Report No. 23812-TA The United Republic of Tanzania Public Expenditure Review October 2001 Government of Tanzania Tanzania PER Working Group The World Bank PREM 2, Africa Region Document of the World Bank GOVERNMENT FISCAL YEAR FY02 = 2001/ 02 = July 1, 2001 to June 30, 2002 CURRENCY EQUIVALENTS Currency Unit = Tanzanian Shilling (T Sh) Interbank Market mid-rate: US$1.00 = T Sh 890 (July 2001) ABBREVIATIONS AND ACRONYMS AfDB African Development Bank MOF Ministry of Finance AIDS Acquired Immune Deficiency Syndrome MOH Ministry of Health BEMP Basic Education Master Plan MSTHE Ministry of Science, Technology and BOP Balance of Payment Higher Education BOT Bank of Tanzania MTEF Medium Term Expenditure Framework CBMS Cash Budget Management Systems NBC National Bank of Commerce CFAA Country Financial Accountability NFA Net Foreign Assets Assessment NGO non governmental organization CG Consultative Group O&E organizational and efficiency (reviews) CSD Civil Service Department O&M operations and maintenance CSRP Civil Service Reform Programme OC other charges DANIDA Danish International Development OECD Organization for Economic Cooperation Agency and Development DEO District Education Officer PE personnel emoluments DFID Department for International Development PER Public Expenditure Review DMO District Medical Officer PHC Primary Health Care DMT District, Municipal and Town Councils PORALG President's Office - Regional Authorities ESP Education Sector Programme and Local Government ESRF Economic and Social Research Foundation PRBS Poverty Reduction Budget Support EU European Union PSWB Public Sector Wage Bill FAO Food and Agriculture Organization PRSP Poverty Reduction Strategy Paper FY Fiscal Year RAS Regional Administration Secretariat GDP gross domestic product REPOA Research on Poverty Alleviation GNP gross national product SAC Structural Adjustment Credit GOT Government of Tanzania SASE Selective Accelerated Salary Enhancement HIPC Highly Indebted Poor Countries Debt SASP Structural Adjustment Support Program Initiative SDC Swiss Development Cooperation HIV Human Immuno-deficiency Virus SDP Sector Development Program IDA International Development Association SPA Special Program of Assistance IFEM Inter-bank Foreign Exchange Market SSA Sub-Saharan Africa IFMS Integrated Financial Management System STD Sexually Transmitted Disease IMF International Monetary Fund TANESCO Tanzania Electric Supply Company LA Local Authority TAS Tanzania Assistance Strategy LCC Local Cost Compensation TB Treasury Bill LGRP Local Government Reform Program TRA Tanzania Revenue Authority LPO Local Purchase Order UDSM University of Dar es Salaam MAC Ministry of Agriculture and Cooperatives UNDP United Nations Development Program MOEC Ministry of Education and Culture VAT Value Added Tax Vice President: Callisto Madavo Director: James W. Adams Sector Manager: Frederick Kilby Task Team Leader: Benno Ndulu TABLE OF CONTENTS Executive Summary ........................................... ............ i 1. Objectives, Methodology and Context of the FY01 PER...................... 1 2. Evaluation of the Tanzania PER Process Since FY98 ........ ............... 6 3. Review of Recent Macro Performance ............................ ..... 15 4. Review of Budget Performance ............................. ......... 18 5. Budget Sustainability and Full Financing of the Priority Sectors............... 32 6. Revenue Issues in the Longer-Run .................................... 36 7. Recommendation ............................................... 40 8. The Way Forward ...................... ..................51 Postscript.................................................... 58 Annex 1: Proceedings of the PER FY01 Consultative Meeting 60 Annex 2: Aspects of budget sustainability................................... 74 Annex 3: Fiscal Sustainability........................................... 77 Annex 4: Data....................................................... 86 List of Tables: Table 2.1: Studies and activities carried out under the FYOIPER ................... 8 Table 4.1 Government Revenue and External Grants (as % of GDP), FY96 - FY01 ........... 19 Table 4.2: Foreign Inflows - Grants and Loans (as % of GDP), FY96 - FYO1 .................. 19 Table 4.3: Government Expenditures (as % of GDP), FY96 - FY01 ........... ..... 20 Table 4.4: Civil Service Employment, FY98-FYOI (December of each year).................21 Table 4.5: Civil Service Average Salaries, FY97-FYOO ............................21 Table 4.6: Financing of the Fiscal Deficit (% of GDP), FY96 - FY01 ....................22 Table 4.7: Composition of Public Expenditures (as % of GDP), FY96-FYO1 ..... ..... 23 Table 4.8: Sectoral Recurrent Expenditures (actuals, as a %age of GDP) ...... ....... 23 Table 4.9: Social Sector Recurrent Expenditures (actuals, as a %age of GDP) ................ 24 Table 4.10: Tanzania: Priority Sector Spending - Other Charges....................... 25 Table 4.11: Sectoral Development Expenditures (actuals, as a %age of GDP)................. 26 Table 4.12: Contingency allocation retained by Ministry of Finance ................ 27 Table 4.13: Actual Reallocations to PE and OC......................... 28 Table 4.14: Reallocations and Expenditure Outturn, FY00........................... 28 Table 4.15: Development Expenditures by Sector, Actual Expenditures as a Share of Budgeted Expenditures, FY96-FYOO ........... ................. 29 Table 7.1 : Structure of Consolidated Arrears- By Category July 1998 - December 2000 ... 45 Table 7.2 : Consolidated Arrears- As a Proportion of Total Arrears July 1998 - December. 2000 ................. . ...................... ......... 46 Table 8.1: Summary of Impact of Public Expenditure Process on Public Expenditure Management in Tanzania ............................. ......... 56 Annex Tables Table 1: Tanzania Microeconomic Indicators............................87 Table 2: Balance of Payment. ....................................... .....88 Table 3: Summary of Central Government Operations. ............. .............89 Table 4: Budget Frame for 1999/2000-2003/04. .............. ................90 Table 5a: Budget Frame for 1995/96-2003/04. ......................... .......91 Table 5b: Budget Frame for 1995/96-2003/04 % of GDP.. ...................... 92 Table 6a: Sectoral-Recurrent Expenditure 1995/1996-2000/01 ..................... 93 Table 6b: Sectoral-Development Expenditure............................. 94 Table 6c: Sectoral-Total Expenditure..................95............ ....95 Table7a: Actual Recurrent Expenditure by Vote as the Share of Total Recurrent Expenditure FY96-FYOI ................................................. 96 Table7b: Actual Development Expenditure by Vote as the Share of Total Development Expenditure FT96-FYO1 ........................................ 97 Table 8a: Actual Recurrent Expenditure as a Percentage of Budgeted Expenditure by Vote FY95-FYO1 ............................................ ..... 98 Table 8b: Actual Development Expenditure as a Percentage of Budgeted Expenditure by Vote FY95-FY0I ................................................. 99 Table 9a: Recurrent Budgeted Expenditure-Regions FY96-FYO 1........... .......100 Table 9b: Budgeted Development Expenditure-Regions FY96-FYO 1.......... ......101 Table 9c: Budgeted Total Expenditure-Regions. ........................ ......102 Table I Oa: Actual Recurrent Expenditure as Percentage of Budgeted Recurrent Expenditure- Regions FY96-FYO I............................... .........103 Table 1 Ob: Actual Development Expenditure as Percentage of Budgeted Development Expenditure-Region FY96-FYO 1 ...................... .. ........104 Table 1 Oc: Actual Total Expenditure as Percentage of Budgeted Total Expenditure-Regions FY96-FYO1 ...............................................105 Table 11: Sectoral-Recurrent Expenditure Before and After Reallocation.. .......... 106 Table 12: Region-Recurrent Expenditure Reallocations FY00....................107 List of Figures Figure 4.1: Development Expenditure as a share of GDP, FY96-FYO1 . .............. 21 Figure 4.2: External Project Support, Average FY99 and FY00. ......... ........... 26 Figure 7.1: Monthly Fiscal Deficit / Surplus............................. 42  Preface Starting in 1997/98, Tanzania has embarked on an annual Public Expenditure Review (PER) process with the interrelated twin objectives of supporting the budget process and conducting an external review of fiscal developments. The Tanzania PER Working Group comprising representatives of the Government of Tanzania, the World Bank, other UN agencies, other bilateral and multilateral donors, research and academic institutions, and NGOs determines the agenda for the annual PER process, guides and finances the implementation of the agreed work program, and reviews all outputs. It also represents an important forum for discussion of public expenditure issues between government and a wide array of interested stakeholders in Tanzania. This report intends to fulfill two purposes. Firstly, it puts on record the activities and achievements of the work of the PER Working Group during FY01. Secondly, it serves as a public record of the findings of the external review of fiscal developments, which previously have been shared with government and members of the PER working group as well as with a wider audience at the annual PER Consultative Meeting, which was held in May 2001 prior to the finalization of the Tanzanian government budget. The report is primarily based on the findings of a joint donor mission in November/December 2000 which was led by Benno Ndulu (mission leader, AFTP2) and consisted of Robert Utz, Sumana Dhar (AFTP2), Vedasto Rwechungura (AFTPS), Philip Mpango, Hamisi Mwinyimvua (consultants, University of Dar es Salaam), Ben Tarimo (consultant), Frans van Rijn (Netherlands Embassy), Tone Tinnes (Norwegian Embassy), Torben Lindqvist (Danish Embassy), Olivier Burki (Swiss Development Cooperation), Fiona Shera (DFID) and Amon Manyama (UNDP). A follow-up mission in April/May 2001 was launched to assist the Government in the preparation of the cross-sector MTEF and to present the findings of the main mission at the Consultative PER meeting held in Dar es Salaam. In addition to the work undertaken in the context of these two missions, the report also draws on work commissioned by the PER Working Group on fiscal sustainability carried out by David Bevan and by Emerging Markets Economics Consultants. The report was written under the supervision of Fred Kilby, Sector Manager, AFTP2, and Peniel Lyimo, Deputy Permanent Secretary, Ministry of Finance, Government of Tanzania. Allister Moon (ECSPE) and Anand Rajaram (PRMPS) served as peer reviewers. Emmanuel Munganasi provided excellent research assistance and compiled the statistical appendix. Patrick Mamboleo was responsible for the word processing and the physical production of the report.  EXECUTIVE SUMMARY THE FY01 PER PROCESS Tanzania has been conducting annual Public Expenditure Reviews (PERs) since FY98. The two principal objectives of the PER process are to support the budget process in Tanzania and to provide peer review on fiscal developments to the Government of Tanzania and to make the findings available to a wide range of stakeholders. The process is government led and benefits from wide participation within government, by donor agencies, research institutes, NGOs, and the private sector. The PER working group, which meets bi-weekly, is the focal point of the PER process. It develops the annual program of work and supervises the implementation of specific activities. During FY01, these activities included studies on the following issues: expenditure tracking in key poverty sectors, fiscal sustainability and local government indebtedness. The PER working group also supports the preparation of sectoral PERs and Medium Term Expenditure Frameworks for the priority sectors (education, health, roads, agriculture, justice, water, HIV/AIDS, lands). The PER macro sub-group provides inputs to the budget guidelines committee on the macro framework, overall prioritization, collects information on donor support as a key element of the government's resource envelope, and contributes to the preparation of the cross-sector medium term expenditure framework. As an integral part of the PER process, the World Bank leads the external evaluation of fiscal performance, covering macro-fiscal development, strategic allocation issues, as well as budget management issues. This report covers mainly the findings of the external evaluation covering developments during FY00 and the first eight months of FY01, while sectoral issues are covered in individual sector reports prepared by the sector working groups. The findings of the external evaluation have been presented at the PER consultative meeting which took place in May 2001 and served as background to government's presentation of the medium term expenditure framework for the period FYO2-FY04 to a wide range of stakeholders. BUDGET PERFORMANCE FY00 AND FIRST EIGHT MONTHS OF FY01 During FY00 domestic revenue remained at the same low level as in the previous year, i.e., at around 11.5 percent of GDP. The first eight months of FY01 saw a slight improvement in the revenue situation with domestic revenue increasing on an annualized basis to 12 %. The improvement in the revenue situation is mainly due to increased revenue from VAT on petrol products and increased income tax revenue. Aid inflows in the form of grants and concessional loans also increased in FY00 to 4.8 percent of GDP. The first eight months of FY01 saw a further increase to 5.5 % of GDP on an annualized basis. On the expenditure side, expenditures increased in FY00 by one percentage point to 15.9 percent of GDP. Expenditures during the first eight months of FY01 were slightly lower in magnitude due mainly to reduced development expenditure. The increase in expenditures in FY00 was evenly divided between providing funding for the implementation of the first stage of pay reform and enhancing expenditures on other charges. The first eight months of FY01 saw a decline in the share of expenditures on wages and salaries, as no pay awards were granted. Expenditures on OC on the other hand increased quite significantly. Despite the significant increases in spending on OC in FY00 and FY01, expenditures on OC were below the budgeted amounts, pointing towards the continued disconnect between budgets and actual expenditures. I Over the past few years, some progress has been made in enhancing funding for priority activities in the areas of primary education, health care, roads, and water, with most of the increased spending going to the districts. Between FY96 and FY99, recurrent expenditures on the social sectors increased from 3.5 percent of GDP to 3.7 percent of GDP. Expenditures for the social sectors declined slightly in FY00 to 3.6% of GDP. This share increased during the first quarter of FY01 to 4.1 % of GDP. However, spending on administration increased even faster, from 1.4 percent of GDP in FY97 to 2.1 percent of GDP in FY00. Expenditures on defence and security have declined from 2.5% of GDP in FY97 to 2.0% in FY00. Progress has been made on bringing a greater share of donor financed development spending into the budget. Recorded Development expenditures in the appropriation accounts increased from 0.9 percent of GDP in FY97 to 1.8 percent of GDP in FY99 and 1.5 percent of GDP in FY00. Correspondingly, actual development expenditures as a share of budgeted development expenditures have increased from 6.1 percent in FY97 to 52% in FY00. However, further work needs to be done to improve the capturing of donor flows in the budget. Deviations between the budget presented to the National Assembly and expenditure outturns remain significant, especially for non-priority sectors. The analysis in this report decomposes deviations into (a) deviations due to reallocations and (b) over or under spending by spending units. Reallocations occurred mainly to distribute funds retained at the Ministry of Finance for "special expenditures" or for contingencies. These reallocations are of concern because they considerably change the sectoral allocations approved by Parliament during the budget session. Significant underspending occurred during FY01 because resource availability from domestic and foreign sources was significantly below the budgeted amounts. Priority sectors were protected from resource shortfalls and received their full allocations. However, continued efforts to reduce such budget deviations will be necessary, including both improvements in budget projections but also consideration of financing options to absorb resource shocks. Contingency funds retained by the Ministry of Finance are substantial. Although retaining unallocated funds for contingencies is important in an environment of large and unpredictable shocks impacting on the budget, efforts should be made to enhance ex-ante transparency in determining the size and allocation of these contingency funds. The main problem of public expenditure management persists, which is the mismatch between available resources and the intended scope of Government activities. By preventing access to deficit financing, the cash budget system highlights this mismatch, resulting in permanent under funding of non-priority spending units which renders them virtually incapable of providing any services. The mismatch between revenue and intended scope of activities also becomes visible in symptoms such as the accumulation of arrears. Priority sectors are also critically under funded. If the poverty reduction targets laid out in the PRSP are to be achieved, additional resources becoming available will need to be devoted to the priority sectors. Possibilities for widening the resource envelope are limited. The structure of the economy makes it difficult to raise more revenue, although the revenue potential of the growth sectors, i.e. mining and tourism, is not yet fully exploited. With Tanzania already being one of the main recipients of foreign aid in the region, the potential for further increases in aid inflows seems limited. Given the limited prospects for expanding the resource envelope and the huge unmet needs of priority sectors for poverty reduction and growth, bridging the gap between available resources and funding requirements of the current government structure can only be achieved if the scope of government is brought in line with the medium term resource availability. ii Finally, improving access and transparency of information on fiscal developments is important to support other efforts to enhance accountability and transparency in the public sector. MANAGING STRESSES FROM CASH BUDGET SYSTEM There are three main types of budgetary stresses that have been identified in respect of under- funding of budgets and contributing to pressures for undermining prudent budget management. The first relates to the overall amount disbursed being far short of requirements for effective delivery of services. Frequently this problem has been addressed in terms of enlarging the overall resource envelope and sector as well as sub-sector prioritization. However, the budget stress is accentuated by the fact that the budget preparation stage has typically overlooked completeness in activity prioritization (sub-items). Currently statutory payments (CFS) and personal emoluments (PE) are treated as first charge. Two more first-charge type of expenditures, if under-funded, often lead to commitments being made outside the budget and build up of arrears. These are utilities (power, water, telecommunications) and "automatic catering" such as food needs of prisons, security forces, boarding schools and hospitals. This may not be an exhaustive list but together they account for about 37 percent of all arrears built up. For the former, until such time as prepaid -service systems are installed the commitment is essentially automatic. Recommendation 1. The report recommends that the Government reviews the classification of first charge expenditures for completeness and ensure that the guidelines for FY02 include instructions for fully funding these. All spending units should provide reasonable estimates of these in their MTEF and budget submissions. The hierarchy in prioritization then would be: (i) statutory expenditures and other first charge sub-items, (ii) Priority sectors and sub-sectors (iii) Other sectors and sub-items. The second dimension of the under-funding problem relates to the mismatch between the monthly cash requirements and exchequer releases - amounts and timing. The lumpiness of some expenditure categories such as road maintenance, pension funds, and examinations present major stresses in the overall functioning of the Government budget when they occur without provision for cash flow gap smoothing. The pattern of expenditures through the year varies greatly across sectors to render a general rule of releasing 1/12 of the approved budget each month disruptive to the effective provision of public services. The monthly cash stress is typically accentuated by unforeseen expenditures triggered by emergencies. The main spending units that have to deal with such crises include Health for epidemics, Defense and Home Affairs for security-related emergencies, and Works and Agriculture for flood disasters entailing emergency repairs of infrastructure and food security. During FY00 it included handling of cholera outbreaks, refugee situations, food relief and security in the game parks. While it is possible to preempt some contingencies, such as dealing with tourism protection through a program of strengthening security presence in the parks, the bulk of other unforeseen events can only be dealt with on a contingency basis. Exchequer releases are typically issued between the 15th and 20th of each month instead of the stipulated date of the 5th day of each month. This concern was strongly expressed by all spending units met. The delay adds to further uncertainty in expenditure planning. Since there is a predetermined rule to base releases on the average of three previous months revenue collection plus projected external program support, it is hard for spending units to understand the delay. One of the causes of delay is a process of conforming to the monthly monetary programming necessitating protracted exchanges with BOT for finalizing the exchequer issues. It was noted that such exchanges could be programmed in such a way to enable meet the stipulated date for exchequer releases. iii Recommendation 2: So as to have a more effective cash management system the report recommends four actions: * As a first step to address cash flow gaps, the report recommends that the Budget Guidelines require spending units to present a cash flow plan along with their annual budgets, which conform to the respective aggregate ceilings but clearly show the time pattern of their cash requirements. Particular attention should be paid to the typical lumpiness in expenditure patterns in these units. Currently submissions are being made for some lumpy activities such as for education and health and the suggestion here would systematically broaden the coverage of submissions to all spending units. Once consolidated the overall budget would also have a cash flow plan to provide a more systematic projection of exchequer releases. * The report recommends that the Government considers a cash flow smoothing instrument that respects the overall budget ceilings for the year. Two options or their combination were discussed with the concerned stakeholders. One is a cash reserve operated as a Government deposit that can be drawn down or built up depending on the net cash requirement position versus available cash. There were indications of possible contribution to such a reserve by donors, provided it can be protected from becoming a financing instrument. The other option is to establish a prudent credit line with the BOT as advances subject to the same rule that the net position as end year be zero. The law allows for such advances with clear limits. The BOT currently provides such credit based on the shortfall between projected external program support and actual disbursement and the credit is repaid when actual flows take place - and applying agreed automatic adjusters. The recommendation here is to broaden this coverage to include projected domestic revenue with specific safeguards against abuse by turning advances into a financing instrument as it occurred in the past. The previous PERs and this current one established that typically the variance between actual and projected domestic revenue collection is smaller than that for external resource flows, and that there is a concentration of external inflows in the last quarter of the year, which could also be used as a safeguard against such abuse. The Government may wish to consider the two options or their combination based on comparative cost assessment( including the opportunity cost of maintaining a cash reserve) and select an appropriate instrument for smoothing cash flow gaps beginning in FY02. * The report recommends that, a separate line item be provided for contingencies under Vote 50 to minimize the stress from unforeseen expenditures on the overall functioning of the Government. The current provision under vote 50 predominantly provides for salary adjustments and regular shortfalls in OC. The current arrangement does not permit to address these contingencies on