution PRBS account statement 55

56 Partnership framework Denmark Tanzania 2012 January-March CG meeting Confirm (in coordination with EC, DE and IRL) choice of TPA/outcome indicators for CWG meetings on GBS and PAF fiscal year 2012 guiding APT disbursement for 2013/14 (February) April-June Joint GBS Secretariat meeting MoFEA/Troika+ Meeting CG meeting Within six weeks of receipt of GBS Annual Review Report: Confirmed disbursement for 2012/13 GBS Annual Review Report 2011, including new PAF 2012 Preparation of sectoral budget submissions and MTEFs Annual Audit 2010/11, incl. audit of the PRBS account [The Exchequer/MoFEA] Preparation for IMF PSI mission CWG meetings on GBS and PAF Preparation of 2012/13 Budget in MOF and presentation to the Parliament (June) Joint GBS Secretariat meeting July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Release of 2012/13 disbursement after compliance with underlying principles is reconfirmed Discussion of 2012/13 Budget in Parliament and approval Joint GBS Secretariat meeting MoFEA/Troika+ Meeting 56

57 October- December SWG review meetings CG meeting Assessment of performance including underlying principles for disbursement of fixed tranche Preparation for IMF PSI mission Budgetary requirements 2013/14 CWG meetings on GBS and PAF Rapid Budget Analysis GBS Annual Review - review 2011/12 performance - agree PAF indicators 2012 Conclusion/joint overall assessment Assessment of the selected indicators for APT disbursement 2013/14 undertaken in coordination with EC, DE and IRL EU takes part in DK mid-term Review for MDG-tranche eligibility consisting of an individual assessment of 10 key PAF outcome indicators for 2010, 2011, 2012 Within three weeks after the end of the GBS AR: Planned disbursements for 2013/ /16 Work on budget guidelines for 2013/14 Call circular issued to ministries and districts Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Annual Implementation Report Poverty and human development report Joint GBS Secretariat meeting Quarterly budget execution MoFEA/Troika+ Meeting PRBS account statement 57

58 Partnership framework Denmark Tanzania 2013 January-March CG meeting Confirm (in coordination with EC, DE and IRL) choice of TPA/outcome indicators for CWG meetings on GBS and PAF fiscal year 2013 guiding APT disbursement for 2014/15 (February) April-June Joint GBS Secretariat meeting MoFEA/Troika+ Meeting CG meeting Within six weeks of receipt of GBS Annual Review Report: Confirmed disbursement for 2013/14 GBS Annual Review Report 2012, including new PAF 2013 Preparation of sectoral budget submissions and MTEFs Annual Audit 2011/12, incl. audit of the PRBS account [The Exchequer/MoFEA] Preparation for IMF PSI mission CWG meetings on GBS and PAF Preparation of 2013/14 Budget in MOF and presentation to the Parliament Joint GBS Secretariat meeting July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Release of 2013/14 disbursement after compliance with underlying principles is reconfirmed Discussion of 2013/14 Budget in Parliament and approval Joint GBS Secretariat meeting MoFEA/Troika+ Meeting 58

59 October- December SWG review meetings CG meeting Assessment of performance including underlying principles for disbursement of fixed tranche Budgetary requirements 2014/15 Work on budget guidelines for 2014/15 CWG meetings on GBS and PAF Rapid Budget Analysis GBS Annual Review - review 2012/13 performance - agree PAF indicators 2013 Conclusion/joint overall assessment Assessment of the selected indicators for APT disbursement 2014/15 undertaken in coordination with EC, DE and IRL. Within three weeks after the end of the GBS AR: Planned disbursements for 2014/ /16 Call circular issued to ministries and districts Preparation for IMF PSI mission Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Implementation Report Quarterly budget execution Joint GBS Secretariat meeting PRBS account statement MoFEA/Troika+ Meeting 59

60 Partnership framework Denmark Tanzania 2014 January-March CG meeting Confirm (in coordination with EC, DE and IRL) choice of TPA/outcome indicators for CWG meetings on GBS and PAF fiscal year 2014 guiding APT disbursement for 2015/16 (February) April-June Joint GBS Secretariat meeting MoFEA/Troika+ Meeting CG meeting Within six weeks of receipt of GBS Annual Review Report: Confirmed disbursement for 2014/15 GBS Annual Review Report 2013, including new PAF 2014 Preparation of sectoral budget submissions and MTEFs Annual Audit 2012/13, incl. audit of the PRBS account [The Exchequer/MoFEA] Preparation for IMF PSI mission CWG meetings on GBS and PAF Preparation of 2014/15 Budget in MOF and presentation to the Parliament Joint GBS Secretariat meeting July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Release of 2014/15 disbursement after compliance with underlying principles is reconfirmed Discussion of 2014/15 Budget in Parliament and approval Joint GBS Secretariat meeting MoFEA/Troika+ Meeting 60

61 October- December SWG review meetings CG meeting Assessment of performance including underlying principles for disbursement of fixed tranche Budgetary requirements 2015/16 Work on budget guidelines for 2015/16 CWG meetings on GBS and PAF Rapid Budget Analysis GBS Annual Review - review 2013/14 performance - agree PAF indicators 2014 Conclusion/joint overall assessment Joint GBS Secretariat meeting MoFEA/Troika+ Meeting Assessment of the selected indicators for APT disbursement 2015/16 undertaken in coordination with EC, DE and IRL. Within three weeks after the end of the GBS AR: Planned disbursements for 2015/16 Call circular issued to ministries and districts Preparation for IMF PSI mission Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Annual Implementation Report Poverty and human development report Quarterly budget execution PRBS account statement 61

62 Partnership framework Denmark Tanzania 2015 January-March CG meeting Within six weeks of receipt of GBS Annual Review Report: confirmed disbursement for 2015/16 April-June CWG meetings on GBS and PAF Joint GBS Secretariat meeting MoFEA/Troika+ Meeting CG meeting GBS Annual Review Report 2014, including new PAF 2015 Preparation of sectoral budget submissions and MTEFs Annual Audit 2013/14, incl. audit of the PRBS account [The Exchequer/MoFEA] Preparation for IMF PSI mission CWG meetings on GBS and PAF Preparation of 2015/16 Budget in MOF and presentation to the Parliament (June) Joint GBS Secretariat meeting July-September MoFEA/Troika+ Meeting CG meeting CWG meetings on GBS and PAF Release of 2015/16 disbursement after compliance with underlying principles is reconfirmed Discussion of 2015/16 Budget in Parliament and approval Joint GBS Secretariat meeting October- December MoFEA/Troika+ Meeting SWG review meetings CG meeting CWG meetings on GBS and PAF Assessment of performance including underlying principles End of contract Budgetary requirements 2016/17 Work on budget guidelines for 2016/17 Call circular issued to ministries and districts Preparation for IMF PSI mission Rapid Budget Analysis GBS Annual Review - review 2014/15 performance - agree PAF indicators 2015 Conclusion/joint overall assessment Annual National Policy Dialogue MKUKUTA Poverty Policy Week PER Annual Consultative meeting MAIR MUKUKUTA Annual Implementation Report Quarterly budget execution 62

