TANZANIA JOINT PROGRAM DOCUMENT
December 2006
Development Partners Group: Tanzania Joint Program Document 1
Acronyms and Abbreviations
Development Partners Group: Tanzania Joint Program Document 1
ADB / African Development BankBEST / Business Environment Strengthening for Tanzania
CAT / United Nations Convention Against Torture
CCM / Chama Cha Mapinduzi
CPIA / Country Policy and Institutional Assessment
CSOs / Civil Society Organizations
DoL / Division of Labour
DPG / Development Partners Group
DPs / Development Partners
EAC / East African Community
EEZ / Exclusive Economic Zone
EMA / Environmental Management Act
EPA / Economic Partnership Agreement
FDI / Foreign Direct Investment
GBS / General Budget Support
GoT / Government of Tanzania
GWG / Governance Working Group
HIPC / Highly Indebted Poor Countries
HQ / Headquarters
IFMS / Integrated Financial Management System
IMF / International Monetary Fund
IMG / Independent Monitoring Group
JAST / Joint Assistance Strategy for Tanzania
JPD / Joint Program Document
LGAs / Local Government Authorities
LGRP / Local Government Reform Programme
LSRP / Legal Sector Reform Programme
M&E / Monitoring and Evaluation
MDAs / Ministries, Departments and Agencies
MDGs / Millennium Development Goals
MDRI / Multilateral Debt Relief Initiative
MKUZA / Zanzibar Strategy for Growth and Reduction of Poverty
MOHSW / Ministry of Health and Social Welfare
MPEE / Ministry of Planning, Economy and Empowerment
MTEF / Medium Term Expenditure Framework
MUKUKUTA / Kiswahili for: National Strategy for Growth and Reduction of Poverty
NACSAP / National Anti-Corruption Strategy & Action Plan
NAO / National Audit Office
NEP / National Environment Policy
NEPAD / New Partnership for Africa’s Development
NPV / Net Present Value
ODA / Official Development Assistance
PAF / Performance Assessment Framework
PCB / Prevention of Corruption Bureau
PEFAR / Public Expenditure and Financial Accountability Report
PER / Public Expenditure Review
PFM / Public Financial Management
PFMRP / Public Financial Management Reform Program
PHDR / Poverty and Human Development Reports
PMO / Prime Minister’s Office
PMTCT / Prevention of Mother to Child Transmission
PRS / Poverty Reduction Strategy
PSD / Private Sector Development
PSRP / Public Service Reform Programme
SADC / Southern African Development Cooperation
SBAS / Strategic Budget Allocation System
TANESCO / Tanzania Electric Supply Company
TAS / 2002 Tanzania Assistance Strategy
TASAF / Tanzania Social Action Fund
TRA / Tanzania Revenue Authority
USD / United States Dollars
VCT / Voluntary Counseling and Testing Services
ZPRP / Zanzibar Poverty Reduction Plan
Development Partners Group: Tanzania Joint Program Document 1
Table of Contents
Executive Summary
I.INTRODUCTION: BACKGROUND AND STATUS OF THE DOCUMENT
II.JOINT COUNTRY ANALYSIS
A.Background and Context
1.Political Context
2.Economic Overview
3.Poverty and Inequality
B.The Government’s Strategy Response
1.MKUKUTA
2.Zanzibar Strategy for Growth and Reduction of Poverty (MKUZA)
C.MKUKUTA Cluster I: Growth of the Economy and Reduction in Income Poverty
D.MKUKUTA Cluster II: Improvement in the Quality of Life and Social Well-Being.
E.MKUKUTA Cluster III: Governance and Accountability
III.JOINT PROGRAM
A.Enhancing aid Effectiveness – How Aid is Delivered
1.History of Aid Effectiveness in Tanzania
2.Joint Assistance Strategy for Tanzania (JAST)
3.Division of Labour, Planning and Budgeting
B.Joint DP support to MKUKUTA/MKUZA
1.MKUKUTA Cluster I: Growth of the Economy and Reduction in Income Poverty
2.MKUKUTA Cluster II: Improvement of Quality of Life and Social Wellbeing
3.MKUKUTA Cluster III: Governance and Accountability
C.Results Based Monitoring and Evaluation Framework
1.Tanzania’s monitoring and evaluation capabilities:
2.Assessing MKUKUTA/MKUZA/Joint Program results:
3.Assessing the Operational Effectiveness of DPs
D.Joint Risk Analysis
1.Risk Identification and Monitoring.