a timely manner. To help speed up responses to emergencies, the Government may wish to have reasonable estimates of emergency requirements based on past experience and to develop and agree on automatic triggers for release based on predetermined criteria. * The report recommends that exchequer releases be issued on the stipulated date of the 5th of each month so as to minimize uncertainty on available cash. The timing of the meetings/exchanges between Treasury and BOT for ensuring conformity to the monetary program could be set within the stipulated timing target. The third area of budget management stress relates to payment arrears. There are two dimensions to this problem - dealing with the accumulated stock of arrears and preventing the building up of new flows of arrears through appropriate incentives. There is currently an initiative funded by the European union to clear up the stock of domestic arrears of the central government. A major problem is the authenticity of the size of the stock. Initially the stock was estimated to be within the range of 60-80 billion shillings but to date under SASP IV the stock that has been cleared up is already up to 120 billion shillings. An independent audit has rejected a substantial proportion of the stock initially verified by CAG. The main problems appeared to be linked to over-pricing of supplies and collusion between some officials and suppliers to short change the government. There is no similar operation of relieving the local governments of their debts, whose stock as of end 1998 stood at 8.65 billion shillings (per CAG report). More than half of this stock was due to iv councils' creditors and slightly more than 15 percent due to non remission of statutory deductions from employees for contribution to Local Authority Provident Fund. The gravity of the problem varies across local governments. For some of the poorer authorities, the stock of arrears makes up over 50 percent of their own revenue collection, representing a major potential drag on financing their development programs. Most better-to-do and fewer poorer local authorities visited by the PER mission have began, on their own, to reduce the stock of debt and often at the expense of much needed funding for public services in the poorer ones. A major issue in such debt relief programs is the moral hazard problem and preventing the recurrence of build up of arrears. The report discusses appropriate disincentives to building up new flows and possible approaches to tightening the financial management system against recurrence of unsustainable stock. Recommendation 3: The report recommends that the Government considers a relief program to clear up the stock of debt of poor Local Authorities (Highly Indebted Poor Local Authorities - HIPLA) to give them a fresh chance under the local government reform program. A separate study under the PER Working Group has been commissioned for a more in-depth analysis of this problem and recommendations for way forward. Following the central and local government relief operations, the report recommends the following measures to prevent recurrence of the unsustainable stock of debt. New payments arrears should be integrated into the following year's respective spending unit's budgets as first charge from their allocations. This used to be the practice in the past in order to enforce discipline in budget management. It would, however, require timely compilation of information on arrears (in the Platinum system where available) and verification. To prevent abuse of extra-budgetary commitments will require enforcing the centralized system for issuing LPOs (even where the automated system is not operative); enhanced enforcement of discipline by the accounting officers (AOs) to ensure that no invoices are held outside the financial reporting system; and strengthening the internal audit functions in ministries, regions and local governments. To minimize collusion with suppliers, it is desirable to publicize/make it very clear to the private suppliers that any LPO issued outside the central payment system will not be honored by the MOF. It will raise the risk costs to corrupt suppliers from non-payment for goods and services supplied inappropriately. Rolling out the Integrated Financial Management System (IFMS) The government has introduced the Integrated Financial Management System (IFMS), which when fully operational would permit improved transparency of public financial operations through real time information, and better controls through centralized payments and procurement processing. The EPICOR (formerly PLATINUM) is the software currently used to operate the IFMS. The Exchequer Ordinance has been revised inter alia to provide a legal basis for operating this new system effectively and accepting its reports for fiduciary accountability. To date all ministries in Dar-es Salaam are using the IFMS. However, two are not on line. In practice this means that all expenditure transactions are now being executed through the system. In the case of the two remaining institutions (President's Office and the Ministry of Defense and National Service and agencies under it), although not yet on line, the IFMS and EPICOR software have now been implemented. Central government agencies located in regions and districts are served through 19 Sub- Treasuries. Manual operation of IFMS has been in place since last fiscal year. During the financial year 1999/2000 all payments were processed at the central payment office in the sub-regional treasuries. The structure of the chart of accounts in use is the same as that in use at the Central Payments Office but all payments and revenues are captured manually. Following failure of the first attempt to automate the system, on line links are being established in the 19 sub-treasuries from where payments and commitments are being executed for all central government agencies located in the 19 regions. An earlier attempt at v automating IFMS in the sub-treasuries using the PLATINUM software suffered technical hitches in hardware and software services making connectivity inoperative. Furthermore, the system used dial up technology for linking with Dar es Salaam. Consequently the links were subject to telecommunication interruptions. The government is in the process of reinstalling equipment and linking the sub-treasuries with the center via satellite technology. Sub-treasuries connected to the IFMS center can now operate on line and the task to connect all the sub-treasuries is expected to be completed by end August 2001. IFMS and the EPICOR software are also being rolled out to 28 local authorities on a pilot basis under phase I of the initiative. 42 more have been targeted for phase II which begun in January, 2001. There are only a few amongst the 28 that operate the software effectively. All ministries, Sub-Treasuries and local authorities visited by the PER mission expressed their appreciation for improvement in efficiency and controls when the PLATINUM is operative and strongly urged for its wide use. In the meantime there are some key transitional concerns that need to be addressed urgently. Recommendation 4: * As of April 2000, a centralized LPO system became operational in Dar-es- Salaam obviating the need for continued use of printed LPOs. The presumption was that since many of the Sub- Treasuries had the PLATINUM system, the need for printed LPOs would subside. Due to the fact that the rolled out PLATINUM systems were not operative, a shortage of LPOs emerged endangering the integrity of the procurement system in areas where PLATINUM was not operative. There is therefore an immediate need for ensuring that adequate supplies of printed LPOs is availed to all those in need of them. * The Government needs to quickly review the IFMS roll out program to ensure availability of functioning equipment, effective supportive technical services, and adequate training to operating staff. LOCAL GOVERNMENT FINANCIAL MANAGEMENT AND OTHER ISSUES Budgetary stress: There is an apparent difference on budgetary stress between rich and poorer local authorities (LAs), based on the extent of arrears, own revenue as percentage of total revenue, own revenue per capita and underfunding. Differential treatment ofLAs in exchequer releases andfunding: By and large under-funding is still a problem both in relation to needs and approved allocation. Some districts receive less resources than approved especially those for funding other charges. There is lack of clear consistency vis-a-vis underfunding, with marked variations in the extent of funding between regions and between districts with some districts receiving far less than their approved allocations. It is not clear what criteria is being used in deciding the allocation, timing of actual releases and disbursements since some LAs do not receive releases as expected. There is a need for a study to determine the extent of inequity of treatment and transparency in the criteria used for differential treatment. Cash flow plans: There are indications from the LAs that cash flow planning would help ease cash flow problems and reduce uncertainties in budget implementation. Some LAs already prepare cash flow plans while some better to do LAs have been able to use cash reserves to bridge cash flow gaps and smoothen cash flow over time. Generally, councils indicated their agreement to including the requirement for preparing cash flow plans in the Guidelines for the budgeting process. Financial Management Capacity: The four key positions - Treasurer, Expenditure Accountant, Revenue Accountant and District Planning Officer are filled by staff with the requisite vi professional qualifications. However, the Internal Audit departments are weak in capacity, because most of the auditors are new (72 recruited in 2000) and lack job experience to man Internal Audit department, while others are not qualified for the job but only seconded from the Finance Department to do the job. Positions below the accountants are also manned by accounts assistants, most of whom have not gone through a formal training on accounting. The finance management capacity is even more worrying and totally lacks at the ward level where, apparently most of the revenue collection in the Councils takes place. There is a need for further training of accounts clerks and orientation of audit staff to the financial accounting and management of LAs, as well as training of finance and audit staff in computer skills to cope with the introduction of the Platinum System. To help more effective supervision by the councilors, there is also a need occasional seminars for the councilors to sharpen their understanding of financial statements. Internal Audit reports and their usefulness: Internal audit reports are essential in uncovering irregularities and ensuring that regulations are properly followed in the course of performing day to day financial management operations. The reports are important not only as a financial management tool for the management, but also in guiding and simplifying the work of external auditors. It would be important, therefore, that these reports are regularly produced and submitted both to the management and the Council. In particular, the Councilors should demand to read such reports on a quarterly basis and subsequently ensure that the management responds to queries contained in these reports. Role of the Regional Secretariat (RAS Office): The RAS office's advisory role is currently very limited and ambiguous. This has led some to think that the Regional Secretariat is an unnecessary overhead to the Government. However, given the distance between ministries and the LAs, there is definitely a need for an intermediate body, which will monitor and ensure that the national standards in service delivery and policies are adhered to. The Regional Secretariat is well placed to perform such a function. The report recommends that there is need to clarify the role of the Regional Secretariat vis a vis the sector ministries in monitoring and evaluation, and in enforcing national standards. The national budget provision for these functions should be shared between the sector ministries and the Regional Secretariats. Arrears: Most LAs and in particular the poorer LAs have accumulated huge payment arrears. Usually in the preparation of the budget, LAs include repayment of arrears as one of the expenditure items. In practice, however, it is only the better to do LAs that have been able to spare enough resources for this item. The inclusion of arrears in the expenditure side of the LA budgets has instilled a sense of responsibility to the LAs making them wary to incur more debts. It is recommended that such practice (integrating debts in their budgets) be formally adopted in the guidelines for budgeting at all levels of government. The report once again recommends that the Government considers a relief program to clear up the stock of debt of poor Local Authorities (Highly Indebted Poor Local Authorities - HIPLA) to give them a fresh chance under the local government reform program. Frequency and quality of quarterly and annual financial reporting and feed-back from supervisors: As noted above monthly, quarterly, and annual financial reports are prepared by the LA management and submitted to the Finance Committee and the full council. Quarterly and annual reports are copied to the RAS and MORALG. However, none of the reports go to the sub-council level directly. The assumption is that the contents of the reports would reach the sub-council levels through their representatives. The report recommends that both financial and audit reports (translated into Kiswahili) be displayed /made public at ward and village levels. The practice existing up to the early 1980s of sending copies of the quarterly reports to Treasury was very useful for accountability / feedback. The report recommends that this practice be re- instituted and a desk officer designated in MOF to deal with such reports. Vii MAJOR EMERGING ISSUES FROM THE PER FY01 CONSULTATIVE MEETING The theme of the PER FY01 Consultative Meeting focused on realigning the budget and the MTEF with the PRSP which is now the overarching national framework for implementing poverty reduction measures in Tanzania and which has become the benchmark document for prioritizing expenditures in Tanzania. A key feature of the 2001 PER consultative meeting was the broader participation both in terms of the substantial increase in the number (around 250) and composition of participants, compared to the last two PERs. Major Emerging Issues 1. PER Process Mileage Gained under the PER Process: There is a consensus that the PER process has enriched the Government budgetary process. Remarkable progress has been made on progressively increasing funding to priority areas. In addition, the PER has become an increasingly GoT owned and led process as well as highly participatory and transparent. All this needs to be maintained and strengthened. Adaptation of the PER Process to Poverty Reduction: The PER process has in addition to providing inputs into the budget process and development of the cross-sector and sector MTEFs adapted to focus more on poverty reduction. The subsequent PER therefore will need to pay greater attention to the poverty focus. Extending the PER/MTEF Process to the Sub-national Level: Flow of funds to LAs and service delivery units is of concern and GoT needs to put appropriate monitoring mechanisms in place with adequate follow-up. This will require, among others, (i) rolling-out the PER/MTEF process to the lower level (Local Government Authorities) as these levels do deliver the primary services. This will improve planning, execution and control of budget at that level. In addition this will strengthen local ownership and local participation. (ii) spending more resources on building capacity at all levels of government but more so at the sub-national levels. 2. Maintain Macroeconomic Stability: There is a broad consensus that the current success of the GOT in maintaining macroeconomic stability should be maintained. 3. Further Prioritization to Foster Strategic Expenditure Allocation: There is need to continue work on prioritization to foster strategic expenditure allocation using the MTEF instrument, including revisiting the priorities, to focus on sectors, such as the transport sector (broadly defined), which can make a real impact in terms of poverty reduction. It is important that ongoing interventions targeted at realizing sustainable development in the rural sector and delivery of high quality primary education are revised and updated to reflect the requirements of Rural Development, Agriculture and Primary Education for poverty reduction. 4. Concern on the Low and Drifting Down of the Revenue Effort: Low and declining revenue effort remains an important concern. The revenue effort is seen to be driven by taxes on international trade while performance of other taxes does not show much improvement. Efforts are thus needed in improving compliance and strengthening tax administration. 5. Concern on Continued Channeling of Donor Resources Outside GOT Budget: More attention needs to be put on improving the reporting and accounting of donor resources. Administration of donor support outside the Government budget creates real problems in budget management and accountability considering that over 30% of the budget is donor funded (over 80% for development budget). More donor resources need to go through the budget so as to support the poverty reduction strategy. Addressing this problem requires promoting/enhancing trust and collaboration between the viii Government and Donors. It also requires the GOT to continue demonstrating resolve to improve budget management, transparency and accountability. 6. Need to Harmonize SDPs and PRSP: There is an apparent disconnect between Sector Development Programs (SDP) and the PRSP. There is therefore a need to harmonize the SWAPs/SDPs with the PRSP for orderly implementation of the poverty reduction strategy. This implies that Sector development programs and strategies should be reviewed to ensure consistency with PRSP to ensure a strategic link between resource allocation and poverty reduction. 7. Options on Full Financing of the PRSP: Full financing of PRSP targets/requirements has implications on resource mobilization vis-A-vis attainment of the targets. Various financing options will need to be considered if the estimated resource gap of 3% of GDP is to be mobilized. The options include: reducing the PRSP targets or lengthen the period over which targets are to be achieved, or raise more domestic resources or through borrowing (external/internal) but without prejudicing macroeconomic stability. 8. Dealing With the Problems Associated with the Cash Budget System: The cash budget system has allowed Tanzania to achieve macro stability and increase discipline in budget management. However, the system denies flexibility in terms of informed planning. The cash budget creates a considerable level of stress to the budget, taking no account of lumpiness of expenditure or the ability to implement programs in an environment of uncertain/irregular/delayed funding. Government should explore possible feasible options in dealing with the problem of cash flows. The challenge facing Tanzania is how to move from the cash budget system to a flexible budget system hinged on credible government institutions. There is a need to address issues of budget management stress from the cash-budget system by: (i) revisiting prioritization by type of categories of spending and bringing to fist charge items like utilities and automatic catering and upkeep; (ii) cash flow planning, and (iii) creating a disincentive for accumulation of arrears. 9. Need to Address Weaknesses in the Financial Sector for Poverty Reduction: The financial system in Tanzania is not sufficiently deep, even by the standard of developing countries; so that the impact of financial intermediation on the growth of the economy and poverty reduction is still low. 10. Strengthening Public Financial Management: While the establishment of the IFMS has greatly enhanced the Treasury's capacity in managing Government finances, lack of ownership of the system threatens its sustainability in the long term and makes the system susceptible to potential breakdowns and/or sabotage. More training is needed together with the roll-out of IFMS and enhancing staff motivation of staff in Government generally. 11. Monitoring of Expenditure Impact: As progress is being made in sharpening poverty-focused priorities and expenditure allocations, increased emphasis will need to be paid to the monitoring of the impact of public expenditures. This should include further tracking studies and service delivery surveys as well as participatory monitoring and evaluation. 12. Enhance Transparency and Information on Expenditure Releases to Recipients and Beneficiaries: A key measure to improve accountability for the use of resources is to provide the intended beneficiaries with information about funds made available from the Central Government for specific purposes and beneficiaries. 13. Greater Attention to Local Authorities: It should be ensured that the' public expenditure management process takes reforms under the Local Government Reform Program adequately into account. Providing some form of debt relief to local authorities who are burdened with high levels of arrears and debts should be seriously considered. ix 14. Need to pay Greater Attention to the Close Link Between Poverty and the Environment: There is a realization that poverty and the environment are intricately linked, so that greater attention to this close link deserves greater attention in the poverty reduction drive. 15. Decisive and Immediate Action Needed Against HIV/AIDS: Decisive and immediate action against HIV/AIDS is necessary and should be fully funded by GOT and donors. 16. Continue Mainstreaming of Gender in the Government Budget 17. Implementation of the Pay Reform Requires More Impetus: Progress is being made regarding the Public Service Reform Program. Donors were asked to discontinue Local Cost Compensation (LCC) and support the Selective Accelerated Salary Enhancement (SASE) scheme. CHALLENGES FOR THE FUTURE Overall the government has maintained good progress towards the use of the MTEF as a strategic allocation instrument and has this year turned its focus to adapting the MTEF formulation to the PRSP process. The key challenge is to further strengthen links with Sector Development programs, particularly where these were developed prior to the advent of the PRSP and further improving the costing of realistic requirements (including consistency with absorptive capacity) for achieving poverty reducing outcomes. The core pillar for improving public financial accountability remains the implementation of the Integrated Financial Management System. Very good progress has been made in rolling this out to all central government agencies, which together account for nearly 80 percent of all resources mobilized through the Exchequer. Rolling out the IFMS to all LAs would also go a long way in improving financial management at the sub-national level. This is a challenge that has to be faced by GOT. Results from the expenditure tracking studies and from the participatory CFAA underline the value of making service delivery surveys and expenditure tracking part of a routine annual assessment of the effectiveness of public spending. This is particularly important in view of the growing role of sub- national authorities and local communities in delivering/organizing essential services without adequate capacity and systems for financial management. A long step forward has been an agreement and initial steps to address the vexing problem of tight cash budget and its impact on limiting predictability in expenditure planning. GOT began quarterly releases and commitments for all priority activities since December 2000 and has committed to stay with this practice. GOT has also embarked on a system of cash flow planning and adopted measures for smoothing cash availability. The extension of this practice to non-priority sectors and preventing the build up of new arrears will reduce pressures on cash flow management. The PER process and dialogue seems to be paying off in terms of improving both predictability and flexibility of budgets. A larger proportion of recorded loans and grants is now being provided as budget support and a larger proportion of the external resources are integrated through the Exchequer (including the development budget). There is still a long way to go but progress has been substantial and the dialogue is at least taking place on the same platform. This raises the stakes for improving the integrity of financial management and result-orientation to provide the necessary comfort to make further strides. Finally, it is pertinent that the PER working group learns from past experience and continuously improves the PER process, to ensure that the process significantly contributes to enhancing the government's budget process. x 1. OBJECTIVES, METHODOLOGY AND CONTEXT OF THE FY01 PER 1.1 INTRODUCTION 1.1 This introductory chapter presents the objectives, methodology and context of the Tanzania public expenditure review (PER) FY01. It highlights the sharper poverty focus adopted under the PER FY01 with the advent of the PRSP process and related sector development programs (SDPs). It also explains how the PRSP process influenced (i) strategic resource allocation; (ii) budget flexibility and accountability; and (iii) the development of a poverty focused medium term expenditure framework (MTEF) using the updated and fully costed PRSP targets. The chapter also highlights some special events that had an important impact on public expenditure including: the second multi- party general elections in October 2000, commitment to intensify the fight against HIV/AIDS, ratification of the East African Cooperation (EAC) treaty in July 2000, Tanzania reaching the HIPC decision point in April 2000, and conflict in the neighboring DRC. 1.2 In the context of the government-led annual PER process, the Bank provides support to the process in terms of strengthening the budget management system and the annual independent assessment of budget performance. Donors and other multilateral institutions provide analytic support and some of them routinely join the Bank-led PER main mission to conduct an independent assessment of budget performance and public financial management. In September 2000 the team carried out an identification mission to agree with the government on the prospectuses and implementation schedule of the Economic Sector Work (ESW) program for FY01 as well as action plans and the supervision program for the adjustment lending program. More specifically, the mission consulted with the government and the PER working group (which includes donors, local researchers and civil society) on the prospectus for FYO1 to determine analytical support from the Bank. The objectives and the approach to implementing PER FY01, presented below, were guided by the findings from this identification mission. 