63 Joint GBS Secretariat meeting MoFEA/Troika+ Meeting PRBS account statement 63

64 A7. Indicative example of how to assess and calculate the MDG-tranche The following example (which is indicative and based on imaginary data for the outcomes in 2010) provides a demonstration of how the potential MDG-tranche will be determined: The first step is to calculate the Overall Performance Score each year. The actual outcome is assessed against a target. If the target is reached or in considerable progress, the score is 1 ; if the target is not reached but showing positive progress the score is 0.5 ; if the performance is minimal or negative, the score is 0. According to Table X below, indicator 1 reached its target in 2010 and therefore received a score of 1. Indicator 2 showed a positive progress compared with the baseline, but did not reach its target and was awarded 0.5. Indicator 9 showed deterioration in standard as the teacher/pupil rate declined from one teacher per 54 students in 2007 baseline to one teacher per 60 students in It was therefore scored 0. Each of the 10 outcome indicators would be given an equal weight of 10%, and a simple average of the individual scores would determine the Overall Performance Score for each year (between 0-100%). In our example in Table X for 2010, the average score is 0.7 or 70%. This assessment would be repeated for each year Table A7-1. Indicative example of calculation of overall score for one year (2010) MDG-based tranche Outcome Indicators Baseline 2007 Target 2010 Actual Percentage of population with access to electricity 10.6% 11.9% 12% 1 2. Percentage of rural roads that are passable (good and 55% 65% 60% 0,5 3. Time taken for an import container from off-loading 19.8 days 15 days 16 days 1 until clearing from port 4. Proportion of births taking place at health facilities as a 46% 65% 52% 0,5 proxy of births attended by skilled health workers 5. Sustaining the high (80%) Tuberculosis completion 80% 80% 80% 1 treatment rate 6. Sustaining the high proportion (equal to or above 85%) of children that receive three doses of vaccine against diphtheria, pertussis (whopping cough), tetanus, and Hepatitis B under two years 87% 85% 85% 1 Score Percentage of cohort completing Standard VII 72% 71% 71% 1 8. Transition Rate from Standard VII to Form I 67.5% 50% 50% 1 9. Qualified Teacher/Pupil Ratio in Secondary Schools 1:54 1:46 1: Percentage of the population that has access to clean 56/78 65/90 56/75 0 and safe water from a piped or protected source (rural/urban) Overall Performance Score % 64

65 Next step is to transform the Overall Performance Score into annual contributions to the MDG tranche in accordance with the rules in Table X below. For an Overall Performance Score below 25%, the annual contribution is 0 and the MDG-tranche would be withheld. An Overall Performance Score between 25 to 50 percent would imply that the annual contribution to the MDG tranche is 35 percent. And, an Overall Performance Score between 50 to 75 percent would render an annual contribution of 65 percent. A 100 percent annual contribution would be subject to an Overall Performance Score above 75%. Table A7-2. Rules for transforming the Overall Performance Score into the annual contribution to the MDG-tranche Overall Performance Score Annual Contribution to MDG-T Overall Performance Score of less than 25% 0% Overall Performance Score from 25% to 50% exclusive 35% Overall Performance Score from 50% to 75% exclusive 65% Overall Performance Score of 75% and above 100% The third step is to calculate the allocation of the annual contribution to the MDG tranche. To emphasise the medium-term perspective of the performance measurement, the MDG tranche is back-loaded. The years 2010 and 2011 would each be given a weight of 25%, while the last year, 2012, would be given a weight of 50%. As a result, the annual contribution to the MDG-tranche for the years 2010 and 2011 will be multiplied by 25%, whereas the year 2012 would be multiplied by 50%. Table A7-3. Indicative example of the calculation of the MDG-tranche Overall Performance Score for each year 70% 40% 80% Annual Contribution to the MDG-tranche ( a ) 65% 35% 100% Weight ( b ) 25% 25% 50% Total (a*b) 16.3% 8.8% 50.0% The last step is to determine the actual size of the disbursements of the MDG tranche in DKK. In order to make it as preventive as possible, disbursements will be made in three equal tranches each year (2013, 2014, and 2015). The indicative calculation used in Table X above imply that Tanzania would be able to access 75% of the total MDG-tranche, based on the aggregation of the performance for the years (16.3% + 8.8% % = 75.0%). This would equal DKK million (75% of DKK 45 million). As a result, Tanzania would receive an annual MDGtranche of DKK million for each of the years 2013, 2014, and For each year the release of the MDG-tranche would also be subject to the general conditions. 65

66 A8. Risk assessment matrix GBS principle Risk Examples of risks identified Likelihood /Impact 1. Good governance, encompassing a minimum respect for human rights, a free press, pluralistic democracy and rule of law, including independence of the judiciary 2. Anti-corruption with implementation of prevention and control measures, as well as follow-up with a view to improving the country s standing in the international corruption league table. The achievement of poverty reduction would be compromised by a deterioration of the current level of good governance, with regards to respect for human rights, a free press, pluralistic democracy and rule of law Increase in corruption due to lack of prevention and control measures would lead to increases in the misuse of public funds. Example: Events in relation to voter registration in the build up to 2010 general elections pose a risk to the development of pluralistic democracy in Zanzibar, and 2010 elections might lead to human rights transgressions Example: The judiciary remains largely independent, but reports of incidences of non-adherence to international standards of fair trials lead to concerns. Example: The ruling party, through their majority in Parliament, continues to influence the legislative as well as the executive branches of government. Parliament s weak oversight role may bias budget planning and execution. (Discussed further in GBS principle5 below.) Example: Lack of follow-up of cases of grand corruption or of misuse of power. Example: Tanzania drops considerably in international anti-corruption indices. Possible /major Possible /major Examples of safeguards The underlying principles in the Partnership Framework Memorandum (PFM) would be at risk if there were deterioration of the respect for human rights and good governance. This would initiate high-level political discussions between GBS donors and GoT. The LSRP basket would continue to strengthen and provide support the judiciary system. The LSRP WG and the GBS Group would raise this issue with GoT. The underlying principles in the Partnership Framework Memorandum (PFM) would be at risk. High level political discussions between GBS donors and GoT would be initiated. GBS to initiate dialogue with GoT on how to improve anti-corruption measures Responsible unit (Representation /Ministry of Foreign Affairs) Embassy - engagement in the GBS group Embassy - engagement in the LSRP WG, and in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the GBS group 66

67 3. Solid poverty reduction strategy and the will to implement it. 4. Positive experiences with development cooperation generally and budget support specifically, as well as ongoing documentation of concrete development results. 5. The Finance Act process, with publication of budget and accounts, as well as parliamentary consideration. If the PRS is not based on reliable data, or not surveyed properly, or if there is a lack of will to implement it, the whole process risks being biased, not reflecting national priorities, and not aiming at poverty reduction. Poor development results indicate serious constraints to the effectiveness of GBS and other development support. Weak Financial Act, or insufficient coverage could lead to unclear rules or loopholes in the budget process, insufficient oversight, opportunities for misuse of funds, large budget deficits and unstable macro situation. Example: The PRS does not mirror national priorities. Instead it reflects vested interests of a few involved, concentrated into one regional area of the country. Example: The PRS is not participatory and no officials apart from the senior central level have been involved in planning and designing strategies, targets, policies, and monitoring systems. Example: PRS activities are not well targeted and therefore do not reach the intended beneficiaries. Example: Despite high economic growth during a long time, poverty surveys show increasing income poverty, particularly in rural areas. Example: Implementation of GBS and development support operations are based on unreliable data or statistical surveys of insufficient quality. Example: The Finance Act covers only part of the budget process, and accounting rules are unclear. Example: Parliament is weak in oversight, and there are large deviations between the budgeted and actual outcomes. Example: The weak Finance Act creates uncertainty at the Ministry of Finance, and the Executive s budget proposal is not publicly available. Unlikely /major Possible /moderate Likely /moderate The underlying principles in the Partnership Framework Memorandum (PFM) would be at risk and high level political discussions between GBS donors and GoT would be initiated. GBS group to initiate dialogue with GoT on the importance of poverty reduction and sector policy reform. GBS group to ensure that new PAF indicators focus more on poverty outcome and impact, and reflect mitigating actions/processes. GBS group to initiate dialogue with GoT on the importance of pro-poor growth. The GBS group with the partners of the TSMP (Tanz. Stat. Master Plan) to increase efforts to build capacity for statistics in general and for performing panel surveys in rural areas. Review the monitoring system and establish reliable and consistent baseline data where needed. The PFMRP basket will continue to strengthen PFM systems in Tanzania, including involvement of oversight bodies. High-level dialogue with GoT and MPs on the role of watchdog institutions in democracies. GBS group to seek a closer cooperation and involvement of the legislature in the GBS annual review cycle. Embassy - engagement in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the GBS group Embassy - engagement in the 67