2.Joint Response to Risks
Annex A: Joint Assistance Strategy for Tanzania (JAST) - DRAFT Monitoring Matrix
Annex B: Division of Labour Matrix
Annex B: Division of Labour Matrix (con’t)
Annex C: Results Matrix
Annex D: Tanzania Country Strategy Evaluations
Annex E: Aid Projections FY06/07 – FY09/10
List of Tables
Table 1: Tanzania’s MKUKUTA and MDG targets and status
Table 2: DP MTEF Projections
List of Figures
Figure 1: Total External Financing (actual + projections)
List of Boxes
Box 1: Tanzania’s Debt Sustainability
Box 2: Measurable Impacts– Aid Effectiveness in Tanzania
Box 3: UN and EU Division of Labour Processes
Box 4: Millennium Challenge Corporation
Development Partners Group: Tanzania Joint Program Document 1
Executive SummaryContext. Tanzania is an international leader in aid effectiveness and donor harmonization, with joint Government-development partner commitments, undertakings and activities dating back to 1997. In July 2006 the Joint Assistance Strategy for Tanzania (JAST) came into force. JAST is a Government-led, national medium-term framework for managing development co-operation and achieving national development and poverty reduction goals. JAST includes commitments on alignment, increased use of government systems, increased aid predictability, open dialogue between government and domestic stakeholders, improved division of labour, and a move towards the government’s preferred aid modalities.
Joint Programming Document. As the next logical step in improved aid effectiveness, Tanzania’s Development Partners Group (DPG) has prepared a results-based Joint Program Document (JPD) as a response to Tanzania’s second generation, results-based Poverty Reduction Strategies (MKUKUTA for mainland Tanzania, MKUZA for Zanzibar) and the JAST. The JPD provides a common frame for DPs to locate their individual agency plans. The JPD’s objective is to reduce transaction costs to Government, and to continue to improve the alignment of development partner support with MKUKUTA and MKUZA. The JPD reflects DPG planned support and commitments to Tanzania on aid effectiveness over the 4 remaining years of MKUKUTA, FY06/07-09/10.
Development Challenges and Government Response. The JPD offers a concise overview of the development challenges facing Tanzania, organized around MKUKUTA’s three clusters: Growth and Reduction of Income Poverty; Improvement of Quality of Life and Social Well-Being; and Governance and Accountability. It summarizes Tanzania’s political, economic and poverty context, and describes the Government’s strategic response as articulated in MKUKUTA and MKUZA. The JPD describes Tanzania’s history with harmonization and aid effectiveness, offers a summary of recent JAST commitments, and describes the processes ahead, including both implementation and monitoring and evaluation of these commitments.
New PDG Commitments. The JPD includes specific DPG commitments on: (i) sector review processes; and (ii) DPG support to budgeting and planning.
i)Sector reviews: DPG commits to work with Government and other stakeholders to ensure that sector reviews are:
- Developed as a means of ensuring: (a) effective feedback for national planning, budgeting, monitoring and evaluation, translating the MKUKUTA into high quality sector expenditure plans; and (b) provision of broad public information and dialogue on key sector performance and policy issues; and
- Designed so that DP requirements for monitoring and dialogue are addressed in an efficient and complementary way recognizing capacity constraints.
ii)Budgeting and Planning: The DPG is committed to seeking improvement in the coverage and quality of DP support to planning and budgeting. The DPG commits to:
- Encourage individual agencies to provide projections on the basis of commitments, indicative pipeline and unallocated categories, establishing disbursement estimates which can be used as a prudent basis for Government expenditure planning;
- Support Government in leading a process in which the Government and DPs jointly assess the coherence of agency projections, on grounds of consistency with the macroeconomic framework, the MKUKUTA/MKUZA, compliance with JAST, etc; identifying and addressing financing gaps, where possible;
- In the event of an unforeseen shortfall against past agreed projections (unrelated to program performance or political developments in Tanzania) the DPG will seek to identify additional financing to ensure that agreed projections are fulfilled; and
- Work with Government through the PER macro group to develop detailed proposals for an effective stabilising mechanism (with DP or Government resources), aiming to ensure that medium term financing projections can be protected. The financing mechanism would be ring fenced, triggered only by deviations in external financing flows from agreed projections, and limited to a maximum of restoring the projected flow.
The JPD also explores additional aid effectiveness commitments on: joint analysis and missions, advice and communication; joint evaluations, improving cross-border/regional coherence; improving coherence between bilateral and multilaterals approaches; programmatic approach to support to CSOs; and global funds.
DPG Support/Programs. The JPD offers a summary of current and planned DPG support aligned across MKUKUTA cluster strategies and specific goals. It lays out a results matrix which aligns DPG projects and programs with the MKUKUTA cluster goals, strategies and targets. All forms of external support are included, from general budget support, sector programs, individual projects, technical assistance and analytic work.