1.2 OBJECTIVES As in the previous years, the PER FY01 bad the interrelated twin objectives of (a) providing support to the budget process in Tanzania and (b) carrying out an external review of budget performance. (a) Support for strengthening the budget process and public financial management 1.3 The overall objective was to support the government's effort to improve the quality of its budget preparation and reflect explicitly the strategic public expenditure issues identified in the PRSP. The specific targets were to (i) engender strategic allocation of public resources through prioritization, and ensure that the overall spending program is consistent with maintaining macroeconomic stability; (ii) improve the predictability and integrity of budgets through the consolidation of the MTEF process; and (iii) adapt the PER process to support the implementation of the PRSP and institute pro-poor tracking of expenditure. (b) Assessment of budget performance and arising issues 1.4 As in the previous years, a traditional task of the PER FYO1 was to carry out an independent assessment of budget performance for FY00 and the first quarter of FY01. The specific aims were (i) to assess the consistency of budget allocations with the objectives of poverty reduction and economic growth, (ii) to review the extent to which actual spending corresponds to government plans and budget in terms of both levels and composition of spending; (iii) assess the efficacy of government I spending as evaluated by the Controller and Auditor General and other stakeholders; and (iv) identify the major concerns and issues arising from the reviews for future action. The findings would form the basis for recommendations for improving public financial management. For the FY01 PER, the external review intended to focus on three specific budget management issues: Downward drift of domestic revenue 1.5 A frequently mentioned concern is the downward drift of the revenue effort in the past three years. Previous analysis has focused on factors related to the efficacy of tax administration. The mission planned to investigate more comprehensively the main causes of this drift and specifically focus on the consequences of two phenomena: (i) the impact of past and prospective policy actions ( e.g. tariff compression/liberalization, investment related tax exemptions and privatization); and (ii) the fact that GDP may be expanding faster than the tax base as mining and tourism (enjoying major tax exemptions) dominate the growth process. Dealing with the negative consequences of the cash budget system 1.6 Previous PERs (based on reports from spending units) and an IMF mission report in early 2001 expressed concerns regarding the negative consequences of the rigidity of the cash budget system under which monthly expenditure releases are based on average revenue collection in the preceding three months. These consequences were primarily the unpredictability in expenditure planning and pressures for building up arrears through budget commitments made outside the official system. The FYO1 PER set out to (i) explore the desirability and feasibility of integrating cash flow plans into the MTEF process to provide a better basis for overall cash flow projections and management; (ii) explore with the Ministry of Finance, donors and the Bank of Tanzania the feasible options for bridging intra-year cash flow gaps; and (iii) investigate the most effective and 'durable way for dealing with the problem of accumulating arrears focusing on sources of such commitments and ways for plugging avenues for making commitments outside the system, whereby emphasis would be placed on minimizing the moral hazard problem of bail outs. Financial management at local government level 1.7 The PRSP and a variety of other reports prepared under the Local Government Reform Program emphasize the need for improving financial management at the local government level, as Local Authorities increasingly assume the primary responsibility for the delivery of essential public services. A World Bank study on decentralization in Tanzania further underscored this concern. Building on these reports, the FY01 PER aimed to make an on the ground assessment of the status of the financial management system and review progress in strengthening the system. More specifically, it set out to assess (i) the effectiveness and capacity for the use of a bottom-up approach in expenditure planning by reviewing the expenditure prioritization process and the extent and reasons for variance between requirements and approvals of expenditure; (ii) the frequency and quality of quarterly and annual financial reporting and feedback from supervisors; (iii) the efficacy of the supervisory functions in budgeting and financial reporting/accountability systems of the local authorities. 1.3 METHODOLOGY 1.8 Bank support to the Tanzania PER is provided in the context of the annual PER process, which now has been in place for three years. This process has two overlapping main phases. The first phase focuses on technical work for strengthening budget management and feeds into the preparation of budget frame/MTEF. The second phase combines evaluative work and open consultation on strategic resource allocation, prioritization and budget management issues. 1.9 During the first phase the Bank's contribution was mainly in the form of providing inputs to the Budget Guidelines Committee in setting the budget framework, expenditure ceilings, and broad 2 cross-sector prioritization for the Tanzania FY02 - FY04 MTEF and the budget for FY02. In this respect the Bank team working with others in the PER Working Group, supported work on resource and expenditure projections consistent with the macroeconomic frame agreed with the IMF and with indicative external finance. In this task, emphasis was placed on reviewing progress and providing support to the costing of programs for meeting poverty reduction targets set out in the PRSP. It is important to note that at this analytic stage the PER process leverages substantial professional and financial resources from donors and other stakeholders. 1.10 In phase two of the PER process for FY01, the Bank's main contribution was to lead the independent external evaluation (PER main mission) to (a) assess the consistency of budgetary allocations with growth and poverty reduction objectives, (b) review the extent to which actual spending corresponds to government plans and budgets in terms of both levels and the composition of spending, (c) assess the efficacy of central and local government budget management, (d) review the poverty-focus of the MTEF in line with the PRSP targets, (e) evaluate the openness of the budget process to consultation with all stakeholders, and (f) identify major concerns and issues (both cross- sectoral and sector-specific) in the area of public expenditure management. The findings from this review and other analytic evaluative studies, e.g. expenditure tracking and budget sustainability assessment, are coalesced into papers for discussion during the annual PER consultative meeting during which, the government conducts an open review of past performance and its plans for the future. The open review involves a wide range of participants including the press, parliamentary committees, civil society, donors, government at all levels, the private sector and researchers. 1.4 THE CONTEXT Initial poverty reduction efforts 1.11 Poverty reduction has been a key policy objective in Tanzania since Independence. During the 1970s and 1980s, under the socialist regime, poverty eradication was embraced as the main goal of development. The strategy adopted comprised income distribution and high aid intensity to support public spending programs on social services. This strategy yielded significant improvements in human development indicators. However, the strategy did not give due emphasis to economic growth. As a result these achievements could not be sustained as requirements for maintenance and operation of the largely-foreign-funded capacity expansion programs by far exceeded growth in the domestic resource base. Pre-PRSP poverty reduction initiatives 1.12 More recent efforts to tackle poverty predate the PRSP. The following initiatives were most prominent in preparing the ground for the PRSP: (i) The National Development Vision 2025, set the national aspirations and the way to attain a middle-income status by 2025. (ii) The National Poverty Eradication Strategy (NPES) set out objectives, indicators and targets for eradicating abject poverty by 2010. (iii) Sector-wide programs (SWAPs) beginning with one for the health sector, aimed to facilitate prioritization, improved resource allocation, improved aid coordination and national ownership of the development programs. (iv) The Tanzania Assistance Strategy (TAS) is a medium- term strategy encompassing joint efforts of the government and the international community, a partnership approach with enhanced Tanzanian ownership of her development agenda, and enhanced transparency in the conduct and application of aid, with a view to increasing the effectiveness of aid for poverty reduction. (v) The PER process focused on evaluating and supporting the development of strategic public expenditure allocation and monitoring through the medium-term expenditure framework (MTEF). The process emphasized the impact of public expenditures on poverty reduction, bringing the review of the integrity and effectiveness of public spending into the public domain, and enhancing the efficacy of public service delivery. (vi) The Local Government Reform Program (LGRP) devolves the responsibility and the means for the delivery of basic social and 3 infrastructure services to the local level in order to achieve greater efficiency and accountability in service delivery and to empower local communities. Advent of the PRSP and sharper poverty focus 1.13 While the PRSP is complementary to the earlier initiatives, it attempts to address the tension between what the sector programs consider to be ideal and what can realistically be achieved. The PRSP stresses that the policy menu should be limited and priorities should be highly focused on poverty reduction. While the PRSP is based on a long-term perspective, reflected in the National Vision 2025 and the National Poverty Eradication Strategy, it has translated long-term goals into annual monitorable targets covering a three-year horizon in the framework of the MTEF. There are several important aspects to the development of this framework in Tanzania: * First, the MTEF embodies a strategic approach to public expenditure allocation according to defined priorities and ensures consistency with macroeconomic stability necessary for sustained growth. In Tanzania, the MTEF, which predates the PRSP, is the basis for applying the strategic resource allocation approach in the annual budgeting process. * Second, as limited public resources (both domestic and external) are expected to play a pivotal role in financing the poverty reduction strategy, the planning framework, notably the sector-wide programs, are being brought under the discipline of the overall hard budget constraint. Furthermore, the preparation of sector programs takes into account human and institutional capacity limitations. * Third, the evaluation of the implementation of the PRSP will incorporate an assessment of the impact of actions taken. This builds on the experience from the past two years when, under the Multilateral Debt Fund facility (MDF), prioritization and protection of social sectors in public spending was monitored on a quarterly basis. The MTEF and the budget provided the benchmarks for evaluation. The MDF has now been transformed into Poverty Reduction Budget Support (PRBS), as Tanzania has qualified for debt relief under the enhanced HIPC initiative. However, monitoring mechanisms developed under the MDF will continue to play a central role under new budget support mechanisms such as the PRBS or the Bank's planned Poverty Reduction Support Credit. * Fourth, the existing sector-wide programs will be recast and new ones developed guided by priorities defined by the national poverty reduction strategy. The PRSP targets serve as a guide in the medium term and the NESP for longer term targets and objectives. In this approach, the PRSP sets the framework for other development programs, while it is also a product of those plans. Given the hard budget constraint, the most appropriate framework for ensuring consistency between SWAPs and the PRS targets is the MTEF/PER process. * While the implementation of the PRSP envisages a shift in focus from input to results/impact orientation, the ability to carry out the needed analytical work is uneven across sectors and across levels of government. In this context, strengthening capacity is critical. Judging from the work that has been carried out on the various sector strategies, the desired financing of the programs far exceeds the levels consistent with the available and projected resource envelope. This underpins the necessity to make a further distinction between "priority" poverty reducing expenditures, to be covered under the government budget, and "other" expenditures to be funded as additional resources become available, resources from the private sector and self-generated funds. In this regard, the government of Tanzania has continued to urge development partners to channel most of their financial assistance through the budget to facilitate the planning and prioritization of the poverty reduction program, and simplify aid disbursement procedures and thereby foster government budget flexibility and accountability. 4 1.5 SPECIAL EVENTS THAT INFLUENCED PUBLIC EXPENDITURE DURING FY01 2000 General elections 1.14 The FY01 PER and budget took into account the government's commitments and expectations. One major commitment was that of financing the second multi-party general elections which combined Presidential, Parliamentary and civic elections in October 2000. The government allocated Tshs.45.8 billion to cater for activities like registration of voters, preparation of polling stations and voting materials, and allowances for election officers. Interim HIPC relief 1.15 The preparation of the budget for FY01 and the related MTEF took into account the availability of interim HIPC debt relief following the Tanzania reaching the decision point in April 2000. This enabled the government to enhance outlays (in real terms) to the priority sectors so as to improve the provision of social services which have a direct bearing on the living standard and capabilities of the poor. In this regard, the exercise of firming up the macro frame under the PER FY01 process involved the development of a high case scenario to take into account additional resource projections from the enhanced HIPC debt relief. Full PRSP 1.16 The government prepared a PRSP to address poverty issues in the context of the enhanced HIPC initiative. The process of preparing the PRSP had important expenditure implications during FY01, considering that the PRSP was to be generated through a participatory process which necessitated among others, conducting several zonal and national workshops to canvass views from all stakeholders including central and local governments, the private sector, NGOs, cooperative societies, and faith groups so as to arrive at a national consensus. The PRSP also set targets for poverty reduction in the medium term, necessitating a re-benchmarking of the MTEF after fully costing the means for achieving the targets. Commitment to intensify the fight against HIVIAIDS 1.17 One of the major thrusts of the FY01 budget was to reduce the spread of the HIV/AIDS pandemic. Consequently, in order to give HIV/AIDS the necessary attention in government expenditure programs, each ministry, department and region was required to allocate funds for this activity under the MTEF. In addition, the PER working group commissioned a study whose main objective was to develop an MTEF for a multi-sectoral HIV/AIDS response. Other events 1.18 Other events that influenced public expenditure during FY01 include the ratification of the East African Cooperation (EAC) treaty in July 2000, the preparation of the first medium term plan for the implementation of the National Development Vision 2025 and continued civil conflict in the neighboring Democratic Republic of Congo (DRC), Burundi and Rwanda. 5 2. EVALUATION OF THE TANZANIA PER PROCESS SINCE FY98 2.1 THE PER PROCESS IN RETROSPECT Introduction 2.1 Since FY98, the government of Tanzania working in partnership with the World Bank, other development partners/donors and local stakeholders, has undertaken PERs, which have greatly influenced pertinent public policy formulation and budget management. This chapter outlines the evolution of a participatory PER process in Tanzania adopted since FY98 to assess the usefulness of the PER and the associated MTEF process in terms of improving the quality of budget management and policy making. The assessment begins with an evaluation of the PER process, in the light of the context and objectives discussed in Chapter 1, and taking a retrospective look at the previous PER in terms of process as well as results. The focus then turns to the FYO1 PER, covering the adoption and deepening of the PER and MTEF process; supportive technical & sector studies (including a synopsis of content); policy pressure from the PER working group (WG) on foreign resources disclosure and inclusion into the GOT budget; poverty focus of PER FY01 taking into account the context and key events; and analytic support provided. The evaluation is also cast in terms of issues raised, progress made to date regarding flexibility, predictability and budget accountability; and with respect to translating the MTEF into the budget. Finally the chapter draws up some important lessons to inform the future PER process. 2.2 Objectives and Organizational Framework: Prior to 1998 the PER was largely external to the Tanzanian government and most stakeholders. Besides not being effectively coordinated with government processes, local ownership was also weak and as a result, the whole exercise had minimal impact. The new PER approach adopted since 1998 in Tanzania has had four main strategic and operational objectives. First, over the past three years the PER process has focused on strengthening public accountability systems and on entrenching the participatory culture in assessing management and operational efficiency of budgets through primarily opening up the PER process to the public under the leadership of the government, and retaining the component of "external (to government) evaluation of budget performance" as a key feedback/peer review mechanism to the government. The second main purpose has been to encourage the adoption of a strategic approach to allocation of public resources through prioritization, and ensuring that the overall spending program is consistent with maintaining macroeconomic stability. The third objective has been to improve the predictability and integrity of budgets through the adoption of a medium term horizon in expenditure allocation, and the integration of sector programs as well as external finance into the MTEF. The fourth major objective has been to strengthen the institutional, legal and personnel capacity for improved budget management and effectiveness of public spending. More recently (beginning FY 01), the PER has evolved a step further to take on board poverty concerns as the overriding objective. 2.3 The Process: In Tanzania the PER has now been adopted as the main routine instrument for annual open review of budget performance and identifying critical strategic issues for improving efficacy of public spending programs. The medium term approach to strategic allocation, priority setting, and integration of sector programs into the overall budget frame have become increasingly routine. The two-phase approach to the process that was introduced in 1998 has been retained. The first phase focuses on technical work for strengthening budget management and feeding into the 6 preparation of the budget frame/MTEF. The second phase combines evaluative work and open consultation on strategic resource allocation, prioritization and budget management issues. The PER Working Group (WG), chaired by the GoT and involving sector representatives, donors, researchers, civil society and private sector, is the focal organizational point for the process. It meets once every fortnight and is responsible for managing the whole process. 2.4 The annual process begins with the approval of the prospectus (by the WG) for the year's PER process (August/September) taking into account lessons from the previous year. The WG then commissions and organizes finance as well as peer review for the technical studies (September - February/March); provides inputs to the Budget Guidelines Committee based on studies, analysis by its own Macro Group and external review of performance (conducted in a World Bank-led donor mission) (December/January); facilitates the preparation of cross-sector and sector MTEFs using outputs from technical studies (February-April); and organizes an open review (PER consultative meeting) in May to review strategic prioritization and budget management issues. The open review involves a wide range of participants including the press, parliamentary committees, civil society, donors, government at all levels, the private sector and researchers. The meeting is co-chaired by the Permanent Secretary Ministry of Finance and the World Bank Country Director. The WG then sees to the preparation of the PER report incorporating suggestions/views from the open review meeting. It is important to note that the PER leverages substantial professional and financial resources from donors and other stakeholders. The two-phase PER process followed in Tanzania has had the advantage of providing constant feedback from one phase to another as well as informing decision making throughout the budget cycle. 2.2 FY01 PER 2.5 The PER process for FY01 was initiated in early September with the first meeting of the PER working group (WG). The WG continued to be chaired by the Deputy Permanent Secretary (DPS), Ministry of Finance (MOF). The composition of the WG expanded compared to the previous PER cycle and now draws members from a broad range of stakeholders including the central and local government, bilateral and multilateral donors, research and academic institutions, private sector, civil society and NGOs. The key tasks of the WG included (i) drawing-up the prospectus of PER FY01 and MTEF work for the year; (ii) reviewing the terms of reference for the sector PER FY00 update work and supportive technical studies; (iii) peer-reviewing of all the interim or inception reports; (iv) soliciting and consolidating projected donor disbursements for purposes of firming-up the budget frame numbers; (v) wider dissemination of the major outputs of the PER process by members of the WG to their constituencies through regular briefings, sector working groups, seminars and workshops; and (vi) performing the oversight function over the PER process. 