68 6. Procurement: rules are broadly in accordance with international standards 7. Presence of an independent supreme audit institution or inspection body with similar functions 8. Expert appraisal of quality and capacity in public financial management Low compliance with rules for public procurement increase risks that GBS funds do not achieve value for money Lack of independence or insufficient capacity of NAO could open a window for misuse of budgetary funds, misuse of powers, inefficiencies in the budget process, and lack of domestic accountability. Weakening or deteriorating quality of PFM systems can lead to mismanagement and inefficient use of public funds, including GBS. Example: The rules in the 2004 Public Procurement Act are in line with international standards, but weak compliance risks misuse of funds and low value for money. Example: Increased incidences of reported poor record keeping, interference of powers, inappropriate tender evaluation, deviations from appropriate procurement channels, inappropriate tender evaluation and communications on the award. Example: Insufficient autonomy and lack of NAO independence would make it difficult to hold key players in the Government or Party accountable. This in turn could threaten and thus weaken incentives to strengthen financial controls and general compliance with regulations. Example: The standard and quality of the budget management and process decreases and opportunities for misuse of funds open. Example: Unreliable and irregular inyear budget execution reports would imply that actual level of expenditure will not be well known before the end of the fiscal year, which in turn would increase the risk of over- or underexpenditure, or skewed expenditure across sectors. Example: Weak internal audit and expenditure control would increase the risk of misuse of funds. Possible /moderate Unlikely /major Possible /major GBS group to initiate dialogue with GoT on the importance of domestic accountability. The PFMRP WG and the GBS group would raise the problem at technical and political levels. In addition, compliance with rules for public procurement could be included as part of the assessment criteria for the APT-tranche. PPRA with support from the PFMRP basket would be strengthened. The GBS group would raise weakened capacity and decreased autonomy of NAO in its contacts with GoT. High level political level dialogue on strengthened NAO independence, keeping in mind that this is a long-term goal since it will require Constitutional amendments. GBS dialogue on PFM at AR and on technical level in the PFM WG would be initiated, as happened during the 2009 Annual Review of GBS where Government presented an action plan to strengthen PFM systems. The PFMRP basket could strengthen PFM systems, and GoT would get an incentive to improve on PFM through a selection of such indicators being used as triggers for disbursement of the APT tranche. GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group 68

69 9. Mutual observance of agreed obligations 10. Consensus among all budget support donors regarding approach (incl. rules for transfer and monitoring) and conditions for GBS Other principles/risks Withdrawal of a donor from the GBS group Sound and stable macroeconomic developments Lack of observance of obligations in the PFM and the bilateral GoT agreement could lead to mistrust and an unstable process that likely could not achieve progress in poverty reduction. Lack of consensus/ disagreement about the current approach would increase transaction cost, decrease transparency and have negative effects on Government ownership. A bilateral issue, or internal considerations, that are not related to the assessment of Government s performance at the GBS Annual Review leads a donor to suspend or abandon the provision of GBS Significant economic downturn seriously impacts Tanzania s macroeconomic Example: Growing mistrust between the partners decreases the effectiveness of the process. Important gains such as ownership, alignment, harmonisation, etc., would lose credibility. Example: Different budget support partners imposing different conditionality criteria for part of their budget support would send mixed signals to the Government of Tanzania as regards performance and priorities. Example: Lack of trust in Government s capacity to implement its PRS, or the withholding of GBS to put pressure on the Government leads a GBS donor to either suspend the provision of GBS or abandon GBS as an aid modality Example: Continued economic turmoil due to external factors leads to permanent shortfall in tax revenue and upward pressures on expenditure. Example: Continued economic turmoil Rare / catastrophic Rare /major Possible/ major Rare /major The GBS group would initiate high-level political dialogue with GoT. A breach in consensus among GBS donors would be discussed in the GBS group in order to seek a common understanding. Internal discussions between donors at HQ or higher level would be initiated if the problem persists and if it has serious consequences for the overall efficiency of GBS. If a donor suspends, revisits or ultimately abandons the GBS group, it would lead to discussions at HoC/HoM level in the GBS group.. Depending on the reasons (e.g a bilateral trade issue vs. a lack of trust in GBS as a modality), as well as the relative size and weight of the GBS donor, it could potentially lead to discussions at HQ level, if it has serious implications for the overall efficiency of the provision of GBS to Tanzania Initiation of IMF dialogue focusing on prudent growth in expenditures within Tanzania s anchor s for inflation and public debt. Embassy - engagement in the GBS group Embassy - engagement in the PFMRP WG, and in the GBS group Ministry of Foreign Affairs - Copenhagen Embassy - engagement in the GBS group at HoC/HoM level Ministry of Foreign Affairs - Copenhagen Embassy - engagement in the GBS group 69

70 Stable or accelerated progress on core reforms(private sector-; local government, legal sector, PFM-; and public service reforms) fundamentals which compromises the achievement of poverty reduction objectives Continued insufficient progress on core reforms compromises the objective on poverty reduction and Government s capacity to implement its PRS leads to loss in jobs, increased poverty, and skewed income distribution Example: Lack of progress on private sector/business reforms Example: Lack of progress on public service reforms, including pay-policy reforms, leading to increasing wage-bill and perverse incentives Possible /moderate Increased focus on results framework, and initiation of dialogue through GBS donors involvement in core reforms, as well as dialogue through the Private Sector Development WG, or through the Public Service Reform Programme (PSRP) WG Embassy - engagement in the GBS group, as well as in the Private Sector Development WG (DK is not represented in the PRSP WG) 70

71 A9. Updated PAP PAP for GBS programme and Good Governance programmes Tanzania Activity/Output Timing Unit responsible Status (available / to be prepared) Preparation phase Assessment according to the 10 budget support principles Representation Available Gender equality rolling plan Environmental screening note Presentation of concept note to MFA Programme Committee Nov 2009 Nov 2009 Representation Representation Dec 2009 Representation Available Available Available Formulation and Appraisal phase Draft Danida Programme Document March 2010 Representation Available Appraisal April 2010 UFT/representation/in cooperation with Accra for GBS Available Final Programme Document and draft Board paper June 2010 Board presentation Dec 2010 Minutes of the Board Representation Dec 2010 MFA/HUC To be prepared Signing of Government Agreements with Partners Jan

72 A10. Gender equality Plan Basic information Programme title Tanzania General Budget Support Programme Sector Macroeconomy/GBS Country Tanzania Budget (Danida s contribution) DKK 545 million Starting date and duration Phases in the programme cycle and documentation Preparation phase GERP annexed to the concept note Action required National level 1.i International & regional conventions Tanzania has ratified the Convention on the Elimination of all forms of Discrimination Against Women (CEDAW) in 1985, adopted the Platform of Action after the Beijing Conference on Women in 1995 and subscribed to the Optional Protocol to CEDAW in Tanzania is also party to the Protocol to the African Charter on Human and Peoples Rights on the Rights of Women in Africa. 1.ii National strategies, policies and legislation, Article 13 of the Constitution of the United Republic of Tanzania guarantees equality of both men and women. Gender equality and empowerment of women in all socioeconomic and political relations and culture are well considered in the Tanzania Development Vision 2025 and the National Strategy for Growth and Reduction of Poverty, The National Women and Gender Development Policy, 2000 which gives direction to stakeholders in advancing gender issues socially, culturally, economically and political is in place. Emphasis on gender equality is also integrated in national sector policies such as Education and Training policy, 1999, Employment policy, The legal framework for enhanced gender equality is to a large extent in place. The government has passed several laws in favour of gender equality and advancement of women such as the Land Act of 1999 and the Village Land Act of 1999 (which repeal and replace the previous legislation on land matters thus enabling women to enjoy equal rights with men in access, ownership and control of lands); Sexual Offences Special Provisions Act of 1998 (seeks to protect women from sexual harassment and Responsibility 72