Monitoring and Evaluation. The JPD describes Tanzania’s monitoring and evaluation systems and capacity. It discusses mechanisms for monitoring and evaluation implementation of the JPD itself, and assessment of the operational effectiveness of individual DPs.
Risks. The JPD also includes a joint risk assessment across five categories of risk: political, political/economic, fiduciary, institutional and operational, and external. It assesses the likelihood and potential impact of each risk, and offers risk mitigation measures and monitoring mechanisms. In the event that these strategies and mechanisms do not mitigate or contain these risks or other new risks emerge, DPs commit to work together within the JDP to identify, assess, and communicate with Government on emerging risks, while retaining the ability to implement individual responses in an open and transparent manner.
Development Partners Group: Tanzania Joint Program Document 1
- INTRODUCTION: BACKGROUND AND STATUS OF THE DOCUMENT
In July 2006,the Government of the United Republic of Tanzania (Government) established a national medium-term framework for managing development co-operation with its Development Partners (DPs) so as to improve the collaboration in achieving national development and poverty reduction goals. The framework also outlines the roles of various stakeholders, including non-state actors, and outlines principles for how financial and technical assistance should be provided. This framework is known as the Joint Assistance Strategy for Tanzania (JAST).[1]
The DPG has prepared a Joint Program Document (JPD) as a response to Tanzania’s second generation, results-based Poverty Reduction Strategies (MKUKUTA for mainland Tanzania, MKUZA for Zanzibar), and the JAST. For many DPs, the JPD provides a common frame in which their individual agency programs are embedded. The JPD reflects DPG planned support and aid effectiveness commitments to Tanzania over the 4 remaining years of MKUKUTA, FY06/07-09/10.[2]
The Government of Tanzania and civil society organization (CSO) representatives were consulted during the drafting of the JPD. Early in the drafting process, the CSOs and the Development Partners Group participated in a Government chaired workshop to discuss the approach of the document and key issues, in particular how to improve MTEF projections. CSO representatives have contributed text to the document and the Government has provided extensive comments on successive drafts of the document.
The JAST should be seen as Part I. The current document contains Part II, which is a joint country analysis describing Tanzania’s development achievements and challenges; and Part III, which is the joint program part, reflecting consistency of DP plans with MKUKUTA and JAST. The JPD does not explicitly include discussions on Zanzibar, but it is expected that over the next two or three years, new work under JAST will see a convergence of the principles of harmonisation and aid effectiveness on both the mainland and in Zanzibar. Some DPs will use Parts II and III verbatim as core elements of their own program documents; others may use Part II and III as reference documents. Individual DPs might develop a Part IV as a supplement, addressing agency-specific issues, including more detailed descriptions of their specific assistance programs, etc. Part IVs are expected to build from the analysis, commitments and undertakings in parts II and III, and they are not expected to require substantial consultation with government to ensure that the joint programming exercise does indeed reduce transaction costs for the Government.
- JOINT COUNTRY ANALYSIS
A.Background and Context
1.Political Context
Surrounded by a number of conflict-prone neighbours, Tanzania has enjoyed virtually uninterrupted political stability and peace apart from a brief but bloody revolution in Zanzibar in 1964 and a short and victorious war with Uganda in 1978. Recognising the importance and precariousness of regional stability, Tanzania has played a significant role in the Great Lakes peace process and is currently home to more refugees – 346,000 – than any other African country. Tanzania also enjoys internal peace and stability. With some 120 tribes, Tanzania is ethnically and religiously diverse. The country manifests a tradition of strong ethnic and religious tolerance.
Tanzania is an emerging multiparty democracy. Executive power rests with the President and ruling party Chama Cha Mapinduzi (CCM; Party of the Revolution).[3] The CCM has effectively dominated Tanzanian politics since shortly after independence in 1961. President Mkapa governed for 10 years, from 1995 through two terms, leaving an impressive track record on economic growth, fiscal management (including recognized leadership in aid effectiveness), governance, and steady progress on a number of the Millennium Development Goals (such as primary education, water, and child health). In late 2005, President Jakaya Kikwete, the CCM candidate, won an overwhelming victory in Tanzania’s third elections. Observers concluded that voters were able to cast their ballots according to their choices. President Kikwete has committed to continue the strong reforms and policies of his predecessor and to accelerating the process of reconciliation on the islands.[4]
2.Economic Overview
Economic growth averaged 4 percent in the mid to late 1990s rising to an average 5.8 percent since 2000, reaching 6.8 percent in 2005. Over the past five years, growth has been led by mining (15 percent), construction (10.2 percent), trade (7.2 percent) and communication (6.1 percent). Agriculture grew more slowly, at an average annual rate of 5.1 percent, although still high by regional standards. Agriculture remains the largest sector, contributing more than 40 percent of GDP, employing up to 80 percent of the population, while trade and financial services account for about 27 percent and industry, including mining, about 12.5 percent.