2.6 The WG has a macro sub-group and several sector working groups. During FY01, the macro sub-group was chaired by the Deputy Permanent Secretary - Ministry of Finance, while during the previous PERs it was chaired by a representative from the Netherlands Embassy. Other members of the macro sub-group from the government side included the Commissioner for Budget, Commissioner for Policy Analysis, Commissioner for External Finance, a representative from the President's Office - Planning and Privatization, and the Bank of Tanzania. Non-government members are drawn from the World Bank, IMF, European Commission, UNDP, UNICEF, DFID, SDC, CIDA, Norway, Sweden, Denmark, The Netherlands and, JICA/Japan. Key tasks performed by the macro sub-group during FY01 include preparation of the terms of reference and peer-review of two studies on overall budget sustainability; commenting on the draft Budget Guidelines regarding omissions and concerns before Cabinet approval; soliciting indications of external support over the MTEF period (by donor, sector, on/off exchequer, and project/program); developing guidelines for the full costing of the requirements to meet PRSP targets and checking for consistency of the numbers with respect to commitments made in the PRSP; and developing the structure and presentational formats of MTEFs for the PER consultative meeting. 7 2.7 The sector working groups are largely made up of officials of planning departments in the priority sector ministries. Besides their routine functions and participation in the broader WG, the sector groups are also responsible for working (alone or in collaboration with consultants) on the PER update for their respective sectors and the preparation of the sector MTEFs using the sector PER as the main input. The sector working groups also play the crucial role of disseminating the major findings and recommendations of the PER to senior sector ministry officials and stakeholders. 2.8 Financial support for the activities implemented during FY01 was provided by donors who are members of the WG as shown in the table below: Table 2.1: Studies and activities carried out under the FY01 PER STUDY/ACTIVITY FINANCIER CONSULTANT 01 Budget sustainability DFID EME (UK) & Oxford University 02 Tracking Expenditure UNDP ESRF/REPOA 03 Local Government Indebtedness EU REPOA 04 Background Study - Lands Denmark DOE IUCLAS - UDSM 05 PER Update - Education Sweden OPM 06 PER Update - Health SDC IHSD - UK 07 PER Update - Trunk & Regional Roads Norway COWI Consult / PWC 08 PER Update - District Roads SDC DOE/UDSM 09 PER Update - Agriculture Denmark ESRF 10 PER Update - Justice Denmark ERB/UDSM 11 PER Update - Water JICA ESRF 12 PER Study on HIV/AIDS Norway PSI/MUCHS 13 Cross-sector MTEF MOF & Macro Group 14 Preparation of PER FY00 Report. World Bank MOF/PER Secretariat 15 PER Main Mission WB, SDC, DFID, Denmark, UNDP & Norway 16 PER Secretariat World Bank 2.9 To ensure sustainability, most of the studies were commissioned by the WG to local consultants who then worked closely with the sector groups in all the priority sectors (partly as an instrument to build local capacity). Review of the supportive technical and sector studies: (i) Fiscal aggregates study: The main objectives of this study were to: (a) review fiscal sustainability in the light of recent decisions on debt relief and projected new flows as an extension of the fiscal policy and the macroeconomic context study done during the FY00 PER; (b) clarify the constraints arising from the cash budget system and the possibility of accommodating a small deficit to allow for flexibility in expenditure (i.e., what level of deficit could be pursued as a matter of policy?); (c) take the estimates of financing requirements for priority sectors and analyze the macro consequences of fully funding these levels of expenditures from various funding options; and (d) undertake a study on Tanzania's revenue potential paying attention to policy handles which link directly to revenue performance. This study has been very instrumental in suggesting fiscal policies that would pay greater attention to the funding needs of priority sectors while ensuring consistency of the target fiscal deficit with the key objective of macro-economic stability. In previous years, significant tensions have developed as government was running budget surpluses concurrent with widespread under-funding of basic social services. The fiscal aggregates work was also a key input into the full costing of PRSP targets as well as in the preparation of the FY02 budget paper fer-Cabinet approval. (ii) Support to improve donor coordination and integration of aid into the budget: The PER working group solicited disclosure of and compiled external resource projections (using a questionnaire) to feed into the firming-up of donor support for the medium term FY02 - FY04. The numbers were then re-confirmed independently by the External Finance Department in the Ministry of Finance prior to incorporation into the budget frame. This exercise, which was an update of the work began during the PER FY00, aimed at addressing the problem of a large share of external resources (70%) passing outside the Exchequer system, which in turn leads to a lack of ownership and limited coherence between public expenditure and donor assistance. In particular, the undertaking was geared to get a 8 better feel of the development resource envelope, in order to integrate the development budget into the whole resource envelope rather than treating it as a residual. (iii) Tracking expenditure allocation and its effectiveness in reducing poverty: Considering that the government of Tanzania has targeted its allocation of resources to poverty reducing activities/sectors under the PRSP, under the PER FY01 a study was implemented to track such expenditures to ascertain whether they reach service delivery units and have the expected impact in terms of improved service delivery and poverty reduction. The overall aim of the study was to assess the efficacy of pro-poor budget execution, focussing on primary education and health care. The study entailed a review of government disbursements and of the flow of materials and supplies, as well as reporting systems. The field survey covered the central government (ministries of finance, education, health, water and regional administration and local government), five local authorities (Babati, Kisarawe and Dodoma rural councils and Mtwara and Kigoma urban councils) and service units. (iv) PER FY00 update work, costing of PRSP Targets and development of MTEFs: The WG provided support to the government in preparing seven sector MTEFs for the priority sectors (education, health, water, roads, agriculture, the judiciary, and lands) and the cross-sector MTEF. The work involved oversight and peer review of sector PER update work on priority expenditure needs and priorities right from the terms of reference to the final reports to feed into the development of improved sector MTEFs and the budget for FY02. In addition, the PER FY01 process focused particularly on poverty reduction. As part of the PER update work, the WG also prepared generic guidelines to be used by sectors and consultants to prepare full costing of priority sector requirements in four steps: Step 1: Identification of targets for the medium term (2001/02 -2003/04) from the PRSP for the priority sectors and activities (health, education, water, rural roads, agriculture, judiciary and HIV/AIDS). Step 2: Estimation of the requirements for meeting the targets and costs of implementing the action programs identified in the PRSP using projected /updated unit costs. Step 3: Generation of scenarios for achieving the targets subject to the projected resource constraint (per Budget Guidelines and with additional 10 percent increase in the resource envelope) and implementation capacity constraints, while pointing out the assumptions and trade-offs (including efficiency gains) involved in the different scenarios. In assessing the scenarios, sectors were asked to spell out clearly what the government of Tanzania would need in the light of what other players (private sector, NGOs, religious institutions etc.) are doing/providing and, additional resources required to meet the optimal levels of service provision. Step 4: Recommendation on the optimum expenditure frame and any suggestions for revisiting timing and phasing of activities; and identify resource and capacity gaps for achieving the most desired long term scenario. The first round of checking for consistency of the full costing requirements with the overall resource envelope, and recommendations on any additional financing strategies were subsequently done at the aggregation stage during the preparation of the cross-sector MTEF. (v) Study on HIV/AIDS: This study addressed issues related to effective financing of HIV/AIDS activities by different sectors and organizations in Tanzania. The study covered the experience of financing HIV/AIDS activities during FY01 with the view to propose improved mechanisms for the effective financing of HIV/AIDS activities and effective ways of disbursing, utilization and accounting of resources and funds according to government budgetary standards. The study also developed an MTEF for the multi-sectoral HIV/AIDS response and made recommendations on strengthening planning and budgeting of HIV/AIDS in the context of the future MTEF rounds. (vi) Study on local authorities indebtedness: In many local authorities (LAs) the financial requirements to meet their operational requirements far exceed the resources available. This has contributed to the build-up of arrears with private suppliers, staff and statutory bodies. It is believed that this build up of "debts" militates against the ability of LAs to provide better services to the local population. The objective of this study therefore was to examine the current level of indebtedness of 9 local government authorities and their material effects on councils' operations. The study also considered the longer term aspects of LAs viability and sustainability, including possibilities of debt relief, grants for disadvantaged areas, revenue sharing between the center and LAs, and workable measures for stimulating and providing enabling conditions for expanded local activity. (vii) External evaluation of budget performance: This is a yearly exercise which is undertaken by donors led by the World Bank. It is a standard output of the annual PER. The major objectives of the FY01 external evaluation exercise were to undertake a review of budget performance including: (i) an analysis of the extent to which actual spending corresponds to government plans and budget in terms of both levels and composition of spending; (ii) an assessment of the efficacy of government spending; (iii) the identification of the major concerns and issues in the area of public expenditure management; (iv) an review the poverty focus of the MTEF in line with the poverty reduction paper (PRSP) targets; and (v) an assessment of the budget and financial management capacity and constraints in local governments. 2.3 ACHIEVEMENTS OF THE PER/MTEF PROCESS 2.10 Although it is difficult to establish a direct causal link between improvements in public finance management and the PER process, it is nonetheless acknowledged that significant improvements have taken place in a number of areas which have been a central focus of the PER process. In general, the government owned and led PER/MTEF process, which is highly participatory and transparent, has become a key instrument to inform decision making and priority setting on important budget issues. Specific achievements include: * Improved prioritization and progressively increasing funding for the priority sectors: Recommendations derived from the PER work have guided strategic resource allocation. Consequently, the share of total spending on priority sectors (dominated by the social sectors) as well as allocations to expenditures on operations and maintenance or other charges (OC) have increased significantly over the last three years compared to before. There has also been a significant re-orientation both in terms of allocation and outturn of development spending towards the social sectors, regions and local governments. * Improved strategic resource allocation through the adoption of an MTEF approach: The government has maintained good progress towards the use of the MTEF as a strategic allocation instrument over the last two years and is now turning its focus to adapting the MTEF formulation to the PRSP process. Strategic resource allocation has benefited from the feedback provided through the PER process and the greater transparency and openness in the budget process that were facilitated through the PER process. * Strengthening of budget management systems and institutions: Expenditure planning, execution and control has improved significantly through the adoption of the MTEF, implementation of IFMS and enactment of the Public Finance Act 2001 and the Public Procurement Act 2001. The PER process has been used as one of the instruments to follow- up implementation and roll-out of IFMS to all ministries, regions and local authorities. * Flexibility, predictability and budget accountability: There has been significant improvement in the predictability and availability of funds for OC and development expenditure compared to previous years. The discrepancy between budget allocations and actual expenditures has narrowed down. This is the result of various factors, including more realistic budget projections, better expenditure estimates, and a broader consensus on expenditure priorities which reduced the need for post-budget reallocations. In response to the policy dialogue conducted under the PER, government has commitment and implemented a three months expenditure commitment system and quarterly releases of OC to all priority sectors since December 2000. In addition government has began to publish all allocations in the news media by ministry, local authority and for the key priority sectors. 10 * Overall fiscal sustainability: The PER process has broadened the discussion on fiscal stability through analytical work that outlines an expanded range of fiscal policies that are consistent with overall fiscal sustainability. As a consequence, the policy dialogue has now evolved from focusing on simple deficit targets to a more complex framework that tries to reconcile funding requirements for basic social services under the PRSP with the objective of maintaining fiscal stability. * Poverty focus of public expenditures: Analytical work done under the PER has highlighted the point that government expenditures have a significant impact on poverty reduction and hence the need to make improvements in the quality of expenditure a government priority. In this regard, the PER process has provided important inputs for the design, update and monitoring of the Tanzania PRSP, which has become the national framework for implementing poverty reduction measures and a benchmark document for prioritizing expenditures. * The PERIMTEF process as a coordinating tool for various other initiatives: The PER/MTEF process is now widely regarded as the main framework for coordinating and harmonizing other initiatives including PRSP, Country Financial Accountability Assessment (CFAA), and Sector Development Programs (SDPs). The PER/ MTEF process has also given more impetus to the Poverty Reduction Budget Support (PRBS) approach as an instrument to ensure that adequate resources are allocated to priority sectors through the budget in support of the poverty reduction strategy. * Improved information flow and aid coordination: The opening up of the budget process through the PER process has led to improved information flows between Treasury, sectoral ministries, donors, and other stakeholders. Furthermore, improvements in foreign resource disclosure and reporting on aid flows under the PER process have considerably strengthened the information base for government budgeting. The PER process and measures to improve budget management have also improved donor confidence and motivated a greater share of donor assistance provided in the form of budget support or channeled through the budget, thus limiting transaction cost and enhancing government ownership. In that regard, the MTEF process associated with the PER now offers an instrument for aid coordination and for ensuring consistency with macroeconomic stability. The influence of the PER in shaping recent macroeconomic developments is significant. For example, once the foreign resource projections were agreed to by the WG, the Ministry of Finance adopted the numbers as indicative resource flows to Tanzania. These were re-confirmed with individual donors after making some corrections for marginal errors based on past experience. The government also used the information generated by the PER process to counter-check the authenticity of development budget data on donor project finance expected by ministries and local authorities. Similarly, in firming-up the FY02 budget around May 2001, the government made adjustments to overall sector allocations as per budget guidelines to take into account not only the latest information available then but also full costing of PRSP requirements done under the PER. * Consolidation and deepening of the PER/MTEF process: The PER has now been adopted as the main routine instrument for annual open review of budget performance and identifying critical strategic issues for improving efficacy of public spending programs. The medium term approach to strategic allocation, priority setting, and integration of sector programs into the overall budget frame have become increasingly routine. * Bringing systemic fiscal issues into the domain of public policy discussions: The analytic work undertaken under the PER/MTEF process has been instrumental in raising pertinent systemic fiscal issues for attention by the authorities and suggesting feasible options for their resolution. Some examples include improvements in cash budget management and tackling the problem of arrears as a result of recommendations from the PER process in favor of front- loading of donor budgetary support to ease cash flow constraints, use of bridging finance and 11 preparation of forecasts of cash flow requirements by spending units. The analytic work has also been very useful in terms of revealing malpractices and weaknesses in budget management including short-term borrowing from from the road toll account for other uses; problems with accounting and disbursement of funds from the health basket fund; inadequacy of financing the road program from the Road Fund alone; potential undermining of strategic resource allocation through the mushrooming of earmarking of revenue; the plight of the development budget; and multiplicity of donor financing mechanisms * Focus on the status of budget and financial management in local governments: As part of the external evaluative function of the PER FY00 and FY01, an on the ground assessment was made of the status of the budgeting process and management in LAs, problems and weaknesses, as well as efforts underway to strengthen them. The findings of this work have been instrumental in bringing the local government reform issues on the table for policy discussion and to help in charting out the way forward. Work was also done to assess the gravity of local authority debts and to come-up with suggestions on how to help highly indebted LAs while avoiding contraction of new debts. 2.4 OUTSTANDING BUDGET ISSUES AND CHALLENGES FOR FUTURE PERs * Poor accounting and reporting of donor finance: In spite of the improvements made under the PER with respect to the reporting of projected donor finance over the last two years, the accounting and reporting of donor finance remains far from satisfactory. Continued dialogue under the PER process, together with improvements in financial management, governance more broadly, and accountability are key in resolving this problem * Low operational efficiency: The continuing problem of low operational efficiency in public spending mainly due to: (a) gross under-funding, partly reflected in continued variance between budgets and actual expenditures, leading to constraints in prioritized service delivery - the problem is more acute for maintenance as investment programs appear to face a softer financing constraint; (b) low predictability of resource availability partly constraining application of the performance budget; (c) personnel incentive problems as civil service pay has declined in real terms over the past three years which underlines the urgency of dealing with affordability and financing constraints to the implementation of the Medium Term Pay Reform (MTPR); and (d) continued weakness in financial accountability as brought out in the CAG reports particularly regarding accounts of regions and local authorities. * Weaknesses in financial management: There remain weaknesses in financial management and the related institutional framework. These include: incomplete roll-out of IFMS particularly to the regions and LAs which limits coverage, timeliness, and cohesion of financial reporting; disconnect between the central and local government financial reporting system despite large budget subventions to LAs and major responsibilities for basic service delivery; and the yet to be implemented link between IFMS and MTEF using the multi-year budget module in the EPICOR; as well as poor donor coordination. * Capacity constraints: Low capacity particularly at the sector level and at the regional and district levels remain as critical constraints in improving budget formulation, implementation and reporting at those levels. Weaknesses in the preparation of full costing of PRSP targets and sector MTEFs as well as poor budgets of most local authorities were largely the result of limited capacity and poor work incentives. This requires making an assessment of absorptive capacity at the relevant levels and working out systematic capacity building / training programs in budget management while revisiting the role of external consultants in the process. * Limited dissemination and follow-up of PER findings: Although the PER/MTEF process has produced a good number of reports/findings and recommendations, the follow-up mechanism 12 is still lacking and needs to be worked out. Possible considerations include MOF issuing directives to implementing agencies to provide formal responses and follow-up actions during the PER consultations. The PER technical studies could also include a summary of main conclusions and policy implications for wider distribution to the general public, policy makers, local authorities, Parliament and civil society. * Phased-extension of the PER/MTEF process to lower levels of government and Zanzibar: So far the PER/MTEF process has not covered Zanzibar and it would be important to explore the feasibility of expanding the PER process to Zanzibar and work out how this should be done. Aanalogously, a phased-extension of the PER/MTEF process to lower levels of government is needed, particularly in view of the government's firm decision to devolve more powers and decision making to the LAs as the main arm of the government which provides basic social services to the population. In the interim, this calls for broader participation of LA officials (District Executive Directors, District Treasurers, Association of Local Authorities of Tanzania (ALAT) etc.) in the PER process. * Corruption: The fight against corruption needs to be intensified, particularly in infrastructure investment and social service delivery. * Fight against HIV/AIDS: Decisive and immediate action is needed against the HIV/AIDS pandemic. * Other challenges: Other challenges that need to be addressed include: the continued problem of poor revenue performance; development of improved forecasts of cash requirements by spending units; the need to conduct regular or formalized service delivery and expenditure tracking surveys or benefit-incidence studies; and the need to pay greater attention to the link between poverty and the environment. 2.5 SOME LESSONS FOR THE FUTURE * Maintaining macroeconomic stability is key: Macroeconomic stability is key for increasing growth and reducing poverty. Thus it is extremely important that the macro-economic gains achieved so far in Tanzania are sustained. However, in addition, it needs to be ensured that such gains are translated into poverty reduction. In order to realize growth which benefits the poor, sustained growth in agriculture and investment in basic social services and rural infrastructure is paramount. * Timing of the PER activities to dovetail well with the budget cycle: The work program of the subsequent PERs should be developed and discussed early in the PER cycle (July/August) so as to establish clear objectives and facilitate the development of the terms of reference for the analytic work in support of the process and subsequent preparation of the reports and MTEFs. * Strong leadership and ownership of the process by the government and participation by all stakeholders: Strong leadership and ownership of a participatory PER process by the government (central & local government and sector working groups) is fundamental for the process to have significant impact. * Stronger role for the civil society: Civil society has a very important role to play, particularly in monitoring government performance. * Transparency in resource allocation and disbursements: If resources are to reach the poor and have impact it is necessary to safeguard transparency in both resource allocation and disbursement. Thus, the intended beneficiaries need to be provided with information about funds made available from the central government. 13 * Monitoring the impact of public expenditure: As progress is being made in sharpening poverty focused priorities and expenditure allocations, it becomes imperative to pay greater attention to monitoring the impact of public expenditure in terms of poverty reduction and social service delivery. This calls for the need to make social service delivery surveys and expenditure tracking part of a routine annual assessment of effectiveness in public expenditure. 