73 Phases in the programme cycle and documentation Action required abuse). Sector legislations such as Education Act and Employment Act emphasise equal rights for both men and women. Tanzania has also adopted an approach to planning that integrates gender equality considerations into planning and budgeting process in all ministries and regional and local authorities. Promotion of women participation in politics and decision-making is among the critical policy areas of concern for Tanzania. The government has changed regulations and taken affirmative action to include women in decision-making. The parliament has passed a Bill to increase the special seats for women in parliament representation to 30% in 2005 from 20% in 2000 and efforts are ongoing to reach the SADC target of 50%. Another national strategy for increasing the number of women in decisionmaking position is through Cabinet Decision no. 23 of 1996 on appointment of women in political and public services such as board directors, heads of institutions, commissioners and national delegates. Institutional set ups and capacity: The Ministry of Community Development, Gender and Children is the focal institution for gender equality issues. The Ministry has put in place the following institutional mechanisms to help smooth execution of its mandate of facilitating and promoting women development and gender development across all sectors through: - Establishment of Gender Mainstreaming Section and Women Development Section within the Department for Gender and Development. Gender focal points have been established in ministries, regions and districts to ensure that gender concerns are taken into considerations in development policies, plans or programmes in those levels. The presence and involvement of the Ministry in Public Expenditure Review (PER) process contributes potentially to all efforts, which are geared towards ensuring gender issues are mainstreamed in the budget processes Most Ministries, Departments and Agencies (MDAs) have gender policies and strategies. However, there is limited capacity in the MDAs for effective implementation of policies and strategies. 1.iii Non-Gov. stakeholders Since the 4 th World Women Conference in Beijing, there is an increasingly vibrant Responsibility 73

74 Phases in the programme cycle and documentation Action required civil society with NGOs addressing many specific gender equality issues. Tanzania Gender Networking Programme (TGNP) has since 1995 remained an active NGO working on gender equality. In implementing the Beijing Platform of Action, Tanzanian human rights activists particularly women/gender organizations built a coalition of like-minded organizations known as Feminist Activism (FemAct) in The NGOs interventions include training and awareness creation on gender equality, advocacy for women participation in politics and decision-making and work to remove discriminatory provisions in existing laws. Most NGOs have gender policies and strategies. 2. Sectoral level 2.i Policies, legislation, institutional set-up Gender has been systematically mainstreamed within the current PRS. With the overall objective of formulating a gender policy, a three-year master plan has been developed. Government addresses gender disparities in employment and income. The implementation of the PRS addresses gender issues at various levels. For instance, advocacy and sensitisation on gender issues is carried out, equal-employment initiatives are undertaken and women s access to higher learning institutions is supported. 2.ii Indicators Indicators for achieving gender equality according to the current PRS include: - Proportion of women among senior civil servants - % of women representatives elected to district council - Proportion of women among members of parliament - Proportion of women with secure tenure over land or property - Number of cases filed on infringement of women rights - % of cases of sexual abuses reported that resulted in conviction. In addition, the current PAF-matrix has three outcome indicators relating to gender. The first relates to "[the] Transition Rate from Standard VII to Form I", the second relates to "[the] Proportion of births taking place at health facilities as a proxy of births attended by skilled Health Workers, and the third relates to "[the] Number of people with advanced HIV infection receiving Anti-Retro Viral combination therapy Responsibility 74

75 Phases in the programme cycle and documentation Action required ", all of them gender disaggregated. The outcome indicators feature rolling three-year targets, which will ensure the presence of gender issues in the PAF-matrix. Issues, opportunities and constraints: The legal and political framework is to a large extent in place, but major issues/constraints for addressing gender equality have been noted: - In Tanzania, women s legal and human rights are constrained by inadequate legal literacy among women. The main reason being that the existing legal system does not reach the majority of women who live in rural areas. Like many societies in Africa, customary laws and practices remain discriminatory against women on issues of inheritance particularly on land, as well as institutionalised violence against women eg. - wife battering, female genital mutilation and the existence, side by side, of multitude of statutory, religious and customary laws that might be conflicting. There are also discriminatory applications of statutory laws, inadequate legislative protective mechanism such as protection orders, baring orders and safety orders in the legal system and in insensitive investigations and prosecution of cases involving violence against women and children. Responsibility 75

76 A11. Environmental Management Plan Basic Information Programme support title (title of appropriation): Tanzania General Budget Support Programme Sector: General Budget Support Country: Tanzania Danida budget: 625 Million DKK Description of the Programme General Budget Support support: Dates Programme committee: 11/12/2009 Appraisal: 01/04/2010 (expected): Module 1: Screening of Country and Sector Environmental Framework Assessment of the adequacy of the legislation, policies, procedures in Environmental Management and Environmental Assessment in the country and sector. (Click yes or no. If no, comment and further work is required in the right hand column and to be included in Next Step - PAP section). Issue: Yes No Comments and further work to be done: 1. Do national procedures for Strategic Environmental Assessment and Environmental Impact Assessment (e.g. legal framework) exist? 2. Do operational national environmental action plan(s) or environment sector programme(s) exist? 3. Do up-to-date state of the environment reports and environmental monitoring systems and indicators exist? 4. Have sufficient assessments been made of environmental aspects of policy reforms and budget support (and underlying PRSP s or similar)? 5. Is environmental management sufficiently integrated into sector plans (the sector to be supported)? 6. Is sufficient institutional capacity for environmental management available to/in the sector (to be supported)? 7. Are there adequate harmonization, alignment and coordination for environmental management in the sector (to be supported)? Summarize the overall impression of the Country and Sector Environmental Framework: The PRS builds on Tanzania s robust environmental institutional framework and considerable capacities to set environmental management standards. The institutional framework is defined by the 1997 national environmental policy and the 2004 Environmental Management Act (EMA). The EMA has since 2005 adopted Environmental Impact Assessment (EIAs) as a management tool to screen undertakings 76

77 likely to pose adverse impact on the environment. EIAs become legal in 2004 and are applied to all development projects and programs that have the potential to give rise to significant social and environmental impacts. EIAs are mandatory for several types of activities including mining operations, agriculture, and petroleum and gas field development, construction of roads, dams and harbours. In addition, EMA has also recognises the need for Strategic Environment Assessment (SEA) as a tool for the assessment of major policies, plans, strategies and programmes. The Strategic Environmental Assessment (SEA) was introduced in 2004 under EMA as a tool to evaluate the potential environmental (natural resources management linkage), social (poverty indicators, livelihoods and health impacts and vulnerability impacts on the poor) and institutional (institutional targeted impacts) effects of the PRS and any plans or programmes that would be derived from it. SEA involved consultations with Ministries, Departments and Agencies, Civil Society Organisations and NGOs resulting in policy refinements on environmental and sustainable development issues. The following list includes example of recent SEAs that have been carried out: SEA for PRS credit (World Bank), Mafia Island airport development (Millennium Challenge Corporation/IRA) (report available by International Resources Group, Washington, 2008),SEA for Minerals Policy 2008, Scoping study for the Strategic Environmental and Social Assessment (SESA) for the Sustainable Management of Mineral Resources Project (SMMRP) in Tanzania (report available, 2009).SEA for transport sector investment programme ( ), Management plan for Ramsar Site in Kilombero Valley. Plans (DMTDPs). Module 2: Screening of environmental opportunities and risks of programme support Assess the possible environmental impact of the programme support on the following issues in terms of opportunities and risks: Will the programme support have an impact on soil, water or air pollution through enmmisions or similar? lead to changes in land and resource tenure and access rights? include activities within or adjacent to protected and environmentally sensitive areas? 4....result in livelihood changes (including resettlement) that can increase or decrease the pressure on available natural resources? 5. have an impact (direct/indirect) on occupational health and safety? have an impact (direct/indirect) on environmental health? include economic and sector policy initiatives with direct or indirect impacts on the use of natural resources and the environment? Opportunity: Risk: None: 77