Fiscal Policy: Over the last five years, revenue has performed well, rising from 11.3 percent of GDP in FY00, to 13.6 percent in FY05, with an estimated 14.2 percent in FY06. These gains have been made through improvements in tax administration, reducing exemptions, and broadening the tax base. Nonetheless, the revenue/GDP ratio remains low by regional standards in part due to the estimated higher share of subsistence agriculture and other informal sector activities. The last five years have also seen a significant increase in government expenditure rising from an average of 17 percent of GDP in the 1990s to an estimated 28 percent in FY06. This has been fuelled by: increases in domestic revenue; Official Development Assistance (ODA - grants and concessional loans increased from 11.6 percent of GNI in 1999 to 16.2 percent in 2004); debt relief (see Box 1); and domestic borrowing (negligible in recent years). ODA has risen from about 6 percent of GDP in FY00 to 11 percent in FY05 (equivalent to levels experienced in the 1980s and early 1990s.) The key challenge for fiscal management is to further enhance the quality and efficiency of public expenditure and ensure that efforts to strengthen Tanzania’s absorptive capacity keep pace with increases in government spending. Tanzania’s high aid dependency makes it vulnerable to fluctuations in aid flows, and puts a significant burden on Tanzania’s budget management, requiring it to remain flexible enough to accommodate changes in the resource envelope without creating macro-economic distortions, and necessitating the enhancement of aid predictability and domestic revenue.
Box 1: Tanzania’s Debt SustainabilityTanzania’s total external debt at end December 2005 was at US$7,931.4 million (about 65 percent of GDP) with total domestic debt at TSh.1,625.1 billion (about 12 percent of GDP). After receiving HIPC debt relief in 2001, Tanzania’s NPV of debt-to-export ratio declined to about 130. By 2004, it had further declined to 118.
Relief under the Multilateral Debt Relief Initiative (MDRI) will see Tanzania’s debt burden (up until December 2005) cancelled with the World Bank (IDA), African Development Bank (ADB) and IMF. Under the MDRI, the World Bank will cancel about SDR 1,898 million or (US$ 2,804.07 million); African Development Fund UA 415.27 million or (US$644.92 million); and the IMF, US$336 million. Total cancellation under MDRI is expected to amount to about US$3,785 million; leading to a reduction of total external debt by over 45 percent. The IMF MDRI was given in a one upfront debt cancellation in January 2006, and the World Bank relief will be spread over the period 2007-2044 with an average annual saving of $74m each year.
Following the implementation of the MDRI, Tanzania’s debt sustainability indicators are well below the debt sustainability thresholds. The NPV of debt-to-export ratio is estimated to have declined to 64 percent in 2006. The most recent debt sustainability analysis prepared by IMF and World Bank staff concludes that Tanzania’s external debt position is sustainable, with low risk. However, this favourable development of debt indicators depends critically on sustained economic growth and enhanced export performance.
Russia has also announced its intention to cancel bilateral debt and Spain is expanding its debt relief to cover 100 percent of debt. In addition, progress in securing debt relief from non-Paris Club creditors is critical to ensure the continued sustainability of Tanzania’s debt. Negotiations have been concluded with eight creditors (Kuwait, India, Bulgaria, China, Hungary, Libya, Slovak Republic, and Czech Republic). Negotiations are underway with two creditors (Iran, and United Arab Emirates) and negotiations are pending with seven other non-Paris Club creditors.
Monetary Policy. Despite expansion of the money supply (28 percent in 2005/06), Tanzania has generally managed to maintain low inflation. Inflation rose to 8 percent in 2006, fuelled by the impact of the recent drought on food prices, and increases in international oil prices. Private sector credit is still very low (10 percent of GDP in 2005) but growing fast (36 percent growth over past 12 months). There remain concerns that an expansionary fiscal stance by the authorities will crowd out increasing private sector borrowing. The sharp rise in government spending (from 22 percent of GDP in 2003/04 to 25.7 percent of GDP in 2004/05) has necessitated rising sales of Treasury bills to sterilize liquidity. As a result, the Treasury bill rate had been increased from a weighted average of 7.7 percent in 2003 to 9.6 percent in 2004, and 14.8 percent in 2005. However in the recent past it has started to decline, and stands at about 10 percent, due to the unwinding of election uncertainties and increased competition at T-bill auctions.