14 3. REVIEW OF RECENT MACRO PERFORMANCE 3.1 OVERALL ECONOMIC PERFORMANCE 3.1 Tanzania's overall economic performance in recent years has remained robust. The country is largely on track with regard to meeting macroeconomic objectives and targets of the Poverty Reduction and Growth Facility (PRGF). GDP growth in the last three years has been steadily rising, estimated at 4.9 percent in 2000 compared to 4.8 percent in 1999 and 4.0 percent in 1998, led by strong performance in exports, increased gold production and investment in tourism. The rate of inflation has fallen significantly, reaching single digit in 1999 driven by a decline in both food and non-food inflation rates from the last quarter of 2000. In June 2001 the annual headline inflation rate was recorded at 5.1 percent. Sustained donor support and adherence to the cash budget management system has ensured a modest fiscal surplus (after grants) amounting to about 1% of GDP in FY01. These achievements partly reflect the government's continued efforts at laying the foundation of a modern, diversified economy through accelerated implementation of structural reforms aimed at removing the remaining constraints for private investors, increasing the efficiency of the economy and creating an environment for private sector led growth. Although private sector growth, beyond mining and tourism, has been slow in responding to the liberalization, and the inflation rate remains above that of Tanzania's principal trading partners, the Finance Bill for FY02 has included measures geared to support a continuation of Tanzania's strong macroeconomic performance in FY02 and beyond. 3.2 FISCAL DEVELOPMENTS 3.2 The objective of fiscal discipline and macro economic stability has continued to dominate government budgetary developments. In general, fiscal developments have been encouraging. The fiscal balance improved during FY98 and FY99 recording budget surpluses (0.2 to 0.4 percent of GDP, after grants). In FY00 the deficit after grants was estimated to be around 0.5 percent of GDP. In FY01 the tax revenue collected have been 6 percent higher than target and expenditures remained below the target despite the elections of October 2000. The fiscal surplus for FYO1 is expected to be about 1 percent of GDP. The budget for FYO1 included further steps in the ongoing tax reform, including introduction of VAT on petroleum products and the elimination of government exemptions on VAT. The budget for FY02 also shows that implementation of all priority spending programs and locally financed development spending will continue as budgeted. However, although there was substantial repayment of budgetary arrears from previous years, continuing weaknesses in public spending control led to some new arrears. 3.3 In the areas of financial management and accountability, government has rolled out the computerized integrated financial management system (IFMS) to all ministries and all sub-treasuries. All the ministries are on line in a centralized IFMS using the EPICOR software. Effective July 2001, the central government expenditure controls are being implemented using IFMS, both against the exchequer issues and the budget allocations. All payments and reconciliation by Bank of Tanzania are now done centrally. Similarly, 19 sub-treasuries are also using IFMS based on stand alone servers and the EPICOR software. The national budget for FY02 was also prepared in IFMS. 3.4 During FY00 Tanzania also made significant strides in improving its external debt management and qualified for the HIPC interim assistance and Paris Club VI debt rescheduling. The government is on track for reaching the Completion Point during the latter part of 2001 under the enhanced HIPC initiative. Significant steps have also been taken to deal with its domestic debt particularly by reducing government arrears with the private sector and private external commercial debt. As a result of the HIPC debt relief, the EIU forecasts that Tanzania's total external debt will 15 decline from US$7.4 billion in 2000 to US$5.8 billion in 2002, while the debt-service ratio will fall from 18.8% to 12.0% over the same period. 3.3 MONETARY DEVELOPMENTS 3.5 Tanzania's monetary policy has continued to aim at a low rate of inflation, with remarkable achievement in terms of lowering inflation to single-digit level even against a backdrop of higher oil prices. However, data on monetary developments indicate that broad money supply (M3) increased during FY00 by 21.7 % compared to FY99 mainly due to a significant increase in net foreign assets (NFA) in the Central Bank and commercial banks. The increase of NFA by 49.8% in FY00 compared to only15.1% in FY99 largely reflect an increase in foreign investment activities, donor flows and earnings from tourism as well as purchase of foreign exchange by the Bank of Tanzania on the Inter-bank Foreign Exchange Market (IFEM). Although the developments in M3 have to some extent contributed to the recent improvements in the balance of payments, higher NFA has not served to build import capacity except for the component earned from tourism. Furthermore, this development has generated an exogenous pressure on monetary expansion which needs to be managed to ensure competitiveness of the Tanzania shilling at a time of sustained donor inflows so as to smooth any sharp falls in the exchange rate. A related problem concerns the fact that the ratio of M3 to GDP has continued to decline, leaving excess liquidity in the banking system when the private sector remains starved of credit. Trends in interest rates have not changed much over the last two years. The spread between lending and deposit rates continue to be high and widening, indicating lack of competitiveness in the banking sector and high interest risks of repayment/default. As regards financial services in the economy, the rural sector remains deprived of financial services with most of the private banks operating only in a few urban centers. During FY00 commercial bank credit to various sectors increased by only 10.9 percent compared to 40.3 percent for the preceding year. The major beneficiaries of credit included trade, mining and manufacturing sectors. Nevertheless credit extended to the productive sector remains low and declining and thereby acts as an impediment to growth. In particular, although overall credit to agriculture showed a slight increase during FY00, the amount directed to the purchase of agricultural products continued to decline following the liberalization of crop marketing and the decision by the government to stop providing guarantees on commercial bank credit to cooperative unions. 3.4 EXTERNAL SECTOR DEVELOPMENTS 3.6 In the external sector the export performance has been strong, specially due to the start of the gold exports and resumption of fish exports to the European Union following lifting of the ban on such exports in 2000. Exports of merchandise goods increased by 21.9% in 2000 over the 1999 earnings of US$543.3. Exports of services also increased by 2.6% over the same period. The exchange rate depreciated by about 6 percent during the end of January-February, 2001, mainly a market corrective response to a strong US$ but has remained stable since then around T.Sh.890 per U.S. dollar. Despite sharply lower international prices for most traditional products, exports grew and the external position improved. By end-2000, gross official reserves had reached the equivalent of 5.3 months of imports of goods and non-factor services. The current account deficit fell substantially from an average of about 15% of GDP during the 1990s to about 4% of GDP in 2000 mainly because of a fall in the level of imports and a rise in current transfers. 3.5 STRUCTURAL REFORMS 3.7 Substantial progress in structural reforms has been made in the last few years aimed at bolstering market efficiency and private sector led growth and reducing the involvement of the public sector in commercial activities. A majority of the banking sector now is in private hands with the sale of NBC to ABSA and the increased participation of the international banks in the country, with Barclays Bank being the newest addition to the more than 23 commercial banks now operating in the 16 country. Having divested/liquidated a large number of state owned enterprises in the manufacturing sector, the focus of the privatization program has now moved to the restructuring and divestiture of large utilities, especially power and water, and provision of appropriate regulatory framework to govern the operation of these liberalized sectors in a competitive environment. 3.6 Focus ON POVERTY REDUCTION 3.8 Having made significant strides in macro stability, fiscal sustainability and debt management, the government concerns have re-focused on poverty reduction. With 57 percent of the rural population living below the international poverty line of US$1 a day, poverty is predominantly a rural phenomenon. GOT has embarked on an aggressive poverty reduction strategy, which emphasizes both higher growth and more effective public service delivery. The poverty reduction strategy focuses on four strategic areas, including (i) rural development; (ii) improvement in social services; (iii) private sector and infrastructure development; and, (iv) public sector reform and institution building. The strategic prioritization areas are reflected in budget for FY01 and the budget for FY02 presented to Parliament in June 2001. Both emphasize further increasing public spending in the priority sectors of primary education, primary health care, agricultural research and extension, rural roads, the judiciary and HIV/AIDS. In addition, the budget for FY02 contains tax policy measures that will provide cost relief for all essential drugs and equipment to treat communicable diseases (including HIV/AIDS), provide incentives for private investment in education and in small scale enterprise. The latter measure aims at expanding income earning opportunities for the poor. 17 4. REVIEW OF BUDGET PERFORMANCE 4.1. INTRODUCTION 4.1 This chapter presents a review of fiscal developments and expenditure management issues and covers the fiscal year 1999/00 and the first eight months of fiscal year 2000/01. The analysis focuses primarily on issues related to aggregate fiscal discipline and strategic allocation. Specific sectoral issues relating to the efficiency of public expenditures have been analyzed in sector specific PER updates and these reports can be obtained from the PER secretariat. Within the framework of the PRSP and HIPC, the monitoring of pro-poor expenditures receives increased attention. To ascertain that increased resource allocations and disbursements for pro-poor expenditures undertaken by the Ministry of Finance lead indeed to increased resource availability at the point of service delivery, a pro-poor expenditure tracking study was undertaken in the framework of the PER. The results of this expenditure tracking study are presented in section 4 of this chapter. The chapter concludes with a few observations on accessibility and transparency of information on public expenditures in Tanzania. 4.2. AGGREGATE FISCAL PERFORMANCE Domestic Revenue and Foreign Inflows 4.2 Total revenue as a percentage of GDP continued its decline from the peak of 13.5% of GDP reached in FY97 to 12.0% in FY98 and to 11.3% in FY99 and FY00. In the first eight months of FY01 revenue collection had slightly recovered to an annualized rate of 12.0% of GDP. This improvement is mainly due to the imposition of VAT on petroleum products as a deliberate tax administration measure aimed at curbing tax evasion on petroleum products. Underlying the decline in tax revenue over the past few years are substantial reductions in external taxes, relatively large tax incentives for new investments, the continued downsizing of the parastatal sector, and sluggish private sector growth which has not yet yielded enough revenue to compensate for lost revenue from the shrinking parastatal sector. In FY99, the bulk of the revenue shortfall was accounted for by a sharp decline in revenue from other taxes, which declined from 1.8 percent of GDP in FY98 to only 1.2 percent of GDP in FY99. This is mainly the result of the streamlining of the tax system and the elimination of a number of nuisance taxes. It may therefore be important to recognize that the tax system is still in transition such that there are temporary declines in revenue as nuisance taxes are eliminated. The expectation is that this declining trend will be reversed as the supply side responds, albeit with a lag. However, increasing tax revenue remains an important challenge in the area of fiscal management, given the substantial expenditure requirements that arise in connection with government's role of providing infrastructure services and basic social services in support of economic growth and poverty reduction. The program of strengthening tax administration is ongoing and expected to yield tangible results over the next few years. In addition to administrative improvements, the streamlining of tax exemptions is another potential source for additional revenue generation. 18 Table 4.1 Government Revenue and External Grants (as % of GDP), FY96 - FY01 Central Government FY96 FY97 FY98 FY99 FY00 FYOl* Operations Total Revenue 13.2% 13.5% 11.9% 11.3% 11.3% 12.0% Tax Revenue 11.3% 11.9% 10.9% 10.1% 10.3% 10.9% Taxes on imports and 3.6% 3.8% 3.5% 3.6% 3.4% 4.9% exports Sales and excise taxes on 2.8% 3.1% 2.7% 2.6% 2.6% 4.9% local goods Income taxes 3.1% 3.0% 2.9% 2.7% 3.1% 2.5% Other taxes 1.9% 2.1% 1.8% 1.2% 1.2% 2.4% Nontax revenue 1.9% 1.6% 1.0% 1.2% 1.0% 1.1% * annualized estimate based on prel. outturn for July-Feb. 2001 Source: Tanzanian authorities 4.3 The relatively weak domestic revenue performance has been offset by increases in official development assistance in the form of grants and concessional loans (net of amortization). Since FY96, grants and foreign loans have seen a continuous increase, with data for the first eight months of FY01 indicating that donor's provide now about 5.5 % of GDP in resources to the public sector. This steady increase in concessional foreign resources presents the donor community's response to domestic policy reforms which create a favorable environment for enhanced aid effectiveness. Along with the general increase in foreign resources came also significant changes in the composition of foreign assistance. Among donors who provide grant financing there is an increased use of budget support through facilities such as the multi-lateral debt fund (MDF) and now the poverty reduction budget support (PRBS). Disbursements on concessional loans have also increased significantly, reflecting accelerated project implementation. Table 4.2: Foreign Inflows - Grants and Loans (as % of GDP), FY96 - FY01 Central Government FY96 FY97 FY98 FY99 FY00 FYOl* Operations Grants and Loans 1.0% 3.1% 4.0% 4.3% 4.7% 5.5% Grants 2.2% 3.6% 3.0% 3.9% 3.9% 4.0% Program 1.0% 1.8% 0.7% 1.2% 1.7% 3.1% Project 1.2% 1.8% 2.3% 2.7% 2.2% 0.9% Foreign loans (net) -1.2% -0.5% 1.0% 0.4% 0.8% 1.5% Foreign loans (loan 0.2% 0.8% 2.0% 1.6% 2.1% 2.6% disbursements) Program loans (import 0.0% 0.5% 1.3% 0.6% 0.8% 0.8% support) Development project loans 0.1% 0.3% 0.8% 1.0% 1.3% 1.9% Amortization -1.4% -1.3% -1.1% -1.2% -1.3% -1.1% * annualized estimate based on prel. outturn for July-Feb. 2001 Source: Tanzanian authorities Government Expenditures 4.4 Government spending increased in FY00 to 15.6 percent of GDP compared to 14.7% of GDP in FY99. Expenditures during the first eight months of FY01 are estimated to be below the level 19 recorded in the previous year. The decline is mainly on account of reduced development expenditures. However, in past years government expenditures during the last quarter of the fiscal year have typically been higher than expenditures in the other quarters which could result in expenditures above the currently estimated 15 percent of GDP. Table 4.3: Government Expenditures (as % of GDP), FY96 - FY01 Central Government Operations FY96 FY97 FY98 FY99 FY00 FY01* Total expenditure and net lending 17.6% 15.1% 14.7% 14.7% 15.6% 15.0% Recurrent expenditure 14.0% 12.5% 10.9% 10.7% 11.8% 12.0% Wages and salaries 4.6% 4.7% 4.2% 3.6% 4.2% 4.0% Interest payments 3.3% 2.6% 2.2% 1.6% 1.5% 1.6% Domestic 2.3% 1.7% 1.0% 0.6% 1.0% 1.0% Foreign 1.0% 0.9% 1.3% 0.9% 0.5% 0.6% Other goods and services and 6.1% 5.1% 4.5% 5.6% 6.1% 6.3% transfers Development expenditure and net 3.6% 2.6% 3.8% 3.9% 3.9% 3.0% lending olw Expenditure financed 0.2% 0.5% 0.5% 0.3% 0.3% 0.2% domestically * annualized estimate based on prel. outturn for July-Feb. 2000 Source: Tanzanian authorities 4.5 The economic breakdown of recurrent expenditures shows that about one third of recurrent expenditures.is spent on wages and salaries, 14 percent are spent on domestic and foreign interest payments, and more than 50 percent of recurrent expenditures are spent on other goods and services. While the problem of insufficient funding for operations and maintenance persists, during recent years there was some improvement in terms of increasing the share of the budget spent on operations and maintenance and containing the share going to the payment of interest and wages and salaries. 4.6 Since average salaries increased in nominal terms only by 1.3 percent in FY99 and the number of civil servants was reduced by another 2.7%, expenditures on wages and salaries remained more or less constant in nominal terms, implying a decline in expenditures on wages and salaries as a percentage of GDP from 4.2 percent in FY98 to only 3.7 percent in FY99. Salary increases below the rate of inflation have led to real income losses for civil servants of up to 35 percent since FY96. However, after further real wage losses in FY99, in FY00 government started the implementation of it Medium Term Pay Policy by granting salary increases ranging between 16 and 65 percent, with the higher increases being accorded to technical personnel and middle and upper management. In addition, the reduction in staff numbers was only 1.3 %, significantly less than in previous years. These large pay increases combined with only small reductions in the staffing levels led to a projected increase in the wage bill in FY00 by more than 30 percent and an increase in expenditures on salaries and wages from 3.7 percent of GDP in FY99 to 4.3 percent of GDP in FY00. In FY01 civil service employment increased by almost 7000. However, since no salary awards have been granted in FY01, expenditures on wages and salaries are estimated to decline to 4.0 percent of GDP. 20 Table 4.4: Civil Service Employment, FY98-FYO1 (December of each year) Salary Scale FY98 FY99 FY00 FY01 FY98 FY99 FY00 Staff in absolute numbers Percentage change TGOS 35651 34806 35001 -2.4% 0.6% TGS 63787 63310 59994 -0.7% -5.2% TGTS 122215 118868 119566 -2.7% 0.6% TPSW + TGPSW 36190 34821 36448 -3.8% 4.7% OTHERS 12785 11381 8837 -11.0% -22.4% TOTAL 270628 263186 259846 266,718 -2.7% -1.3% 3.0% Source: CSD Table 4.5: Civil Service Average Salaries, 1996-97-FYO0 Salary Scale FY97 FY98 FY99 FY00 FY98 FY99 FY00 TGOS 33707 37703 38212 47220 11.9% 1.4% 23.6% TGS 47099 57313 57625 78067 0.5% 35.5% TGTS Included 56314 57073 80162 1.3% 40.5% in TGS TPSW + TGPSW 65002 60506 61400 70925 -6.9% 1.5% 15.5% OTHERS 35344 115878 108011 167861 227.9% -6.8% 55.4% TOTAL 47498 54684 55387 74143 15.1% 1.3% 33.9% Source: CSD 4.7 Expenditures on other goods and services have increased continuously from a low of 4.5% of GDP in FY98 to an estimated 6.3% of GDP during the first eight months of FY01. Expenditures on interest payments declined from 2.2 percent in FY99 to 1.6 percent in FY00, as a result of a fall in both domestic and foreign interest payments. During FY00, foreign interest payments fell from I percent of GDP to 0.5 percent of GDP. However, this decline in foreign interest payments is offset by an increase in domestic interest payments to one percent of GDP. 4.8 Central government operations statistics indicate that about four percent of GDP or a little more than one fourth of the overall budget is spent on development expenditures, most of which is foreign financed. However, problems with the proper integration of development expenditures in the budget continue. Data on official development expenditures collected by UNDP indicate that official development assistance is about 12 percent of GDP. Although a significant share of ODA goes directly to NGOs, the private sector, and the Bank of Tanzania, it is likely that the information on donor financed projects implemented by sector ministries and local authorities is incomplete. On the other hand, development expenditure in the appropriation accounts is only about one third of the Development Expenditure as a Share ofGDP, FY96-FY01 7.0"/. __ 6.0Y/ DCGO 0 Budget Estimate ~ 0 Approp. Amts. 2.P4 0.0 YX FY96 FY97 FY98 FY99 FY00 FY01 21 figures shown in the central government operations tables. Deficit Financing 4.9 Following the introduction of the cash budget in 1996, Tanzania recorded continuous budget surpluses (after grants) in the past five years with the exception of FY00, when small budget deficit in the magnitude of 0.6 percent of GDP was registered. During the first eight months of FY01, data show a surplus after grants of about 1 % of GDP. Taking into account net inflows from foreign loans, which also constitute development assistance and contain a significant grant element, the deficit for FY00 turns into a small surplus of 0.2 percent of GDP and for the first eight months of FY01 a surplus of 2.2 % of GDP is registered. These surpluses have allowed government to reduce its outstanding debt with the domestic banking and non-banking institutions and also repay arrears to a significant extent. The fiscal discipline enforced through the cash budget system was a key factor in restoring macro-economic stability in Tanzania. However, given the significant public expenditure needs identified in the PRSP in key poverty related areas, the issue of the appropriate fiscal position gains relevance and is discussed in the chapters on fiscal sustainability and on key systemic issues. Table 4.6: Financing of the Fiscal Deficit (% of GDP), FY96 - FY01 Central Government Operations FY96 FY97 FY98 FY99 FY00 FYO1* Overall balance before grants -4.3% -1.6% -2.8% -3.4% -4.4% -3.0% (checks issued or commitment basis) Overall balance after grants -2.2% 2.0% 0.2% 0.5% -0.5% 1.0% (checks issued or commitment basis) Overall balance after grants -3.0% 1.9% 0.2% 0.3% -0.5% 0.7% (checks cleared or cash basis) Foreign loans (net) -1.2% -0.5% 1.0% 0.4% 0.8% 1.5% Overall balance after grants and -4.2% 1.4% 1.2% 0.7% 0.3% 2.2% foreign loans (checks cleared or cash basis) Domestic (net) 3.3% -0.7% -0.4% -0.2% -0.1% -1.9% Bank 2.7% -0.4% -0.9% 0.0% -0.1% -1.7% Nonbank (net of amortisation) 0.6% -0.3% 0.5% -0.1% 0.0% -0.2% Privatization Funds 0.5% 0.3% 0.1% 0.2% 0.0% 0.5% Change in arrears 0.4% -0.9% -0.8% -0.8% -0.2% -0.9% * annualized estimate based on estimate for July-Feb. 2000 Source: IMF, Tanzanian authorities 4.3. STRATEGIC RESOURCE ALLOCATION 4.10 This section presents the functional analysis of public expenditures for the period FY96- FY00 using data obtained from the appropriations accounts. In addition, data for the first nine months of FY01 are presented on an annualized basis based on exchequer release data from the flash reports. However, since under the cash budget system monthly releases are determined by monthly revenue collection outturns and foreign concessional inflows, these annualized figures for FYO1 should not be interpreted as an estimate for the likely outturn for FYOl. It is worth noting that beginning with the third quarter of FY01, the Ministry of Finance has provided quarterly exchequer 22 releases to the priority sectors, facilitated by the newly set up Poverty Reduction Budget Support facility. Table 4.7: Composition of Public Expenditures (as % of GDP), FY96-FYO1 FY96 FY97 FY98 FY99 FY00 FYO1* Recurrent Expenditures 12.5% 13.5% 13.1% 12.8% 12.8% 12.7% Debt Service 3.7% 5.0% 4.9% 3.8% 4.2% 3.4% Recurrent 6.5% 6.2% 6.0% 6.9% 6.3% 6.7% Central Recurrent 2.3% 2.3% 2.3% 2.1% 2.3% 2.6% Regions Development 0.5% 0.9% 1.6% 1.8% 1.5% 0.3% Expenditure Total Expenditure 13.0% 14.4% 14.7% 14.6% 14.3% 13.0% * annualized expenditures based exchequer releases for the first nine months of FY01 Source: Appropriation Accounts (FY96-FYOO), Flash Reports (FY01) 4.11 Overall, recurrent expenditures as a percentage of GDP remained fairly stable over the period FY99-FYOI at around 12.8 percent of GDP.' However, as the share of recurrent expenditures used for debt service payments declined from aboit 37 % in the mid nineties to around 30 percent in recent years, a greater share of recurrent expenditures is used to fund ministerial and regional supply votes. Although debt service payments show a declining trend in the medium term, year to year fluctuations in debt service payments are relatively large with corresponding variations available to fund salaries and operations and maintenance.2 It is also interesting to note that during the past five years resources allocated for the delivery of decentralized services in the priority sectors covering education, health, water, and agriculture have remained fairly constant at around 2.3 percent of GDP. Based on expenditure releases during the first nine months of FY01, resources for decentralized service delivery appear to have increased to 2.6 percent of GDP which would be in line with the implementation of the government's decentralization policy and the prioritization of expenditures for poverty reduction. Table 4.8: Sectoral Recurrent Expenditures (actuals, as a %age of GDP) Sector FY96 FY97 FY98 FY99 FY00 FY01* Administration 2.1% 1.4% 1.6% 2.2% 2.1% 2.1% Defence and Security 2.4% 2.5% 2.2% 2.2% 2.0% 2.0% Social Services 3.5% 3.5% 3.6% 3.7% 3.6% 4.1% Economic Services 0.2% 0.6% 0.4% 0.4% 0.7% 0.9% Productive Services 0.5% 0.4% 0.3% 0.5% 0.3% 0.3% Supply Votes 8.7% 8.5% 8.2% 8.9% 8.6% 9.3% Consolidated Fund Services 3.7% 5.0% 4.9% 3.8% 4.2% 3.4% Total Recurrent 12.5% 13.5% 13.1% 12.8% 12.8% 12.7% Expenditures * annualized expenditures based exchequer releases for the first nine months of FY01 Source: Appropriation Accounts (FY96-FY00), Flash Reports (FY01) The definition of recurrent expenditure in this section uses the Government of Tanzania classification, which includes total debt service payments as part of Consolidated Fund Services, while the classification used in the previous section includes only interest payments but not amortization as part of recurrent expenditures. 