78 Summarize and elaborate on Environmental Opportunities: There is an increased focus on environment in the PRS. The Current PAF-matrix has two outcome indicators relating to environment. The first relates to "[the] Amount of collected waste in tonnes per day in the three municipalities of Dar Es Salaam", and the second relates to "[the] Number of Districts allocating budget to EMA implementation ". Both outcome indicators feature rolling three-year targets, which will ensure the presence of environmental issues in the PAF-matrix. In addition, the PAF also features an indicator on transparency in the management of natural resources ("Total value of revenue received from concessions and licenses (if any) for forestry, fishing, wildlife and minerals"), which also includes rolling three-year targets. Summarize and elaborate on Environmental Risks: Identify requirements for Environmental Impacts Assessment. EIA categories: [ A ] Full EIA required; [ B ] Partial EIA required; [ C ] No EIA required 13. Component Name: Category A, B or C: 1: N/A 2: N/A 3: N/A Will activities of the programme support with potential environmental impacts be subject to national regulation and procedures for EIA? Yes - No When will the EIA be done? Next Steps process action plan (PAP) NB! To be attached to module 1, and updated and attached to module 2 Need for further work (click the box if action is needed during preparation or formulation and appraisal phase, or implementation): Suggested activity: N/A Action needed Comments and elaboration: 1. Assessment of Environmental Management in sector development plan. 2. Assessment of capacity for Environmental Management in the sector. 3. Prepare ToR for and conduct Country Analytical Work. 4. Prepare ToR for and conduct SEA(s) of sector policies or plans. 5. Prepare ToR for and conduct EIA(s) for programme support activities. 6. Initiate donor harmonisation in the sector on environmental assessment and management. 7. Other...? Signing of the Environmental Screening Note Dar es Salaam 27/11/ Category A = Intervention is likely to have adverse environmental impacts that may be sensitive, irreversible, and significant in scale/scope; B = Intervention is likely to have negative impacts, but which are less significant, not as sensitive, numerous, major or diverse; C = The environmental risk of the intervention are of little or no concern. 78

79 . Jema Ngwale, Danish Representation in Tanzania A12. EC Programme Document for Tanzania MDG Contract EN AIDCO/ (YYYY) D/NNN Action Fiche TANZANIA Identification Title/Number Tanzania MDG Contract Total cost EC contribution: EUR 305 million Partially decentralised management (complementary actions component) Aid method / Management mode General Budget Support Centralised Management DAC-code Sector General Budget Support Rationale and country context Despite high growth levels since 2000, Tanzania remains a very poor country, with a GDP per capita of about 300. The key objective is to accelerate progress in poverty reduction. Tanzania continues to be in need of external assistance to finance the growth and poverty reduction objectives of its development strategy, the MKUKUTA and its successor programme. This support is particularly critical in the context of the rapidly deteriorating international economic environment, which is also affecting Tanzania. Given its track record in macroeconomic management and PFM and its strong donor coordination framework, Tanzania is well qualified to receive budget support in the form of a MDG Contract. The MDG-Contract, with a strong medium-term focus will help to directly address one of the major constraints to Tanzania s development by enhancing the predictability of external aid. In doing so, it will facilitate discussions on macroeconomic and Public Financial Management issues on an annual basis, while supporting improved progress towards the MDGs and stronger performance monitoring systems. 2.1 Country Context and National Policy and Strategy Economic and social situation and poverty analysis Between 2001 and 2007, real GDP growth averaged 7% per year. The strong growth performance did however not translate into significant reductions in poverty levels. According to the Household Budget Survey of November 2008 (HBS), the proportion of people living in poverty has decreased by 2.4%, from 35.7% in 2001 to 33.3% in 2007, with no evidence of a strong imbalance in trends between rural and urban areas although there is a clear gap in poverty levels between these areas. The HBS also shows mixed results in terms of how public expenditures have reached poor people, with good performance for education and health but poor results for water and electricity, which has consequences for gender relations, as women and girls continue to spend a disproportional part of their time to collect water and fuel. The Human Development Index scored Tanzania at th out of 177 countries, whereas the Gender related Development Index (GDI) scores at th out of 156 countries in Tanzania scored relatively well in terms of adult literacy rate (103 rd ), and 148 th in terms of school enrolment but the most recent administrative data shows some areas of concern, including declining Primary Completion Rates, which suggest a clearer focus on achieving outcomes will be needed. 79

80 The agriculture sector, which represents about 25% of GDP and employs about 80% of the population, continues to lag behind in terms of growth rates. Growth in the manufacturing sector, which represents 9.2% of GDP, has however started to pick up (8.7% growth in 2007). There is a broad recognition within the Government of the United Republic of Tanzania (GoT) that the significant increases in public expenditures experienced in the last few years cannot be a sustainable driver of growth and that more sustained government efforts are required in improving the investment climate and private sector led growth National Development Policy and Strategy National policy and strategy The GoT is currently implementing its second poverty reduction strategy, the MKUKUTA, covering the period It is the result of extensive consultations within government, Parliament, civil society, and other stakeholders. The strategy includes three main pillars (clusters): Growth and Reduction of Income Poverty; Improvement in Quality of Life and Social Well Being; and Governance and Accountability. The MKUKUTA focuses on economic growth, supported by a scaling up of expenditures that would support this objective. Sector strategies are generally clear and coherent and gender specific indicators have been included, but cross-sector links are sometimes weak. Time-bound and MDG-related outcome indicators to measure progress have been established and are reflected in the Performance Assessment Framework (PAF). These are monitored annually, as part of the MKUKUTA Annual Implementation Report (MAIR). Preparations have started on the successor to the MKUKUTA which will link to the long-term development strategy Vision The latter has set the objective of making Tanzania a MIC by One of the major issues for the successor programme to MKUKUTA will therefore be how the HBS findings can be used to improve policies to enhance pro-poor growth, poverty reduction and gender equality. Government has presented a Road Map for the preparation of the next MKUKUTA, including extensive analytical work and stakeholder consultations. A critical action in that road map is the review of the current MKUKUTA, which focuses in particular on key questions to support the prioritisation process of the next strategy. An EC-funded consultant has been contracted to assist with the review and preparation process of the MKUKUTA. National Budget and medium-term fiscal perspectives The GoT s fiscal framework for 2008/ /11 aims at increasing the overall budget deficit (before grants) from 10.5% of GDP in 2008/09 to 10.9% in 2010/11 (or 5.2% after grants). Domestic revenues are set to increase by 2.1 percentage points of GDP over the next 3 years from 16.2% in 2008/09 to 18.3% 2010/2011, while overall expenditure would increase from 26.3% in 2008/09 to 27.5% in 2009/10. The increase will be funded by marginally higher aid flows and domestic financing (up to 1.6 % of GDP as agreed with the IMF). Government is anxious to scale up its infrastructure investment as a key component of a more growth-oriented poverty reduction strategy--an acknowledgement that the previous strategy had delivered improvements in education and health but that more pro-poor growth oriented interventions would be needed to ensure lasting reductions in poverty. The agreement with the IMF foresees in a deviation from the previous fiscal anchor of zero net domestic financing to one in which a modest amount of domestic financing would be made available, consistent with an agreed path for debt. The updated debt sustainability analysis conducted jointly by World Bank and IMF staff highlight that there is a low risk of debt distress at current levels suggesting that there is room for such a policy without endangering debt sustainability. The budget for FY 09/10 is still being formulated by government but is likely to include a ratcheting up of infrastructure spending financed in part through domestic borrowing. 80