2 The figure for FY00 for expenditures under the supply votes obtained from the appropriation accounts appears to be almost one percent of GDP less than the comparable figure obtained from the Ministry of Finance on Central Government operations. Clarification is being sought from the Ministry of Finance. 23 4.12 Table 8 presents the functional classification of expenditures funded from the central government budget for the period FY96-FYOI. Although debt service payments have been on the decline during the past five year, until FY00 they claimed the largest share of recurrent expenditures and the government spent more on debt service payments than on the social sectors. The social sectors which include education, health, water, and the ministries for community development and women's affairs and labor and youth development. Expenditures in this sector were fairly constant during the past five years receiving about 3.6 percent of GDP with only a slight upward trend in recent years. Expenditures on administration have been rising faster than expenditures on the social sector during the past five years. However, a significant part of the increase in expenditures on the administrative sector is related to the central payment of electricity since FY99, expenditure on the new civil service pension scheme, clearance of arrears to suppliers incurred by all ministries, one time expenditures for the preparation of elections, 'and increased expenditures for priority areas related to accountability in the public sector such as the OCAG, the Judiciary, the Civil Service Reform Department, the establishment of the Ministry of Regional Administration and Local Authorities, and the Ministry of Lands. Taking all this into account, expenditure patterns are broadly in line with the objective of increasing social sector spending faster than other spending plans. Nevertheless, given that under the extremely tight resource constraints which Tanzania faces and the often commented on inability to fund operating cost for many government agencies even at a minimum level, government is urged to critically review and prioritize among administrative functions and limit its engagement to those services that can be properly funded. Nonetheless, there is a clear recognition that some specific administrative services such as funding for the Office of the Controller and Auditor General are essential for the proper functioning of government. Expenditures on defence and security have declined from 2.5 percent of GDP in FY97 to 2.0 percent in FY00. Table 4.9: Social Sector Recurrent Expenditures (actuals, as a %age of GDP) Sector FY96 FY97 FY98 FY99 FY00 FY01 * Education 0.3% 0.3% 0.4% 0.3% 0.3% 0.3% Water, 0.0% 0.0% 0.0% 0.1% 0.0% 0.1% Health 0.3% 0.4% 0.5% 0.6% 0.5% 0.4% Science, Technology & Higher Education 0.5% 0.5% 0.4% 0.5% 0.4% 0.5% Regions 2.3% 2.3% 2.3% 2.1% 2.3% 2.6% Total Social Services 3.5% 3.5% 3.6% 3.7% 3.6% 4.1% * annualized expenditures based on exchequer releases for the first nine months of FY01 Source: Appropriation Accounts (FY96-FYO0), Flash Reports (FY01) 4.13 Expenditures in the social sectors have been increasing continuously from 3.5 percent of GDP in FY97 to 4.1 percent of GDP in FYOl. This reflects the priority status accorded to these services by government and additional support received from the multi-lateral debt fund, which was linked to enhanced funding of the social sectors. Most of the increase in social spending occurs at the regional and district level, where the responsibility for the delivery of basic services such as primary education and health care lies. However, given the financing constraints which Tanzania faces, scarce resources will have to be focused on those areas identified in the PRSP, which can be expected to have the biggest impact on poverty reduction and economic growth. In this context, the benefit incidence of post primary education and tertiary health care should be guiding principles as to whether government should retain its current role in providing and financing these services. 24 Table 4.10: Tanzania: Priority Sector Spending - Other Charges. Actual Expenditure on OC as Percentage of Budget Estimate FY00 FY01 Education 97% 148% MOEC 100% 132% MSTHE 95% 132% Teachers Service Corn. 110% 81% Local Government 98% 185% Regions 101% 103% Health 97% 137% MoH 97% 131% Local Government 98% 161% Regions 101% 103% Judiciary 66% 122% Judiciary 66% 122% Roads 81% 80% Road Fund 80% 80% Other Roads 98% Water 137% 103% MoW 158% 98% Local Government 98% 109% Regions 465% 0% Agriculture 41% 131% MOAC 41% 131% Extension Services Land 101% 110% Land 101% 110% Note: OC for FY01 cover July - December only. Source: MoF 4.14 Allocations for OC in the priority sectors have increased significantly in FY01. Available data for the first half of FY01 indicate that exchequer releases for the priority sectors were also significantly higher than budgetary allocations. For the last two quarters of FY01 the Ministry of Finance has introduced quarterly exchequer releases for the priority sectors and the priority sectors have received their full OC allocation at the beginning of the third and fourth quarter. 25 Table 4.11: Sectoral Development Expenditures (actuals, as a %age of GDP) Sector FY96 FY97 FY98 FY99 FY00 Administration 0.1% 0.4% 0.4% 0.0% 0.3% Defence and Security 0.0% 0.0% 0.0% 0.0% 0.0% Social Services 0.2% 0.2% 0.4% 0.9% 0.5% Economic Services 0.1% 0.2% 0.6% 0.7% 0.6% Productive Services 0.1% 0.0% 0.2% 0.2% 0.2% Consolidated Fund 0.0% 0.0% 0.0% 0.0% 0.0% Services Total Recurrent 0.5% 0.9% 1.6% 1.8% 1.5% Expenditures * annualized expenditures based on first nine months Source: Appropriation Accounts (FY96-FYOO), Flash Reports (FY01) 4.15 Recorded development expenditures show a continuous upward trend increasing from 0.5 percent of GDP in FY96 to 1.8 percent of GDP in FY00. This increase in development expenditures is partly due to a greater share of donor funded expenditures passing through the exchequer system, but also to improvements in project implementation performance. However, given the constraints on the side of recurrent financing of operations and maintenance, it will be imperative to properly take into account the recurrent cost implications of development projects to ensure their sustainability. Foreign Aid: From the Central Bank to the Office of the Auditor and Controller General 4.16 Tanzania benefits from huge aid flows which amounted to about External Project Support, Average FY99 and US$1.2 billion in recent years. Less FYO0 than 20 % of the aid flows registered in the balance of payments are in the form of program or general budget W/. support and as such included in the government's budget. The bulk of foreign assistance is however still in the form of project financing through grants and loans. The amount of project financing that 2%M enters Tanzania is about 8% of -- GDP, an amount almost similar to P ODA QIffl D,- r-p. (App-p. the total of Tanzania's recurrent (B.dgt/fCGO) Aais.) budget. However, little more than a one third of project assistance to Tanzania are recorded in the Central Government Budget estimates. The other two thirds of project assistance are essentially outside the budget process and any official scrutiny. Of the one third of project assistance that is recorded in the budget estimates at the beginning of the fiscal year, again only about one third passes through the exchequer system and is finally recorded in the government's appropriation accounts, which are audited by the Office of the Auditor and Controller General The reasons for providing assistance outside the budget by directly working with sector ministries, local authorities, communities, or NGOs are manifold and partly related to Tanzania's history of poor management and accountability for public funds. However, huge aid flows outside the budget clearly undermine the budget process by weakening the incentives for good budget management if significant resources for essentially public tasks are available: outside the formal budget process. The fact that only 16 % of project assistance is recorded in the appropriation accounts and audited raises the question about the accountability of the remaining 84 % of project assistance. Accountability mechanism for these funds generally aim at satisfying the 26 funding donor, with relatively less attention to accountability to local stakeholders. As the Tanzanian authorities make progress in improving public finance management and accountability mechanisms, it seems desirable to have development assistance linked to the public sector also properly integrated in the budget. 4.4. VARIATION BETWEEN THE APPROVED BUDGET AND ACTUAL EXPENDITURES 4.17 Previous PERs have noted significant variations between budget allocations as approved by the National Assembly at the beginning of the financial year and expenditures as recorded in the appropriations account. There are three principal reasons for these differences with respect to recurrent expenditures: > reallocations from the contingency account at the Ministry of Finance in the course of the budget year; > differences between projected and actual resources available; > under/overspending my ministries compared to the approved budget. 4.18 During the budget process not all projected resources are allocated to spending units. A contingency provision is allocated to the Ministry of Finance which during the process of budget implementation is then re-allocated to spending units, if the revenue situation permits. In the Finance Bill Parliament authorizes the Ministry of Finance to undertake reallocations across votes throughout the fiscal year. The budget speech presented to Parliament usually indicates how the contingency allocation will be used. At the end of the fiscal year, a statement of reallocation is presented to Parliament for approval. This contingency fulfills at least three purposes: > reduce the risk of having to borrow in case revenue collection and foreign inflows are less than projected; > keep aside funds for emergencies; and > cover increases in the wage bill which are typically not determined prior to the approval of the budget. 4.19 In addition to reallocations from the contingency budget allocation, the Ministry of Finance also undertakes special requisitions to enhance spending on consolidated fund services, comprising debt service payments and expenditures of the state house. Table 4.12: Contingency allocation retained by Ministry of Finance FY98 FY99 FY00 FY01 TSh. Billion 38.0 29.3 66.7 44.5 % of Supply Votes (Ministerial and 6.7% 4.7% 8.8% 5.1% CFS) 4.20 In recent years, the amounts allocated for contingencies has varied considerably, ranging from TSh. 29.3 billion in FY99 to TSh. 66.7 billion in FY00 (see Table 12). The relatively large size of the contingency in FY00 was necessary to provide for the planned implementation of Phase 1 of the pay reform and the parallel introduction of a medical insurance scheme for civil servants. 27 Table 4.13: Actual Reallocations to PE and OC FY98 FY99 FY00 Total 43,182,423,677.00 91,732,932,979.00 66,780,763,015.00 PE 20,388,229,000.00 9,679,534,453.0 53,208,424,454.00 OC 22,794,194,677.00 82,053,395,906.0 13,572,338,561.00 Source: MoF, Reallocation Warrant 4.21 Table 13 shows total reallocation undertaken by the Ministry of Finance during the past three years. In FY00, 80% of the contingency were used for reallocations to PE to fund the implementation of the first phase of pay reform. In contrast, in FY99, only 11 percent of reallocations were needed to fund salary adjustments, while 89 percent of the reallocations were used to fund OC and increased debt service payments. In FY98, the reallocations were almost evenly divided between OC and PE. 4.22 While it is recognized that in an environment of unpredictable resource flows and vulnerability to external shocks the current practice of retaining an unallocated contingency item in the budget of the Ministry of Finance has its justification, care should be taken to establish clear criteria for determining the magnitude of this item, to limit the degree of discretion in the use of this contingency, and to establish clear and transparent criteria for the use of this contingency allocation. Otherwise there is a threat that this contingency undermines the credibility and transparency of the budget process and of budget implementation. Table 4.14: Reallocations and Expenditure Outturn, FY00 Approved Reallocation Budget after Actual Actual Approved Budget Reallocation Expenditure Expenditure Budget after as % of Reallocation Approved as % of (Tshs. (Tshs. (Tshs. (Tshs. Budget after Approved Billion) Billion) Billion) billion) Reallocation Budget Ministry of 128.4 (67.4) 61.0 48.5 79.6% 47.5% Finance Administration 94.2 10.4 107.2 94.2 87.9% 113.8% Social Services 222.6 48.8 271.4 263.2 97.0% 121.9% Economic 54.4 2.1 56.5 23.0 40.7% 103.8% Services Productive 26.8 (2.1) 24.7 18.2 73.7% 92.1% Services Total Supply 526.4 (8.2) 520.7 447.1 85.9% 98.9% Votes CFS 266.3 29.0 295.3 287.7 97.4% 110.9% GRAND 792.7 816.1 734.8 90.0% 103.0% TOTAL Source: Budget books, appropriation accounts, and statement of reallocation. 4.23 Table 14 shows the allocation of this contingency in FY00 to the various sectors. The bulk of it went towards the social sectors, especially to local authorities to provide for salary increases at the service delivery level. A significant re-allocation took also place from the Ministry of Agriculture (productive services) to the local authorities to complement the shift of extension staff from the Ministry of Agriculture to local authorities. Consolidated fund services received a special requisition of TSh. 29 billion which was used for debt service payments in excess of the budgeted amounts. 4.24 Table 14 also shows actual expenditures in TShs. and as a share of approved budget estimates after reallocations. For the supply votes, actual expenditures were only 85.9 percent of 28 budgeted amounts. As statutory payments, salaries, and priority sectors including health, education, water, roads, the judiciary, and lands are protected from cuts, these expenditure shortfalls affected disproportionally OC expenditures of non-priority spending units. Spending units in the social services sector, which comprise most of the protected expenditure units, received 97 percent of the budgeted amounts. Spending units in the administrative sector received 88 percent of their budget. Spending units belonging to the economic services and the productive services were hardest hit by expenditure short falls, receiving only 49 and 74 percent of their budgets, respectively. As was observed in previous PERs, this underfunding of OC expenditures for non-priority ministries, which is compounded by unpredictable and fluctuating exchequer releases throughout the year, makes rational budget implementation virtually impossible. Mechanisms to alleviate this situation and to restore the credibility of the budget need to be pursued vigorously and are described in the discussion of systemic issues. 4.25 Most of the difference between approved development expenditures and development expenditures recorded in the appropriations accounts is due to problems in capturing donor funded projects. 4.26 Firstly, the problem of appropriately capturing planned donor project disbursements in the budget submitted to Parliament still persists. A proper system to capture donors' disbursement plans is still not in place and there is scope for improving information flows on disbursement plans between donors and government. While donors who provide planned disbursement figures to the government often find that these planned disbursements are not reflected in the budget as indicated, many donors also do not provide adequate information to the government. Further work is required to improve the capturing of donor disbursement plans appropriately in the budget. 4.27 In addition, even for donor funded projects that are contained in the approved budget, expenditures are often not captured in the appropriation accounts. This makes it difficult for government to keep track of the implementation of the development budget. The difference between approved development funds in the budget and recorded expenditures in the appropriation accounts may be either due to the fact that donor funds by-pass the exchequer system, contributions are provided as real goods and services without any recorded financial flows to Tanzania, or planned development projects are not implemented as planned. Table 4.15: Development Expenditures by Sector, Actual Expenditures as a Share of Budgeted Expenditures, FY96-FYOO FY96 FY97 FY98 FY99 FY00 ADMINISTRATION 8.3% 29.2% 17.5% 6.4% 101.5% DEFENCE AND SECURITY 18.6% 25.0% 34.4% SOCIAL SERVICES 12.2% 35.3% 24.6% 54.1% 32.6% ECONOMIC SERVICES 20.0% 1.5% 33.9% 52.7% 59.9% PRODUCTIVE SERVICES 66.6% 16.4% 91.4% 31.1% 36.5% GRAND TOTAL 14.0% 6.1% 27.5% 45.9% 52.2% Source: Appropriation Accounts 4.28 Table 15 shows the ratio of budgeted to actual development expenditures for the period FY96-FYOO. In recent years there has been a significant increase in the share of budgeted development expenditures actually recorded as expenditures. Between FY97 and FY00, the ratio increased from 6.14 percent to 52.3 percent. This points towards improved capturing of donor funded assistance in the appropriation accounts. It is also likely to be due to improved portfolio implementation performance by the government and donors. For example, a recent country portfolio 29 performance review undertaken by the World Bank indicated that the disbursement rate of World Bank credits almost doubled in the last 2 years increasing from 15% to 28%. 4.29 Provisions for counterpart funds in the amount of TShs. 3.01 billion made in the budget for various projects (e.g., the national agricultural extension project, Madibira smallholders rice scheme, rehabilitation of schools and colleges, Lake Victoria, environment management program, etc.) were reallocated for the set up of Television Tanzania. There is concern about the implications of this reallocation for the implementation of the affected projects. 4.5. PRO-POOR EXPENDITURE TRACKING STUDY 4.30 Allocating resources to pre-identified pro-poor expenditure programs is necessary but not sufficient for guaranteeing that public spending contributes to poverty alleviation. It is also necessary that allocated funds flow indeed to service delivery units and the intended beneficiaries. Since 1998, various expenditure tracking studies were undertaken to ascertain whether allocated funds reach the intended beneficiaries. With the implementation of the Local government Reform Program these expenditure tracking studies gain on importance, as greater responsibility for the delivery of basic services in priority sectors is being moved from central government ministries to local authorities. In the framework of the FY01 PER process another tracking study was carried out by ESRF and REPOA with the objective of assessing the efficacy of budget execution and the intention of drawing lessons that could be used to improve implementation of pro-poor public expenditures. The study focused on primary education and health, two of the eight sections/activities that have been identified to receive government priority in the fight against poverty. Rural roads and water which were to receive equal treatment in the study have featured only marginally because they have not established institutional linkage at the sub-district levels. 4.31 The study reviewed government procedures and channels for disbursing funds, reporting systems and the flow of funds from one level to the other. In addition to the flow of funds, an assessment was made on the flow of materials and supplies. 4.32 Both desk work and field work were undertaken. In the former a review of documents was made. In the latter visits and interviews were made in the relevant government ministries and local authorities. Five local authorities were visited, three rural and two urban, namely Babati, Kisarawe and Dodoma rural councils and Mtwara and Kigoma urban councils. In the councils documents were reviewed and interviews were made with staff. In addition service centers were visited to provide a feel about supply and availability of materials and supplies. At this level interviews with the beneficiaries were also held. 4.33 A number of observations have been made in the main report. Below we present the salient ones and draw policy implications. Firstly, the cash budget system has in principle relegated OC to a residual position. This has implications on the timing and level of OC disbursement. Lack of predictability on the disbursement of OC has promoted leakages especially at the sub-national levels. Other things being equal, increased predictability would enhance transparency and minimize leakages. 4.34 Secondly, the existing system of disbursing funds is in principle alright. However, it assumes adequate transparency in information sharing and transmission. The present review has found that in situations of scarce resources ownership of information and misinformation are important for redistributing resources to suit the owners of information. In the case of local authorities information contained in the exchequer issue notification has normally not been transmitted to sectoral heads. This has opened room for re-allocations, without the knowledge and consent of sectoral heads. The introduction of IFMS at the ministries level has improved albeit marginally the speed of OC disbursements. However, it has not reduced reallocations at the local authorities because it has not been implemented at that level. Since it will take a long time for the IFMS to be implemented at lower levels efforts should be made to build capacity to manage the existing manual system and 30 promote transparency there. On the latter, it is proposed that sectoral heads be given copies of the exchequer issue notification to minimize misinformation. 4.35 Thirdly, perhaps in response to budget cuts, at both the Treasury and the council, sectoral heads have tended to re-allocate the OC they receive in favour of activities that benefit the council staff at the headquarters, at the expense of service units. In this case traveling and vehicles have been favoured at the expense of school materials and health drugs. 4.36 Fourthly, councils have managed to get away with observations two and three above because financial reporting requirements have accommodated too much aggregation. It is important that an acceptable format be developed that can easily be related to the exchequer issue notification. 4.37 Fifthly, sectoral departments are the last point of cash flow in the disbursement system. There is no flow of cash beyond council departments. Only supplies and services flow to the service units. However, as stated above very little materials and supplies originate from the councils. Most of the materials distributed by councils originate from sectoral ministries. In this context survey results show that the supply of primary materials is limited and ad hoc. The lack of predictability may promote leakages. This is different from the supply of health drugs which is more reliable in both timing and quality. The perceptions of beneficiaries on availability of school materials and health drugs support the above observation. Beneficiaries are more satisfied with availability of health drugs than school materials. A closer look at survey results show that both the quantity supplied and reliability play an important role in influencing beneficiaries perceptions. It is important that the Ministry of Education work on improving both quantity and reliability, i.e. there should be a known schedule on the distribution of materials that is followed. 4.6. TRANSPARENCY AND ACCESSIBILITY OF FISCAL INFORMATION 4.38 One of the cornerstones for public accountability in fiscal management is readily available, reliable, and easily understandable information on public expenditures. As government continues to open up the budget process to various stakeholders inside and outside of government and as more donors are considering to either provide direct budget support or at least channel their assistance through the budget, these issues gain additional importance. 4.39 At present, fiscal information is not easily accessible and often difficult to interpret. In addition, there is also the perception that data from various sources are often inconsistent and pubic debate on fiscal issues often lacks a solid informational foundation. 4.40 With the introduction of the computer based Integrated Financial Management System and the reclassification of the budget according to the GFS, the transparency of the budget should improve and it is thus important to proceed with this initiative. 4.41 In addition, it is recommended that active efforts are undertaken to make information accessible and to provide easily understandable information on key fiscal issues. It is thus recommended that the PER process in close collaboration with local economic research institutes pays greater attention to the dissemination of information generated by the PER process to the public. It is also recommended that in parallel government undertakes to provide information on budgetary performance to the public on a quarterly basis. 31 5. BUDGET SUSTAINABILITY AND FULL FINANCING OF THE PRIORITY SECTORS3 5.1 The main aims of this chapter are (i) to make an assessment of the resource envelope available for the FY 01-02 budget and for the MTEF period. This is approached through a review of the prospects for the major sources of resource availability - domestic revenues, external grants and loans and domestic financing; and (ii) to present estimates of the cost of fully financing the PRSP priority sectors under the 2001/2 to 2003/4 MTEF. The report also comments briefly on some aspects of expenditure control and the budgetary management systems in place to improve expenditure control (the use of first charges). 5.1. THE RESOURCE ENVELOPE Domestic Revenue 5.2 Tanzania's revenue performance (measured by the revenue/GDP ratio) is poor in relation to the average for Sub-Saharan Africa and has declined significantly in recent years, reflecting the substantial reduction in external taxes, relatively large tax incentives for new investments, and the continued downsizing of the parastatal sector coupled with informalisation of the economy. The recent decline in revenue performance (1996/97-1998/99) has been attributed to the growth in exemptions (OPM, 2001) and streamlining of the tax system and the elimination of a number of nuisance taxes. 5.3 There is significant scope for substantially raising domestic revenue in Tanzania. However the changes required, particularly with respect to necessary improvements in tax administration, are expected to take time. Thus, unless the government pursues a policy to significantly reduce exemptions in the short term, even with significant tax effort, we do not expect to see any substantial improvements in domestic revenue during the life of the current MTEF. These observations support the cautious revenue projections included in the Budget Guidelines. External Grants and Loans 5.4 The analysis suggests that the Budget Guidelines are conservative in their estimates of the likely flow of external grants and loans over the MTEF period. This is resulting primarily from the methodology used by the MOF (and the supporting donor community) which tends to identify only fairly firmly confirmed donor financing opportunities. This is not necessarily the appropriate budgeting practice, which should be based on most likely outcome (with allowance for risk). Domestic Borrowing 5.5 Prudent budgetary policies in the past 5 years have led to a reduction in the domestic debt burden, measured by domestic debt as a proportion of macro aggregates (government revenue or GDP). Successful inflation control has also led to a potentially sharp reduction in the cost of servicing the outstanding debt as the yield on Treasury Bills has declined to low nominal and real rates. This chapter is the executive summary of a report on "Budget Sustainability and Full Financing of the Priority Sectors" prepared by Emerging Market Economics Ltd. and funded by DFID as a contribution to the PER process. 32 5.6 The commercial banking system remains very liquid, with liquid assets accounting for per cent of total commercial bank assets, opening up the possibility of some renewed recourse to domestic borrowing, should this be appropriate There are several explanations for the high degree of commercial bank liquidity which combine structural and transitory factors. The restrictions on lending by NBC during restructuring and high liquidity arising from expansion of the mining sector are among the transitory factors, while the limited outreach and lack of experience in private sector lending are more structural features. The interest rate structure is characterized by a divorce of commercial lending rates from the BOT's discount rate or the TB rate. 5.7 In this situation it is implausible to argue that modest net government borrowing would crowd out private sector lending. Equally implausible is the frequently cited view that low government borrowing can crowd-in private sector lending, given the structural market constraints and the lack of an integrated interest rate structure. 5.8 However, there are important reasons for continuing to take a cautious approach to renewed net borrowing: any borrowing from the commercial sector would be short-lived as the overall volume of excess liquidity would be rapidly absorbed by any significant shift in government policy; any significant net borrowing is likely to be at a high budgetary cost as a rising TB yield progressively affects both new debt and rolled over debt; until such time as expenditure arrears have been cleared from the system, any new borrowing would in effect be financing the build up of arrears. 5.9 There is a need for changes in the reporting of TB market transaction by the BOT to enable researchers to analyze adequately the determinants of yields in the TB market. BOT should publish information that allows the determination of net TB sales on a monthly basis. 5.10 Domestic debt policy should be based on a range of considerations, rather than observance of a rigid "target" in the form of the ratio of debt or debt service to some macro aggregate. The study's views on the main elements to be taken into consideration at present include: cost-effective management of the outstanding debt stock, private sector crowding-out issues, and the need for expenditure side controls to be fully in place before there is any renewed recourse to net domestic lending. 33 5.2. THE EXPENDITURE SIDE Full Financing Costs for the Priority Sectors 5.11 The study attempted to calculate the cost of fully financing the requirements for achieving the PRSP targets in the priority sectors, drawing primarily on the sectoral reports prepared by consultants during the first quarter 2001. The main purpose of this exercise was to identify the degree of financing gap between the full financing requirement and the resource envelope. 5.12 A review of the sectoral consultants' reports revealed several types of obstacle to calculation of the desired type of full financing estimates: * for some sectors the definition of targets in the PRSP is either unclear, insufficiently detailed or only loosely linked to sectoral investment or service delivery programmes; * some sectors have not explicitly adopted the PRSP targets, preferring to continue with their own sectoral strategies which have not been fully integrated with the PRSP process; * some sectoral programmes, at least as judged from the sectoral consultants reports, have not yet been conceived or detailed to the point where they provide a plausible approach for meeting sectoral PRSP targets either at all or in the timeframe envisaged by the PRSP; * almost all the sectors have so far failed to define detailed action plans and activities which form a basis for a disaggregated and quantified approach to PRSP target achievement. This is true even for the best organized sectors; * the basis for costing of achievement of PRSP targets remains poor in most sectors, largely because of the lack of detailed activity plans, which are a necessary condition for preparation of scaleable cost estimates; * there remain important implementation and absorption capacity constraints in most sectors which mean that the realistic upper bound for effective expenditure in support of the PRSP targets remains below the level of the proposed full financing level of expenditure; * per contra, in some sectors the estimate for full financing has been based too closely on the sectors' expectation of likely resource availability as indicated in the Budget Guidelines, leading to full financing estimates which substantially understate the resources which could and should be made available to meet PRSP targets. This appears to be true of the Judiciary and Water sectors. 5.13 As a result of these problems and shortcomings the full cost estimates need to be interpreted carefully for each sector on the basis of the stage which the sectoral ministries have reached in strategy and budget formulation and in the light of the pervasive implementation and absorption capacity constraints. 5.14 Aggregation of the estimated full financing costs for the 8 priority sectors suggests an under- financing in the Budget Guidelines of Tsh 233bn in 2001/2 and Tsh 166bn in 2002/3. This would constitute roughly 1.5 per cent of GDP and of a magnitude which it might prove possible to accommodate in the resource envelope. 5.15 However, attention is drawn to the severe implementation constraints which are prominent in most sectors which will place a ceiling on the effectively utilizable funds in the PRSP priority sectors at least in the near term. Key implementation constraints arise from: * Limited procurement capacity (especially in the Roads sector - both MOW and MORLG); * Limited capacity at the district level to administer the roll-out of sectoral service delivery programs; 34 * Constraints in the staff remuneration and incentive systems which limit the ability of the sectors to achieve a rational deployment of staff to areas of greatest need for poverty reduction; this implies that even if additional funds are provided for Personal Emoluments, the effectiveness of the spend for poverty reduction will remain muted; * Constraints to the release of approved funds arising from the cash budget and expenditure management systems (including the regulations in place for the Health Sector Basket). Specific recommendations arising from the review of full financing costs are: Recommendation 1: The anticipated revision of the PRSP should be undertaken as a matter of urgency on completion of the current budgetary cycle, with a view to establishing a firmer basis for sectoral strategies and plans in the later years of the MTEF Recommendation 2: In order to permit less tightly constrained growth in the later years of the MTEF high priority should be afforded to measures which address and reduce existing constraints for programme roll-out in the PRSP priority sectors. Recommendation 3: The PER Committee should review the adequacy of the existing and prospective provisions for the sectoral ministries to apply sufficiently remunerative packages to attract key staff required for programme roll-out in remote and poor districts, with a view to ensuring that this constraint, which needs a systemic rather than sectoral solution, is adequately addressed 5.3. ASSESSMENT OF FISCAL SUSTAINABILITY 5.16 Sustainability is treated as a composite and probabilistic concept. At this stage of the PER a key aspect of the assessment of sustainability relates to the confirmation of the plausibility of the projections set out in the Budget Guidelines, and a substantial part of this report has been concerned to assess and comment on those projections using our own independent estimates of low, medium and high scenarios for each of the major aggregates and their principal elements in the resource envelope. 5.17 The overall conclusion drawn at this stage is that the Budget Guidelines (December 2000) provide a robust basis for budgetary planning. However, this result depends on a number of off- setting elements contributing to this conclusion: we believe that the Budget Guidelines are appropriate for domestic revenue, but conservative for contingent liabilities and for external grants and loans. 5.18 The full financing cost estimates, such as they are, point to some scope for increased PRSP target achievement through the allocation of incremental resources in addition to those anticipated in the PRSP and the December 2000 Budget Guidelines. This scope, is, however, limited by the poor state of several sector's preparedness to implement the PRSP and the strong implementation constraints faced in most if not all sectors. 5.19 There is, in principle, scope for the renewal of net borrowing from the commercial sector given the current liquidity of the commercial banks, and the reduction in the burden of domestic debt service in recent years (which has resulted from GDP growth and falling interest rates). However, this option should probably not be pursued till firm control of arrears and expenditure planning has been achieved. 35 6. REVENUE ISSUES IN THE LONGER-RUN4 6.1. THE CURRENT POSITION 6.1 The share of domestic revenue in GDP, at around 11.7%, is low in Tanzania relative to that in several other Sub-Saharan countries. The Budget Guidelines state that "raising the revenue to GDP ratio will be given high priority", but accept that over the next three years the budget share will be nearly flat5. The Guidelines thus reflect a tension between a normative approach to the budget (what we would like to see happen) and a positive approach (what we actually think will happen). 6.2 In the budgeting context, the positive approach must be right. Building-in implausible revenue forecasts would expand the perceived resource envelope and hence the magnitude of planned expenditures beyond what was likely to be financeable in practice. Unless there were offsetting errors, it would therefore lead to a built-in bias so that, in practice, expenditures would have to be curtailed below the budgeted amounts'. Since different components of spending are differently compressible, this is not only inefficient, but is also likely to lead to unplanned shifts in composition. 6.3 However, while the normative consideration should not be allowed to disrupt the budgetary process, revenue remains a serious issue. It appears to be an implicit rule of thumb that governments in poor countries can usefully deploy resources at least of the order of 20 per cent of GDP, and this seems now to be accepted as an appropriate broad target for Tanzania. With a revenue share of less than 12 per cent, this leaves a very large gap for financing. In view of Tanzania's high current approval rating with donors, they seem happy to provide the bulk of the requisite flow. However, it is one thing to do this against a background where the gap is being narrowed albeit slowly by continued relative growth in domestic revenue: it is another matter if the gap appears to be stationary and hence indefinite. It does seem important, in consequence, for the government to take a serious look at the issue of stagnant revenue: whether it is desirable to raise it, and if so, how that might be accomplished; if not, how that can be squared with the longer run issues of size of government operations and aid dependency. 6.4 There have been a number of reforms of the tax regime, and overall, the problem does not seem to rest in the design or rate structure of the system. Also, neighboring countries have very different revenue performances from their somewhat similar systems. Performance in Uganda is very similar to that in Tanzania, at around 1l%-12% of GDP, whereas Kenya's performance is much stronger, with the tax share averaging roughly twice as much. It is tempting to attribute this to Kenya's higher per capita income and more developed manufacturing sector, but it is necessary to be cautious about this. Recent cross-country analyses of tax revenue performance tend to suggest that Tanzania should be capable of generating substantially higher revenues, even when her low per capita income and disadvantageous economic structure are controlled for. As an illustration, we can feed Tanzania's (1999) characteristics into the tax equations estimated for 39 Sub-Saharan African countries by Ghura. Using his base regression, which includes only per capita income and economic This chapter was prepared by David Bevan as part of his report on "Budget Sustainability and Full Financing of the Priority Sectors." It is projected to remain at 11.7% over the next two years, and then rise to 11.9% in 20023/04. 6 In practice, there is a potential offsetting error; this is the tendency to underestimate future donor flows because they are not yet committed, discussed in the text. However, it does not seem appropriate to budget on the basis "two wrongs [may] make a right". D. Ghura, Tax Revenue in Sub-Saharan Africa: Effects of Economic Policies and Corruption, IMF working Paper, WP/98/135. 36 structure, Tanzania should apparently be capable of generating a revenue-to-GDP ratio of nearly 18% (or 19.5% if Tanzania's status as a non-oil mineral producer is taken into account). These regressions should certainly be taken with a large pinch of salt, but they do suggest that Tanzania's relatively poor performance cannot be fully attributed to her unfavorable initial conditions. 6.5 Taking the longer view, it is worth noting that the growth in the revenue share would be (in the Ghura model) only around 3 percentage points even if per capita income were doubled, something which would require twenty years of growth in real GDP at rates in excess of 6% per annum. Once again these estimates should be treated with considerable caution. But they do indicate that growth alone is unlikely to resolve the revenue problem. 6.6 There is also the reverse connection to consider, running from taxation to growth. Tanzania has recently succeeded in raising the real GDP growth rate to over 5% and plans to raise it further to (and maintain it at) over 6%. However, the investment share in GDP has been quite low in recent years (around 15%); to achieve a sustained growth performance without increasing this would imply an incremental capital output ratio of only a little over 2, which is unlikely to be achieved over a long horizon. The continued high growth of GDP on which the government is relying is therefore likely to require a substantial increase in private investment. While international evidence suggests that a high tax share is not inimical to rapid growth, this evidence relates to countries where broadly based taxes at moderate rates raise large revenues. It certainly would not sustain a recommendation to raise revenue share by setting high rates on narrow bases. 6.7 The long-run spending implications of these unresolved domestic revenue issues can hardly be over-stressed. At present, the government's recent record as a good macroeconomic manager, and evidence of its commitment to a comprehensive reform agenda, mean that donors are prepared to underwrite something close to a 'normal' spending programme, despite Tanzania's relatively modest revenue performance. It is of course possible that they will be prepared to do so indefinitely. However, it would not be wise to plan on this eventuality. More immediately, there must be some risk that a failure to address the revenue issue will begin to tarnish Tanzania's other achievements, and might conceivably lead to an earlier decline in net aid flows than would otherwise occur. This would involve something rather like a 'matching grant' phenomenon; an extra shilling of domestic revenue would be accompanied by an enhanced aid flow, and vice versa. It should be stressed that this argument is both speculative and (probably) long run. But there are real risks nonetheless. 6.2. THE REVENUE PROFILE IN THE MEDIUM TERM 6.8 This section discusses considerations that are relevant to the choice (and attempted implementation) of the revenue profile in the medium term. Since it utilizes a somewhat idiosyncratic, though quite natural, use of terms, this is spelt out first. 6.9 'Revenue effort8 is usually taken in the tax literature to be the number here called 'revenue performance', typically the share of revenue in GDP. The common usage implicitly assumes that the input (which is here called effort) is exactly measured by the output - a low level of achieved revenue is taken to reflect a proportionately low level of the effort to raise that revenue. Without wishing to deny that there is a positive relation between the two, it seems implausible that this relationship should be linear, as opposed to reflecting some sort of diminishing returns. We make the plausible assumption, instead, that increased effort would lead to increased revenue, at least over a range9, but The discussion is equally valid for the closely similar but somewhat narrower concepts of tax effort and tax performance. Beyond that range, the converse will be true. The idea that there is a revenue-maximizing rate for any tax, so that any further rate rise actually reduces revenue, has been made familiar in the concept of the 'Laffer curve'. 37 at a diminishing rate. Devoting an extra ten percent of resources to collection, or raising rates by ten per cent, would increase revenue, but by less than ten percent. 6.10 It also seems plausible, and there is some evidence in support, that these diminishing returns set in more sharply if the attempt to raise performance is rapid rather than gradual, at least if this is attempted by rate rises. Conversely, lowering rates when these had been widely perceived to be unjustifiably high can improve collections by increasing the system's legitimacy and hence compliance. However, in Tanzania, while there is scope for further design improvements, it does not seem likely that these will of themselves generate substantial gains in revenue, legitimacy or compliance. 6.11 Even in the literature which presupposes a linear relationship between effort and performance, it is widely acknowledged that the slope will differ between countries, reflecting differences between them in the practical difficulties of collecting taxes. (See the discussion of the paper by Ghura above.) Once these difficulties have been taken into account (typically by regression analysis, using proxies for the various recognized dimensions of "tax-collectability"), a normalized revenue performance can be computed for a country, which acknowledges its own idiosyncratic characteristics. Any discrepancy between the normalized and actual performance is then ascribed to differences in its effort relative to the average in the sample. In particular, a low ratio of actual to normalized revenue is taken to imply a proportionately low level of effort. 6.12 There are two problems with this procedure. The first is that it assumes that the residual category "effort" is uncorrelated with the tax-collectability parameters. But this seems very unlikely, and significant correlation would obviously lead to misleading inferences. To illustrate, suppose low- income countries, facing severe difficulties in raising revenues, systematically tried harder than richer ones. Then the coefficient on per capita income would be biased downwards; a low-income country whose effort was high relative to the overall average but low relative to the low-income group would be categorized as low effort relative to both. If the correlation had the opposite sign, effort levels would again be biased, and the regression would now exaggerate the benefits of income growth for revenue. 6.13 The second problem is that the residual category is not really effort at all, but a composite of tax design, tax administration, compliance, and corruption. A low level of "effort" could therefore reflect unduly low tax rates or excessive exemptions; it could reflect lax and inefficient tax administration; it could reflect a culture of non-compliance; or it could reflect a high level of corruption. The latter two difficulties are often treated as two sides of the same coin, but there is a material difference between them. Poor compliance will give a tax administration problems even if it is completely free from corruption. Most tax administrations depend on a high degree of voluntary compliance by taxpayers coupled with a reliable system of enforcement, which itself requires an appropriate culture. 6.14 The effort calculation - for what it is worth - suggests low effort in Tanzania. This poses a choice. It would be possible to discard the calculation, and argue that Tanzania's structure and circumstances make it appropriate to settle for a low level of revenue generation for the time being. This argument would have to rest not on the proposition that a country in these circumstances could not raise substantially more - there are counter examples to show the contrary. It would have to rest on the proposition that such a country should not raise more, on the grounds that the damage inflicted to private sector activities, income and growth would be excessive. By extension, other countries in similar circumstances but with higher revenue collections should be encouraged to reduce their revenue effort. 