81 The share of MKUKUTA spending in 2008/09 was 68%, in line with previous years. The challenge now is to ensure a sufficient level of capital expenditures in the budget in a context of a rapidly increasing wage bill (at 9.5% of GDP in 2008/09). This increase, which is partly to address the human resource crisis in health and education, may create inflationary pressures. The GoT has finalised its first Budget Brief Paper, which will go a long way in addressing concerns about a lack of a transparent medium-term fiscal strategy and a lack of a well-defined MTEF. A key issue for the future will be ensuring adequate funding in the MTEF to deliver economic growth through development of infrastructure as well as enhancing performance in key sectors such as agriculture and tourism. The Government s recent decision to prepare a Public Investment Plan is a welcome development in that regard. Performance Measurement Results-oriented monitoring was for a long time a concern in Tanzania. With the harmonised reporting structure introduced in 2007, the GoT has made a giant stride in improving the quality of performance measurement. Each MDA is now required to present an annual performance report linking both the budget and performance data. The first series of these reports were presented in October 2008, with, as expected, mixed quality. Education issued a first-rate performance report, with comprehensive and updated information. The report on health was a real improvement to earlier reports, but lacked up-to-date information. The annual performance reports are part of the overall performance reporting system, which also includes the MKUKUTA Annual Implementation Report and the rolling PAF which has now been fully established with annualised targets. The process of improved monitoring and evaluation systems will be supported by major capacity building efforts over the medium term through core reforms such as the Tanzanian Statistical Master Plan. Eligibility for Budget Support National Development Policy and Strategy A well defined National policy providing a comprehensive framework for addressing poverty reduction is in place in the form of the MKUKUTA covering The assessments made by the EC, the WB and the IMF in their joint staff assessment and the overall PRBS donor group is that MKUKUTA provides for a consistent strategy, aiming at achieving the key MDGs by The implementation of MKUKUTA is not without problems but has throughout the last 7 years been rated satisfactory. The focus in the national programme on macroeconomic stability, growth and improved service delivery addresses the main development challenges. Preparation has started towards the development of a new poverty reduction strategy ( ), with an analysis of the determinants of poverty and growth. A review of the current MKUKUTA will take place in mid 2009, informing the formulation of a more focused and strategic new MKUKUTA. As an indication of GoT s growing focus on results, the 2009 PAF includes for the first time annualised targets for the outcome indicators. These indicators and targets will be discussed each year during the Annual Review and updated if necessary. With each passing year, a new year will be added so that the PAF will always be at least 3 years forward looking. The PAF indicators are based on the MKUKUTA, which is again as much as possible aligned with the MDGs. Most social sector indicators can be linked to the MDGs. Zanzibar has its own development strategy, called MKUZA. So far MKUZA monitoring and reporting was not aligned with MKUKUTA. This will change with the new MKUKUTA/MKUZA. 81

82 Government is currently reviewing both strategies and aims at having the two new strategies approved at the same moment. Monitoring, performance reporting, and auditing will then be fully aligned. Tanzania is considered to fulfil the general budget support eligibility criterion with respect to having in place a well defined national policy which can be supported by a MDG Contract. Macroeconomic situation GDP growth averaged almost 7% between 2001 and 2008, among the highest performances for nonoil based economies in Africa. Inflation has remained low over that period, but has risen up to 13% in 2009, which represents a serious challenge for GoT, including for fiscal policy, as it tries to preserve hard-won macro-stability and protect the purchasing power of the population. Rising inflation also means that the GoT will have to prioritise development expenditures with a high import-component if it increases the level of public investments. As indicated in the latest HBS, inflation experienced by families may have been significantly higher than the market prices revealed by the CPI. The National Bureau of Statistics will start in 2009 with a rebasing of the inflation data and the National Accounts. Government spending has doubled over the last ten years reaching 26.3% of GDP, financed by a massive broadening of the revenue base and scaled-up donor assistance. Over the last five years, revenue has performed well, rising from 11.3 percent of GDP in FY00/01 to 16 percent in FY07/08. Thanks to prudent fiscal and monetary policies, inflationary pressures were eased and credit to the private sector was rapidly expanded (over 30% per year since 2003). In addition, extensive debt relief and a major build up of international reserves have reduced vulnerabilities to external shocks. External public debt now stands at 30% of GDP compared to 57% in 2005 and gross official reserves are at 3 months of imports. The outlook for the Tanzanian economy remains broadly favourable, albeit at significantly lower levels then earlier projected. As a result of the economic crisis, GoT has revised these projections downwards and a further revision is expected. A growth rate of 4-5% in 2009 and 5% in 2010 is now projected by the IMF (compared to previous projections of respectively 7.5% and 8%). For 08/09 revenues are expected to fall short of budget targets by around 2 % of GDP--most taxes had been close to target for the first half of the year but latest data (April 2009) show collections weakening across the board, including in VAT thereby confirming that the economy is slowing. The preliminary agreement with the IMF--the Board discussion of the PSI review and the authorities request for financing from the IMF under the exogenous shocks facility of 110 percent of quota (about $328 million) is scheduled for 29 May --is essentially to permit the automatic fiscal stabilizers to work by maintaining expenditures at budget levels and thereby avoid unproductive cuts in expenditure programmes. Anticipated under-execution of the development budget (as in previous years), combined with a likely slightly higher level of foreign financing imply a need for domestic financing of around 1.2 % of GDP which is to be met through a combination of running down government deposits at the BoT and with commercial banks and possibly some new domestic borrowing. The monetary stance is also to be eased modestly to avoid a crunch in private sector credit. Inflationary impact is unlikely to be large--the economy is slowing, non-food inflation has been below 5 % for several months, and food price inflation appears to be due to structural causes. In the revised macroeconomic framework new fiscal anchors will be formulated to take into account the anticipated reduction in revenue collection. The policy of zero net domestic financing will be relaxed. A new anchor on total public debt will be set and there will be year-to-year flow benchmarks to allow for anti-cyclical fiscal policies and to allow more fiscal space for growth. Limits to nonconcessional financing and on the speed of the increase in public spending will also be introduced. 82

83 The fiscal framework also shows that the gap between domestic revenues and recurrent expenditures is closing over the next three years. In the context of the good progress in the past on the revenue side and recent (perceived) unpredictability GBS disbursements, Government had become more assertive towards aiming to reduce donor dependency and to balance recurrent expenditures with domestic revenues. With the global economic downturn now catching Tanzania, and with credit conditions delaying GoT plans to finance infrastructure projects through sovereign bonds, concessional financing (now 36% of the budget) is however likely to continue to play a critical role. Against a background of an aid-driven macroeconomic structure with agriculture still the dominant sector and industry lagging behind, the Government recognizes that the key challenges include addressing low agricultural productivity and developing the small industrial base. Tanzania is considered to fulfill the general budget support eligibility criterion with respect to having in place a stability oriented macroeconomic policy, which should (especially in the context of the financial crisis) be supported by providing general budget support in the form of an MDG-Contract. Public Financial Management and Domestic Accountability As the last PEFAs undertaken in Tanzania indicate, Tanzania s public financial management systems score better than most African countries, with average PEFA scores around C+. This good performance partly reflects the important and widely praised efforts made between 1995 and 2002 in a number of key PFM areas, such as cash management, the introduction of IFMS and policy-based budgeting, including experiences with gender budgeting since the late 1990s. However, operationalisation and integration of software and management systems proved particularly challenging, as reflected in the PEFA scores, which didn t show real progress between 2004 and The PFM Reform Programme, despite the introduction of a basket fund in 2004, continued to face challenges on ownership, commitment and leadership and thus did not fully play its role of driver of reforms it was supposed to play. Since 2007, with a new focus on financial accountability within GoT, the emergence of much stronger oversight bodies (National Audit Office, Parliament, and Procurement Authority) and increased donor engagement, the reform process has received newattention. Over the last two years, new management has taken charge of key departments and more recently a special D-PS has been appointed for PFM Reform. Monitoring of progress on PFM reform will be done under ministerial supervision from now onwards. A new and more coherent PFM reform programme, based on a platform approach and using the PEFA findings, was launched in November The new strategy also includes PFM reform on Zanzibar, where a PFM reform Action Plan has been formulated. The reform process started with support to the Office of the Auditor General, the Accountant General and the Parliamentary oversight bodies. Key monitoring outputs of the strategy have been defined in the PFMRP and include improved accuracy of cash forecasting, improved predictability of resources availability to LGAs, and strengthened accounting system through IFMS improvements. Encouraging steps have already been taken, in particular in terms of strengthening the budget preparation and MTEF process, trying to address some of the weaknesses of the IFMS and of the cash management system, and strengthening internal audit. More remains to be done in terms of strengthening the coordination and management of the programme. While the EPA corruption scandal 14 represented a serious challenge to the credibility of the PFM reform process, the response of the GoT has been encouraging. The general finding was that the issue was mainly confined to the Bank of Tanzania and did not call into question the integrity of the PFM system as a whole. Notwithstanding this, GoT has used the opportunity to introduce specific 14 An audit reported that transactions amounted to Tsh 133 billion made in 2005/06 from the External Payments Arrears (EPA) account at the Bank of Tanzania were either fraudulent or invalid 83

84 measures designed to address weaknesses in the procurement and audit areas in order to increase transparency and reduce risk. It will be critical to monitor progress in these initiatives through the regular meetings with the Minister of Finance and Economic Affairs and the overall PFM and GBS dialogue to ensure that they are followed through and become operational practice. An EPA-related indicator has now been included in the PAF. In light of the above, the EC Delegation considers that the PFM situation is on a positive trend and that Tanzania fulfils the general budget support eligibility criterion with respect to public finances and fulfils the conditions for an MDG-Contract. The Government has agreed to a PEFA exercise being carried out every two years and to use the PEFA methodology as the basis for the monitoring framework of its PFMRP. With a more coherent, broader, and better sequenced PFMRP than in the past, with a stronger commitment to reform at political and technical level, a new reform-minded manager of the programme, and with growing domestic pressure to deliver on PFM reform coming from a large variety of key stakeholders (including Civil Society, the President, media and the Parliament) reform prospects are better than they have been in the past. Domestic accountability has improved with the passing of a new Public Audit legislation, which widens the mandate and auditing scope of the Controller and Auditor General (CAG). With the new Public Audit Act, the CAG has full operational independence. The law also provides for a structured response of the GoT to the CAG report, thereby improving the follow-up to the audit findings. The Parliamentary accountability committees will benefit from support from the PFMRP, the deepening democracy programme (co-funded by the EC) and support from the Millennium Challenge Cooperation. In 2008, Parliamentarians participated, for the first time, in the Budget Support Annual Review. A similar trend is being witnessed on Zanzibar, although these developments are still at the initial stage. Lessons learnt GBS programmes have successfully been implemented in Tanzania since 2001, with the exception of 2008 when disbursements were delayed over the EPA case. The HBS revealed disappointing results in poverty reduction. The lesson learnt is that the intervals in between each HBS (currently every 6 years) are too long and that more regular information about the impact of the reform programme on poverty has to be provided. It is therefore proposed to make 5 million available for the National Panel Survey (NPS), to be implemented by the National Bureau of Statistics. The NPS should allow for more up to date analysis, informing decision makers how to improve the quality of poverty reduction policies. The lessons learned from the implementation of the current General Budget Support and Education Sector Support Programmes is that the quality of the policy dialogue has to be improved. GoT and DPs have agreed on a new dialogue structure, setting out clear modalities for regular and high level policy dialogue. Through an elaborate government-led Division of Labour process, the roles of DP engagement is now better articulated. Policy dialogue will also be enhanced by the clear annualised indicators that have now been agreed upon in the Performance Assessment Framework (PAF) for each sector. It is therefore important that this programme will draw all its indicators from the agreed PAF. The three year time horizon of the PAF will allow for an assessment of performance over a medium-term perspective. Getting sector ministries to understand the GBS (and SBS) concept has been a lengthy process, leading sometimes to difficulties (i.e. such as the definition of annual targets), but with their stronger engagement over the last two years, the dialogue at the sector level is 84

85 improving, the integration between sector reviews and the GBS is getting stronger, and the concept of outcome indicators and targets is now better understood at sector level. The PAF is considered to be an important mechanism for the Commission in view of the relatively low disbursement rates from the variable tranche under previous programmes. Moving to an MDG- Contract requires a particular need for high quality policy dialogue on macro and PFM issues; this is why the amount of the Annual Performance Tranche is at its maximum level (15%). With Tanzania moving closer to the achievement of a number of MDGs, it becomes more important to look at geographical disparities, recognizing spatial and other inequities in the country. Complementary Actions Improving the quality of policy dialogue is at the heart of the agenda of the local Development Partners Group and is continuously being discussed at all sectors. More analytical work, e.g. on drivers of growth, household income levels, the supply response of the agricultural sector, will be carried out. This should provide for a better empirical basis for policy decisions. A comprehensive review of the current MKUKUTA will inform the preparations for the next MKUKUTA. A separate 5 million capacity building component will focus on improving the quality and timeliness of poverty relevant statistics, with special attention to the National Panel Survey and the related analytical capacity. The NPS is part of the new Tanzanian Statistical Master Plan (TSMP), which foresees in a comprehensive improvement of the capacity of the NBS to provide quality statistics. In addition, a Support to Core Reforms programme ( 8 million) will be formulated, which should include support to the revised PFM Reform Programme and support to reforms on Zanzibar. Donor Coordination Budget Support in Tanzania is embedded in a comprehensive donor coordination framework. The Joint Assistance Strategy for Tanzania (JAST) is the central articulation of the aid effectiveness process and of the mutual commitments which it entails. The 14 GBS donors coordinate their activities under the umbrella of the PRBS Group. This group is represented at the highest level by the so-called Troika +, which consists of the incoming, current and outgoing chair and the WB as a permanent member. The Head of Missions meeting, in which all 14 donors participate, is the highest decision making body. The Consultative Group, bringing together the economists of all GBS donors, is the technical and advisory body of the PRBS Group. The disengagement of the EC from the health and education sectors represents a challenge in terms of the monitoring, policy dialogue and management of this programme. The Commission plans to sign DoL agreements with member states active in both sectors in order to address this. Description Objectives The overall objective of the Tanzania MDG contract is to contribute to the promotion of sustainable economic growth and the reduction of poverty in Tanzania through the implementation of the ongoing PRSP (the MKUKUTA) and its successor programme and thereby to the achievement of significant progress towards the Millennium Development Goals. 85

86 The specific objective is to provide financial support to the Government of Tanzania to contribute to poverty-reduction through accelerating the implementation of the MKUKUTA and the successful implementation of its successor programme within a context of macroeconomic stability and improved public financial management and service delivery. Expected Results and Main Activities The expected results will include contributing to: macroeconomic stability and structural reform to enhance economic growth; poverty reduction; increased gender equality and equity; continued growth in provision of basic services while increasing the focus on quality and equity; maintenance of economic infrastructure; improved public financial management; and more harmonised and aligned development assistance with the objective of delivering enhanced social service provision and propoor growth. Assessing on a continuous basis the eligibility and monitoring the progress on the indicators will be a key activity of the programme. This will take place in the context of sector and GBS reviews, to which the Mid-Contract and End-Contract Reviews of this programme will be closely aligned. Another ongoing activity will be policy dialogue with GoT around the underlying principles of the GBS Partnership Framework Memorandum (GBS PFM), domestic accountability, the PAF, the implementation of the PFMRP and the main objectives/outputs of the MKUKUTA and its successor programme. Stakeholders In the discussion of GBS and the formulation of the PAF, discussions have largely been with officials of the Ministry of Finance and Economic Affairs (MOFEA). Intermediary stakeholders include Parliament and civil society, both of which play a growing role on matters of public expenditure and budget monitoring. These groups are increasingly involved in processes like the Annual Review of budget support, Public Expenditure Reviews, etc. The ultimate beneficiaries of the Tanzania MDG contract are the population of Tanzania (particularly the poor), who should benefit from improved public services and macroeconomic stability. Risks and Assumptions The major risks relate to continuing adherence to eligibility criteria. A particular risk is related to corruption. It should be expected that, as a result of more transparency and the intensification in the fight against corruption (as highlighted by recent high-profile arrests), more corruption cases will emerge. Perceived inadequate Government response could trigger GBS donors to withheld future GBS disbursements. This could jeopardise macro-economic stability and affect the implementation of the development strategy. On Public Finance Management, the government is committed to regular PEFA assessments and a new strategy is now in place, which will help better to coordinate/sequence the ongoing reforms. Its implementation will critically depend on the capacity and commitment of the government, in particular MOFEA, to implement it. In this context, and to cushion future risks related to for example the 2010 elections, it is important that an Article 8 Political Dialogue is now being put in place, as agreed with GoT in October As regards the macroeconomic framework, the latest IMF PSI review (December 2008) reconfirmed that the overall macroeconomic situation remains strong. The financial crisis is however posing a serious risk. Domestic revenues may be affected by a downturn in e.g. the tourism sector. Tourism generates about 700 million per annum and major setbacks will also reduce growth significantly. Tanzania s largest source of foreign exchange is foreign aid at almost 1.8 billion per annum. In case of a severe recession, levels of aid might suffer. Tanzania s major financiers are multilaterals, the 86

87 US, the UK and the EU. All have stated intentions to maintain or increase levels of assistance to help address the crisis. However, a significant drop-off in aid remains a serious risk for Tanzania, since it would result in reductions in public and private investment and harm growth. A policy note will be prepared looking at the prospects and implications of the current international economic crisis on the medium term macro framework. It will propose various fiscal and macroeconomic alternatives. The next IMF PSI review will also provide an update on the macro and fiscal data in light of the crisis. Crosscutting Issues Rural-urban, regional, gender and income inequalities are included in the MKUKUTA as well as poverty-related concerns from cross cutting issues (i.e. environment, HIV/AIDS, employment, governance, gender, children, youth, elderly, disabled and settlements). The Government intends to better reflect progress on these cross-cutting issues by presenting more dis-aggregated data (gender and regional dis-aggregation) in the annual performance reports. For the medium term, GoT intends to develop some specific targets for selected social sectors to reflect its policies to address the geographical and other inequalities. Implementation issues Budget and Calendar The envisaged execution period is 90 months as from signature of the Financing Agreement. In line with the new MDG Contract approach, the full EDF 10 amount of 300 million will be committed for the 6-year period These components are illustrated in the table below. In year 1, there will only be a base tranche, as the Financing Agreement will be only signed after the GBS AR of November 2008, when the chosen MDG-related and Annual Performance Tranche (APT) indicators will be assessed. Over the duration of the programme, 70% will be fixed and 30% variable, with an equal distribution over the APT and the MDG-based tranches. This reflects the strong focus on macro and PFM issues to be discussed annually to determine the size of the APT. Max. Annual Performance Tranche (APT) Max. MDGbased tranche Maximu m Total (million EUR) Base tranche Minimu m Total Year 1 (2009/10) Year 2 (2010/11) Year 3 (2011/12) MCR (end 2011) Year 4 (2012/13) Year 5 (2013/14) Year 6 (2014/15) Total Total as % 70% 15% 15% 70% 100% *Minimum total is if the MDG-based tranche and the APT are both 0. This is the worse case scenario. **Maximum total is if both the MDG-based tranche and the APT are disbursed at 100% ***MDG-based tranche is 0-15 Complementary support actions: Partially decentralised management mode. The NAO will be the Contracting Authority. The 5 million for support to the TSMP, in particular the National Panel Surveys, will be provided by means of Programme Estimates (PE) managed by the National Bureau of Statistics (integral part of the Ministry of Finance) in direct decentralised operations. The NPS for 2008/09 is already being funded. EC contributions will ensure continuation of the NPS for 2009/ /15 (5 years). The costs for the NPS and related analytical work are estimated at about 1 million per year. Audits of the PE, Mid-Term and Final Evaluation would be carried out by 87

88 Consultants, for which funding will be secured by specific commitments included in the Programme Estimates and contracted through the Framework Contract instrument. Budget Support Modalities Direct centralised management The operating modality for the budget support programme will be direct untargeted budget support to the Treasury. The Tanzanian currency (TSh), is convertible and freely transferable, and complies with article VIII of the IMF s Articles of Agreement with respect to transactions on the current account. Following a National Authorising Officer (NAO) request, EC funds will be transferred to a GoT bank account with the Bank of Tanzania. Procurement and grants award procedures 15 All contracts implementing the action must be awarded and implemented in accordance with the procedures and standard documents laid down and published by the Commission for the implementation of external operations, in force at the time of the launch of the procedure in question. All programme estimates must respect the procedures and standard documents laid down by the Commission, in force at the time of the adoption of the programme estimates in question. Participation in the award of contracts for the present action shall be open to all natural and legal persons covered by 10 th EDF. Further extensions of this participation to other natural or legal persons by the concerned authorising officer shall be subject to the conditions provided for in article 20 of Annex IV of the Cotonou Agreement. Performance Monitoring and Criteria for Disbursement The key tool to monitor performance is the rolling 3-year PAF. The PAF has been agreed in December 2008, following an intensive consultation process between GoT and GBS donors. The PAF consists of a list of underlying processes, temporary process actions, and outcome indicators, drawn mostly from the MKUKUTA and covers FY 2007/08 to FY 2010/11. Once the new MKUKUTA is finalised, the PAF will need to be revised. This process is expected to take place around the GBS Review of October The PAF , approved in December 2008, will be the starting point for performance monitoring under this programme and will be assessed on an annual basis and at the Mid Contract Review (2011). This implies using the joint reviews of 2009, 2010 and 2011 to determine the potential size of the following three-year disbursements (2012 to 2014). The GoT has agreed to include by the time of the Mid Contract Review (MCR) regional disaggregated targets for a number of indicators on key social sectors (health and education) reflecting their policies to address regional inequalities. This stems partly from a recent directive from the President to make social and economic data better aligned with the reality on the ground. In the meantime, sector groups will start analysing the underlying reasons behind regional disparities and assess the policies and time-frame required to reduce them. Based on this analytical work, targets will be formulated and included in the PAF 2011 (i.e. agreement has to be reached in the Annual Review 2010). The general conditions for the disbursement of all tranches are the continued respect for the three eligibility areas for general budget support: satisfactory progress in the implementation of the PFM Reform Strategy; satisfactory progress in the implementation of the MKUKUTA (and its successor); and satisfactory progress in the implementation of a stability-oriented macroeconomic policy. On the 15 Only for complementary support. 88

89 basis of the information provided, the EC shall formulate a positive assessment of these general conditions before the disbursement of all tranches. While the areas identified below for the specific conditions should remain the same until the MCR, the set of PAF indicators for assessing performance is indicative, as both targets and indicators could change over time, in line with the three-year rolling nature of the PAF. Annual Performance Tranche An Annual Performance Tranche (APT) is envisaged for year 2 to 6 ( ). Disbursement of the APT will be based mainly on the conclusions of the GBS review with particular attention paid to issues related to PFM, domestic accountability, and the PAF process itself. A list of 7 PAF indicators will inform this assessment. The APT could also respond to other related events such as grand corruption scandals. The APT may be disbursed in full, or withheld completely. Any deduction would be permanent, with decisions about the utilisation of un-disbursed amounts to be taken at the mid-contract and end- contract reviews. MDG-based tranche The MDG-based tranche is envisaged for year 4 to 6 ( ). It will be assessed at the MCR based on the following: Continued compliance with the entry criteria for the MDG contract (i.e. track record, rolling threeyear PAF, macro perspectives, PFM). Assessment of 10 outcome indicators from the PAF for the years 2008/09, 2009/10 and 2010/11 in the area of Growth and Reduction of Income Poverty (3 indicators) and Improvement of Quality of Life and Social Well-being (7 indicators). Other performance information available at, or arising from, the Annual Review process that is relevant for arriving at a decision on the disbursement (sector reviews, MKUKUTA Implementation Reports, three-year rolling PAF which includes MDG-based indicators). Evaluation and Audit The GBS Technical Note foresees an annual audit of the GBS facility which is the responsibility of the Controller and Auditor General (CAG). The CAG will ensure the report is produced in a satisfactory and timely manner. Only in case where this report is delayed or unsatisfactory would an additional audit be commissioned, to be undertaken in collaboration with the CAG. The GBS Partnership Framework Memorandum (PFM) foresees an independent evaluation of the GBS facility relative to the objectives outlined in the PFM and the PAF. In 2009 a review will be carried out of the Joint Assistance Strategy for Tanzania (JAST) and of MKUKUTA. Communication and visibility The General Budget Support Group in Tanzania has a communication strategy, providing background information to the media and civil society, informing Parliament and issuing press statements when necessary. Visibility of the EC will be promoted through a signing ceremony for the MDG contract and press communiqués for the annual budget support disbursements. The EC Delegation Newsletter will feature articles on EC Budget Support and the websites of MoFEA and the Delegation will be actively used to create more visibility. 89

90 A13. Partnership Framework Agreement THE UNITED REPUBLIC OF TANZANIA PARTNERSHIP FRAMEWORK MEMORANDUM GOVERNING GENERAL BUDGET SUPPORT (GBS) FOR IMPLEMENTATION OF MKUKUTA January, 2006 MINISTRY OF FINANCE DAR ES SALAAM 90