6.15 The alternative is to accept the calculation, and consider ways of improving performance. Since the structure does not seem to be characterized by unduly low rates, the explanation must lie in one or more of the other components, but these imply very different strategies. Particularly difficult to tackle is the issue of a culture of non-compliance. Also, while the perception that revenue performance is poor seems naturally to imply that revenue effort should be increased, it is far from 38 clear how large an increase in effort would be justified. Indeed, it is unclear how far and how fast the revenue to GDP ratio could be raised, even if the government was to devote all available energies to raising it. In principle, it would be possible to carry out a cost-benefit analysis, weighing the marginal costs (including those borne by the private sector) of increased efforts against the benefits. In practice, the information for such an analysis is lacking. 6.16 In present circumstances, where donors are prepared to fund Tanzania government operations very generously, the pressing issue may be one of absorptive capacity, rather than the contribution of domestic revenue. In other words, even given the low level of domestic revenue mobilization, donor supplementation could be carried to the point at which severely diminishing returns to government spending would set in. In this context, raising domestic revenue may be a low priority. If it were possible to raise revenue performance reliably and quickly by adopting certain clear cut measures to increase effort, then there would be a strong case for leaving the revenue picture alone, and concentrating on other matters, until such time as absorptive capacity ceased to be a problem, and/or donor flows began to subside. However, there does not appear to be any quick fix of this type, so that prudence suggests that the attempt to improve revenue performance should not be delayed until funding shortfalls have already become an issue. 39 7. RECOMMENDATIONS 7.1 SYSTEMIC ISSUES IN BUDGET MANAGEMENT 7.1 One of the main objectives of the Tanzania PER process is to support the improvement of budget management. This goal goes beyond ensuring sustained fiscal balance consistent with macroeconomic stability, which Tanzania has achieved in the past five years. This chapter highlights four key systemic budget management issues in Tanzania, identifies the key challenges faced, and recommends actions to deal with them. Some of these recommendations, which were drawn during FY01 PER missions in December 2000 and May 2001 and presented to the Government of Tanzania, have already been adopted and implemented as shown in Chapter 8. 7.1.1. Strategic Allocation of Scarce Public Resources 7.2 Until FY00, strategic budget allocation primarily targeted the enhancement and protection of expenditure in the social sectors. Tanzania being a signatory to the Copenhagen Social Summit (1995) agreed to pursue the international development targets largely focused on raising and protecting expenditure allocations to the education and health sectors. Development partners likewise prioritized their support, including that provided through the Multilateral Debt Fund, to the same end. Sector development programs were designed without explicit link to overall poverty reduction outcomes or exploiting synergy with other sectors in achieving this goal. 7.3 In FY00, the focus shifted more explicitly to reducing poverty (first with TAS and then PRSP) in all its dimensions, through actions in a wide range of interrelated sector activities. This shift has entailed paying attention to reducing material poverty (income poverty) in addition to the previous emphasis on increasing social welfare. To this effect, the government's strategic expenditure allocation through the MTEF was modified to also explicitly target support for growth, particularly in rural areas, and to increase income earning opportunities for the poor. In this regard, expenditures on health and education were to be valued not only for their impact on improving social welfare but also for enhancing the capabilities of the poor to earn incomes - the human capital dimension. 7.4 There are notably three key challenges in enhancing the cohesiveness of strategic resource allocation under the new approach. One challenge is to harmonize the sector development programs, which were precedent to the PRSP, with sector-specific programming of activities as a means for achieving specific poverty reduction targets. It requires adapting the sector development programs to the poverty reduction goals in the PRSP and seeking greater cross-sector cohesion in activity programming to achieve the desired results. For the health and education sectors, the gap between the sector programs and the requirements for achieving social welfare targets (and human capacity building) in the poverty reduction strategy in broad terms is not wide. However, it will require two types of deliberate actions. One is a clearer mapping of inputs to outcomes, and the other is a more deliberate focus on disadvantaged locations and socio-economic groups. The rest of the sectors can anticipate the need for harmonization as they prepare their development programs. This is particularly urgent for the agriculture and transportation/roads strategies, currently under preparation. 7.5 Second is the need to resolve the emerging tension between sectoral and central agencies over responsibilities and authority for strategic expenditure planning. Sector ministries maintained a significant autonomy in negotiating external financial support with donors, often within a sector development program but largely outside the overall strategic expenditure allocation framework. Project support to sectors was channeled largely outside the exchequer system, weakening the integrity of the budget process and management. The process of integrating external resources into the cross-sector Medium Term Expenditure Frame (MTEF) and budget has changed the relations between the budgetary authorities and spending units with respect to the autonomy of sectors to pursue their own ends. The tension can be resolved partly by delineating and specifying the 40 respective roles of sectors and central ministries in the budgeting process to minimize unproductive competition and formalize the evolved process in well-documented budgeting procedures. Furthermore an inclusive planning process, involving the budget authorities, sector ministries and donors inter alia, as currently being done under the PER Working Group provides a useful mechanism for harmonizing dialogue. 7.6 Third is the need to more explicitly involve the local authorities (LA) in the national budgeting process and strategic expenditure allocation decisions. The share of budget allocated to the LAs is approximately 17 percent (excluding large off-budget donor support). These sub-national entities have the primary responsibility for delivering basic services (e.g. primary education, primary health care, agricultural extension services and rural infrastructure) involving significant shares of total spending in the priority areas (e.g. nearly 55 percent of total spending on education). Prior to the inception of the Local Government Reform Program, the local authority delivery system was essentially a deconcentration of the sector programs under the relevant sector ministry. With more autonomy envisaged for local authorities under the reform program, there is greater need for integrating their budgeting processes into the cross-sector and sector MTEF preparation. 7.7 Two measures are needed in moving towards this direction. One is the harmonization of the fiscal calendars. The LAs operate on a calendar year in contrast to July-June fiscal year for the central government. This difference leads to some disconnect in the planning process and lack of accurate foresight for expenditure planning for half of the operating year. The uncertainty in budgeting is particularly acute since LAs largely depend on the central budget subventions (conditional grants, capital transfers and shared revenue), accounting on average for about 76 percent of their financing sources. New budget guidelines to LAs provide guidance for expenditure planning in an MTEF approach, but have still to be implemented. The other measure is devising a mechanism for involving the 113 LAs in the MTEF process, both in terms of capacity requirements and logistics for participation. To enable grass root participation in the budgeting process, it would be necessary to begin the process early. The regional administration secretariats and PORALG would consolidate the inputs from the sub-national levels and use these inputs in the preparation of the national budget guidelines (for prioritization) and subsequently local authority MTEFs. The budgetary authorities at both levels would need to ensure consistency with both the projected national resource envelope and agreed public service delivery standards. 7.1.2. Enhancing the predictability of resource flows for improved service delivery 7.8 The cash budget system was introduced in FY96 with the primary aim of instilling fiscal discipline in spending units and restoring sustainable budget balance by limiting spending to available cash. There is no doubt about the success of this policy, having helped the country achieve sustained macroeconomic stability. Tanzania has been able to keep its fiscal balance either in surplus or sustainable deficits, since the introduction of the cash budget system. Combined with a tight monetary policy, which precluded government borrowing from the central bank to finance its expenditures, it enabled a sharp reduction in inflation over the same period to the current single digit levels. It is worth noting that the introduction of this system came immediately after Tanzania had gone through three years of very poor fiscal performance (FY92-FY95), during which the government lived well beyond its means. 7.9 Five years after the system became operational, all spending units, at national and sub-national levels, now express concerns about the stringency of the cash budget system. During the FY01 PER mission in December 2000, concerns were raised by all sector ministries and 14 local authorities visited. The main problems cited revolve around uncertainty faced by implementation units in planning their spending as monthly disbursements were based on actual revenue collection and disbursement of donor 41 funds, resulting in under-funding of requirements at the time large needs arise. The pressure from such stringency has led in some cases to commitments outside the official system and the build up of payments arrears. A comparison of expenditure on first claim items (debt service and salaries) with other charges and development expenditure for FY99 showed as expected that first claims have been largely constant and fully funded. On the other hand, development expenditure and operating charges were treated as residual, whenever there were cash shortfalls. In FY00, problems with the technical operation of the cash budget system led to a temporary lack of synchronization between the exchequer releases and availability of cash (from domestic revenue and external budget support) as illustrated in figure 1. There has been a very significant reduction in the gap in FY01. 7.10 There are three main types of budgetary stresses associated with large variations in the availability of cash and the associated under-funding of activities, which contribute to pressures for undermining prudence in budget management. Fig 1: Monthly Fiscal Deficit/Surplus (Tshs billion) 140.0 120.0 100.0 - IIMonthly Exchequer Issues 0 80.0 .Ei Total Resources Available 60.0 - 40.0- 20.0- 0. 0 o~~~~ CD a a a~o 0 a 0 a a - 0 - 0 0............ 0) 0 ) 0 )0) 0 0 L to 0 0 , 0 0 0 0 0 0 0 0 0 0 Z L-i 1 0% 0 6% 0 5% 04% 0 8% 0 8% 0 7% 0 7% 0 7% TRA 00/1 04% 03% 04% 03% 00% 00% 0 0. 0 0% P3arastatal 1aes 000% 0 6% 0 6% 0 6' 0 8% 0 0% 0 09. 00% 00% Retention Scheme 00% 03% 03% 05% 0 3% 0 5% 05% 05% 05% 00% Other CharLes 45% 20% 17% 31% 31% 44% 44% 4 5% 48% De, elopment expenditure 09% 2 0. 38% 25% 52% 4 1% 3.8% 27% 2 1% Vr-jcts 0 9% 2 0% 38% 25% 5 2'. 40% 3 7% 2 6% 21% L0cal 02% 05% 05% 03% 0 3% 04% 04% 0 4% 04% Foreign 07% l 5% 3 3% 21% 4 % 3 6% 3 3% 2 3% l 7% Other Prouramme Assistance 0 0% l 0% 0 0/ 00% 0 0%' 00% 00% 00% 0 0. O erall deficit (checks issued) - before grants 0 1% -1 7% -2 3% -2 3% -5 8% -5 1% -5 3% -38% -33% Grants 14% 27% 24% 31% 4 2% 54% 46% 3 5% 28% impon suppori *OGL 09/ 1 6% 00% 1 3% 1 1% 2 3% 1 7% 1 2% l 1% project grants 05% 2% 24% 3 8% 30-. 2 6% 23% 1 6% l 1% HIPC interim relief 0 2% 0 6% 06% 0 6% 06% Oserall deficit tchecks issued) - after grants 14% 1 0% 02% 08% -3 ip 0 3- -05% -0 3% -0 5% Adjustment .25% 009,. 01% -0 8% 0 0% 0 0% ( 0% Tb% 0 0% Ove,all defcit (checks cleared) -3.3% .0% 0.3% 0.0% -1.6% 0.3% -0.5% -0.3% -0.5% Financing 1.1% -1.0% 0.3% 0.0% 1.6% -0.3% 0.5% 0.3% 0.5% Focign -10/ 02%.1 13% -0 3% l 5% 0 2% 06% 06% 06% impon suppon loans 02% l 1% 16% 0 7% 0 8% 09?. 12% 08% 07% project lan 02% 04% 12% 0 3% l9%, 1 0% 1 0% 0 6% 06% anonization -1 5% -1 :16 -1 5% -) 3 -1 2% -3 8% -15% -09% -0 8% Local (net 21% -12% -1 0% 04% 01% 00'.6 00/6 0 0% 00% Bank nec 1 8% -3 1% -0 5% 01% 0 1% 00% 0 0% 00% 00% Non-bank 02% -0 3% -05% 0 2% 0 0% 0 0% 000% 0 0% 00% borros ing -02% 0.1% 0 6% 08% 0 0i 00% 0 0% 00% 00% amonIzallon -03% 00% -3 3% .07% -34%1 0 0% 00% 00% 000% Pris,aisation Funds 0 5% 06% 0 0% 0 19. 0 0 0 3% 0 l% 0 0% 00% Chan.e in Arrears -08% 00% 00.. 0M'. -08" 090%' 0 0% 00% 3.394,100 4.235,551 4.929,469 5.532,096 6,884.940 7.664,187 8.482,19(1 9351,997 10.310,999 /'rrma. /...r...,ea inued/ 2 0% 0 9% -02% -0 7% -4 0-i -30. -3 8% . 26. -2 2% ( 'ermnem emyt h ' i'nued) 3 09' 3 2'.. 3 5% 02 -0 6%%'0 -- i .1 -. -2% Sorc TaNbe 5,- 94 Table 6a: SECTORAL - RECURRENT EXPENDITURE, 1995/1996-200001 (TSh. Billion) VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 BUDGET BUDGET BUDGET BUDGET BUDGET BUDGET ADMINISTRATION 23 Accountant General 22.5 27 Registrar of Political Parties .0 .0 3.4 2.6 2.7 2.8 30) Presidents Office & The Cabinet 6.7 9.5 10.5 15.7 19.6 24.6 26 & '1 Vice President .2 .5 .8 .9 1.0 1.4 32 Ci% il Ser\ ice Dept. 1.6 2.0 2.4 3.7 3.4 43 33 Ethics Secretariat .0 .1 .2 .2 .2 .2 34 ForeiLn Affairs 11.8 10.5 13.3 18.3 17.1 20.5 35 Perm. Comm. Enq. .1 .1 .2 .3 .2 .3 36 Ci%il Ser\ ice Comm. .1 .1 .1 25 & 37 Prime Ministers Office 4.9 3.9 9.1 14.1 4.7 4.9 40 Judiciary 3.0 3.6 4.6 5.4 7.9 8.8 41 Justice & Constitutional Affairs .6 .8 .8 2.2 1.1 1.5 42 0111ce Of The Speaker 2.3 3.2 3.6 5.3 5.9 6.6 45 Exchequer and Audit .4 .5 .7 .8 1.1 1.8 50 Finance 22.1 20.5 33.5 51.1 49.7 51.3 z; Home Affairs 1.4 1.6 2.0 4.6 5.8 5.6 54 Radio Tanzania .3 .3 .3 1.2 1.2 1.6 55 In\ estment Promotion .2 .1 .7 .6 .2 .0 56 MORALG .. .. .. 6.2 5.3 17.5 57 Defence & National. 1.2 1.6 2.4 4.5 2.3 4.1 59 La\\ Reform. Commi. .1 .1 .1 .1 .1 .2 60 Industrial Court Of Tanzania. .1 .1 .1 .1 .2 1 61 Electoral Commision 8.6 .9 1.4 3.0 16.2 30.9 63 Local Govt. Ser\ i. Comm. .2 .1 .1 .2 .2 .3 64 Information and Broad. .6 .. .. 1.4 66 Planning Commission .7 .6 .9 2.7 1.9 2.3 Sub Total 67.2 60.6 91.4 145.2 148.3 192.0 DEFENCE AND SECURITY 28 Police Force 17.8 23.8 28.8 29.7 34.9 42.0 29 Prison Ser\ices 11.0 12.2 17.2 16.4 19.4 210.9 38 Defence 46.9 63.8 72.5 73.2 81.7 89.2 39 National Service 5.7 7.5 9.5 11.4 12.1 12.5 Sub Total 81.5 107.3 127.9 130.8 148.1 164.6 SOCIAL SERVICES 46 Education 10.5 12.1 17.1 19.6 21.0 28.6 49 Water. 2.0 1.5 2.8 6.4 3.4 5.9 52 Health 13.3 18.8 25.8 37.2 33.8 40.1 53 Comm. Dev.Wome. Aff. .7 .9 1.4 1.8 2.3 20 65 Labour Youth Develop. 1.3 1.3 1.5 2.0 3.0 3.2 67 Teachers Ser\ ice Comm. .1 .1 .1 .1 .2 1.5 68 Science. Tech.& H Ed 17.3 21.3 22.9 32.8 32.3 44.9 70-89 Regions 85.3 99.8 118.3 120.9 168.6 206.5 Sub Total 130.5 155.8 189.8 220.8 264.6 332.8 ECONOMIC SERVICES 47 Works 21.7 2.3 24.4 4.9 38.0 56.0 48 Lands. Hous..& Urb. Dev. 1.3 .6 1.8 3.4 3.6 4.3 58 Energ and Minerals .2 .5 .9 2.0 3.0 3.1 62 Comm & Transport .7 2.3 5.7 13 4 10.7 10.5 Sub Total 23.9 5.7 32.8 23.7 55.3 73.8 PRODUCTIVE 24 & 43 Agriculture & Li\estock, Coop. & Marketing 11.8 11.9 13.9 19.3 12.3 12.1 44 Industries and Trade 1.6 1.4 2.9 4.6 3.6 4.1 69 Tour.. Nat. Res. & En\. 5.5 2.3 2.8 7.9 8.7 13 5 Sub Total 19.0 15.5 19.6 31.9 24.7 29.6 CFS 20 State house .4 .9 .8 .9 1.0 1.1 22 Public Debt 171.7 217.7 207.1 238.0 294.4 287.5 Sub Total 172.1 218.6 207.9 238.9 295.3 288.6 GRAND TOTAL 494.1 563.5 669.5 791.2 936.3 1081.5 Note Data for FY0i-all \otes are from the Flash Reports Source: MoF. Appropriations Accounts and Expenditure Flash Report 95 Table 6b: SECTORAL-DEVELOPMENT EXPENDITURE (TShs. Billion) VOTE 1VOTE IOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 BUDGEIBUDGEBUDGEIBUDGEYUDGEtBUDGET ADMINISTRATION 23 Accountant General .0 .0 .0 .0 .0 1.1 27 Registrar of Political Parties .0 .0 .0 .0 .0 .0 30 Presidents Office & The Cabinet .2 .3 .4 .0 3.6 10.4 26 & 31 Vice President .0 .0 1.8 2.4 5.9 8.3 32 Civil Sers ice .2 .1 1.4 .4 3.9 6.4 33 Ethics Secretariat .0 .0 .0 .0 34 Forcign Affairs .0 .1 .1 .0 0 .0 35 Permanent Comm. of Enquiry .0 .0 .0 .0 .0 .0 36 Cis il Service Committce .0 .0 .0 .0 .0 .0 37 Prime's Office 5.0 3.5 17.4 .1 34 4.4 40 Judiciary .0 .0 .0 .0 .0 .8 41 Justice .0 .2 .3 .2 .0 .0 42 Speaker's Office .0 .1 .5 .0 .0 .5 45 Exchequer & Audit Department .0 .0 .0 .0 .0 .6 50 Finance 35.4 56.2 83.3 17.4 6.4 9.8 si Home Affairs .7 .0 .3 .0 .0 .0 54 Radio Tanzania .5 .0 .8 .0 .4 .3 55 Investment Promotion .0 .0 .0 .0 .0 .0 56 Regional Adminisstration and Local Gov. .0 .0 .0 .0 17.4 27.1 57 Defence & National 2.7 1.9 1.0 1.0 1.0 1.0 59 Lawv Reforin Comm. .0 .0 .0 .0 .0 60 Industries Court of Tanzania .0 .0 .0 .0 .0 61 Electoral Commission .0 .0 .0 .8 .8 63 Local Go% t Servece Comm .0 .0 .0 .0 .0 64 Information ,3 .0 .0 .0 .0 66 Planning Comm. 1.7 1.4 7.4 1.5 1.3 2.5 Sub Total 46.8 63.8 114.7 23.8 44.2 72.0 DEFENCE AND SECURITY 28 Police Force .8 .9 4 .0 .0 .0 29 Prison Services . .4 .5 .2 .0 .0 .0 38 Defence .0 .0 .0 .0 .0 .0 39 National Service .0 .0 .0 .0 .0 .0 Sub Total 1.3 1.3 .6 .0 .0 .0 SOCIAL SERVICES 46 Education 9.0 4.1 7.8 10.9 16.7 22.1 49 Water 10.3 1.3 7.6 30.7 30.8 29.6 52 -ealth 8.7 4.0 26.0 21.5 23.2 34.2 53 Comm. Dév & W 1.0 2.4 3.3 2.4 2.6 1.6 65 Labor Youth 2.4 2.4 4.2 1.7 2.1 3.1 67 Teachers' Service Comm .0 .0 .0 .1 0 .> 68 Science. Tech 5.4 2.8 5.2 4.7 5.1 4,2 70 & 89 Regions 19.4 10.9 21.7 29.2 29.2 37.0 Sub Total 56.2 27.9 75.8 101.0 109.7 131.8 ECONOMIC SERVICES 47 Works & Trans 14.8 8.4 45.6 51.1 35.8 31.7 48 Lands. Housing .9 .7 1.1 .0 .5 .9 58 Energ %and MineraIs .1 5.6 24.1 23.8 21.2 35.4 62 Comm. & Transport 5.4 4.0 27.0 9.2 10.0 22.4 Sub Total 21.2 18.6 97.7 - 84.2 67.5 90.4 PRODUCTIVE '4 & 43 Agr. & Livestock 1.1 3.1 5.3 23.3 28.1 16.7 44 Industries & Trade 1.3 .7 .4 .3 I.2 .4 69 Tourism. Nat. 2.2 1.9 6.1 7.7 3.7 5.5 Sub Total 4.6 5.7 11.8 31.2 33.0 22,6 CONSOLIDATED FUND SERVICE 20 State House .0 .0 .0 .0 .0 .0 22 Public Service .0 .0 .0 .0 .0 .0 Sub Total .0 .0 .0 .0 .0 .0 GRAND TOTAL 130.1 117.4 300.5 240.2 254.3 316.9 Note: Data for FYOI-all votes are from the Flash Reports Source: MoF. Appropriations Accounts and Expenditure Flash Report 96 Table 6c: SECTORAL - TOTAL EXPENDITURE (TShs. Billion) VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 BUDGET BUDGET BUDGET BUDGET BUDGET BUDGET ADMINISTRATION 23 Accountant General .0 .0 .0 .0 .0 23.6 27 Registrar of Political Parties .0 .0 3.4 2.6 2.7 2.8 30 Presidents Office 6.9 9.8 10.9 15.7 23.2 35.0 26 & 31 Vice President .2 .5 2.7 3.3 7.0 9.7 32 Civil Service Dept. 1.8 2.1 3.8 4.0 7.3 10.7 33 Ethics Secretariat .0 .1 .2 .2 .2 .2 34 Foreign Affairs 11.8 10.6 13.3 18.3 17.1 20.5 35 Perm. Comm. Enq. .1 .1 .2 .3 .2 36 Civil Ser% ice Comm. .1 .1 .1 .2 . 2 37 Prime Ministers Office 9.9 7.3 26.5 14.2 8.1 9.3 40 Judiciarn 3.0 3.6 4.6 5.4 7.9 9.6 41 Justice .6 1.0 1.2 2.4 1.1 1.5 42 Office Of The Speaker 2.4 3.3 4.0 5.3 5.9 7.1 45 Exchequer and Audit .4 .5 .7 .8 1.1 2.3 50 Finance 57.6 76.7 116.8 68.5 56.1 61.1 51 Home Affairs 2.1 1.6 2.3 4.6 5.8 5.6 54 Radio Tanzania .8 .3 1.1 1.2 1.6 1.9 55 Investment Promotion .2 .1 .7 .6 .2 .0 56 Regional Adminisstration and Local .. .. .. 6.2 22.7 44.6 57 Defence & National. 3.9 3.5 3.4 5.5 3.3 5.1 59 Law Reform. Commi. .1 .1 .1 .1 .12 60 Industrial Court Of Tz. .1 .1 .1 .1 .2 .3 61 Electoral Commision 8.6 .9 1.4 3.8 17.0 30.9 63 Local Govt. Servi. Comm. .2 1 .1 .2 .2 .3 64 Information and Broad. .9 .. .. 1.4 .0 .0 66 Planning Commission 2.4 2.0 8.3 4.1 3.2 4.8 Sub Total 114.0 124.4 206.1 169.0 192.5 264.0 DEFENCE AND SECURITY 28 Police Force 18.7 24.6 29.1 29.7 34.9 42.0 29 Prison Services I 1.5 12.7 174 16.4 19.4 20.9 38 Defence 46.9 63.8 72.5 73.2 81.7 89.2 39 National Service 5.7 7.5 9.5 11.4 12.1 12.5 Sub Total 82.7 108.7 128.5 130.8 148.1 164.6 SOCIAL SERVICES 46 Education 19.4 16.2 24.8 30.4 37.7 50.8 49 Water. 12.3 2.8 10.4 37.1 34.2 35.5 52 Health 22.1 22.8 51.7 58.7 57.0 74.3 53 Comm. Dev.Wome. AfT. 1.8 3.3 4.7 4.1 4.9 3.6 65 Labour Youth Develop. 3.7 3.6 5.7 3.7 5.1 6.2 67 Teachers Service Comm. .1 .1 .1 .1 .2 1.5 68 Science. Tech.& H Ed 22.7 24.2 28.1 37.5 37.4 49.1 70 & 89 Regions 104.7 110.7 140.0 150.1 197.8 243.5 Sub Total 186.7 183.7 265.6 321.8 374.3 464.6 ECONOMIC SERVICES 47 Works. 36.5 10.7 70.0 56.1 73.8 87.7 48 Lands. Hous..& Urb. Dev. 2.2 1.3 2.8 3.4 4.1 5.2 58 Energy and Minerals. .3 6.1 25.1 25.8 24.2 38,5 62 Comm.& Transport 6.0 6.3 32.7 22.6 20.7 32.8 Sub Total 45.0 24.3 130.6 107.9 122.8 164.2 PRODUCTIVE 24 & 43 Agriculture & Livestock 12.9 15.0 19.2 42.6 40.4 28.8 44 Industries and Trade 2.9 2.0 3.3 5.0 4 8 4.5 69 Tour.. Nat. Res. & Env. 7.8 4.2 8.9 15.6 12.5 19.0 Sub Total 23.6 21.3 31.4 63.1 57.7 52.3 CONSOLIDATED FUND SERVICE 20 State house .4 .9 ,8 .9 1.0 1.1 22 Public Debt 171.7 217.7 207.1 238.0 294.4 287.5 Sub Total 172.1 218.6 207.9 238.9 295.3 288.6 GRAND TOTAL 624.2 680.9 970.1 1031.5 1190.7 1398.3 Note: Data for FYO1-all votes are from the Flash Reports Source: MoF. Appropriations Accounts and Expenditure Flash Report 97 TABLE 7a: ACTUAL RECURRENT EXPENDITURE BY VOTE AS THE SHARE OF TOTAL RECURRENT EXPENDITURE, FY96-FYOI VOTE VOTE HOLDER 1995196 1996/97 1997/98 1998/99 1999/00 2000/01 ADMINISTRATION 27.0 Registrar of Political Parties 0.0 0.0 0.5 0.3 0.2 0.3 30.0 Presidents Office 1.6 1.7 1.5 2.0 2.2 2.4 31.0 2nd Vice President 0.0 0.1 0.1 0.1 0.1 0.1 32.0 Civil Service Dept. 0.3 0.3 0.4 0.5 0.4 0.4 33.0 Ethics Secretariat 0.0 0.0 0.0 0.0 0.0 0.0 34.0 Forcien Affairs 3.1 2.1 2.2 2.5 1.9 2.0 35.0 Perm. Comm. Enq. 0.0 0.0 0.0 0.0 0.0 0.0 36.0 Civil Service Comm. 0.0 0.0 0.0 0.0 0.0 0.1 37.0 Prime Ministers Office 1.1 0.7 0.8 0.8 0.5 0.5 40.0 Judiciary 0.6 0.6 0.7 0.7 0.7 0.9 41.0 Justice 0.1 0.1 0.1 0.2 0.1 0.1 42.0 Office Of The Speaker 0.6 0.5 0.5 0.7 0.7 0.6 45.0 Exchequer and Audit 0.1 0.1 0.1 0.1 0.1 0.2 50.0 Finance 3.3 3.4 4.1 6.6 5.5 4.0 51.0 Home Affairs 0.3 0.3 0.3 0.6 0.5 0.5 54.0 Radio Tanzania 0.1 0.0 0.0 0.1 0.1 0.1 550 Investment Promotion 0.0 0.0 0.1 0.1 0.0 0.0 56.0 Regional Adminisstration and Local Gov. .. .. .. 0.4 1.9 0.4 57.0 Defence & National. 0.3 0.3 0.2 0.4 0.3 0.4 59.0 Law Reform. Commi. 0.0 0.0 0.0 0.0 0.0 0.0 60.0 Industrial Court Of Tz. 0.0 0.0 0.0 0.0 0.0 0.0 61.0 Electoral Commision 4.9 0.2 0.2 0.4 0.7 3.0 63.0 Local Govt. Servi. Comm. 0.0 0.0 0.0 0.0 0.0 0.0 64.0 Information and Broad. 0.1 .. .. .. .. 0.0 66.0 Planning Commission 0.1 0.1 0.1 0.3 0.2 0.2 Sub Total 16.8 10.7 12.3 16.9 16.1 16.3 DEFENCE AND SECURITY 28.0 Police Force 4.3 4.2 3.7 3.8 3.7 4.1 29.0 Prison Services 2.5 2.1 2.2 2.1 1.8 2.0 38.0 Defence 11.1 11.1 9.8 .. 8.9 8.7 39.0 National Service 1.3 1.3 1.3 1.5 1.2 1.2 Sub Total 19.1 18.7 17.0 16.9 15.6 16.1 SOCIAL SERVICES 46.0 Education 2.5 2.1 2.7 2.5 2.3 2.8 49.0 Water. 0.4 0.3 0.4 0.8 0.4 0.5 52.0 Health 2.7 2.8 3.8 4.8 3.6 3.9 53.0 Comm. Dev.Wome. Aff. 0.2 0.2 0.2 0.2 0.2 0.2 65.0 Labour Youth Develop. 0.3 0.2 0.2 0.3 0.2 0.3 67.0 Teachers Service Comm. 0.0 0.0 0.0 0.0 0.0 0.1 68.0 Science. Tech.& H Ed 3.9 3.4 3.1 4.2 3.5 4.4 70 & 89 Regions 18.4 17.3 17.2 16.5 17.9 19.9 Sub Total 28.4 26.2 27.6 29.3 28.1 32.1 ECONOMIC SERVICES 47.0 Works. 1.2 4.1 2.6 0.8 3.3 5. 48.0 Lands. IIous..& Urb, Dev. 0.3 0.1 0.1 0.4 0.4 0.4 58.0 Encrem and Minerals. 0.0 0.1 0.1 0.2 0.3 0.4 62.0 Comm.& Transport 0.1 0.4 0.5 1.7 1.3 1.0 Sub Total 1.6 4.6 3.3 3.1 5.4 7.3 PRODICTIVE 43.10 Agriculture & Livestock 2.4 2.1 1.8 2.3 0.8 1.1 44.0 Industries and Trade 0.5 0.2 0.4 0.6 0.4 0.4 69.0 Tour.. Nat. Res. & EIn. 1.3 0.4 0.3 1.0 0.8 ).1 Sub Total 4.1 2.7 2.6 4.0 2.1 2.7 CONSOLIDATED FUND SERVICE 20.0 State house 0.1 0.1 0.1 0.1 0.1 0.1 22.0 Public Debt 29.8 36.9 37.1 29.7 32.5 25.5 Sub Total 29.9 37.0 37.2 29.9 32.6 25.6 GRAND TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Source: Table 6a. 6b. and 6c 98 TABLE 7b: ACTUAL DEVELOPMENT EXPENDITURE BY VOTE AS THE SHARE OF TOTAL DEVELOPMENT EXPENDITURE, FY96-FYOI VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 DEV. DEV. DEV. DEV. DEV. DEV. ADMINISTRATION 270 Registrar of Political Parties 00 0.0 0.0 00 00 00 300 Presidents Office 0.8 0.5 0 1 0.0 34 82 31 0 2nd Vice President 00 00 0.3 0.7 1 5 07 320 Civil Service Dept 02 02 0.2 00 7.8 95 330 Ethics Secretariat 0.0 00 00 0.0 00 00 340 Foreign Affairs 00 00 00 0.0 00 00 350 Penn. Comm. Enq 00 0.0 00 00 0.0 00 360 Civil Service Comm 00 00 0.0 00 0.0 0.0 370 Prime Ministers Office 43 85 73 0.1 2.8 06 400 Judiciary 00 00 0.0 00 00 1.3 41.0 Justice 0.0 0.5 0.0 0.0 0.0 00 420 Office Of The Speaker 0 1 02 02 0.0 00 0.0 450 Exchequer and Audit 00 00 00 00 0.0 0.1 500 Finance 35 37.7 90 00 1 5 1.4 510 lome Affairs 06 00 00 0.0 0.0 00 540 Radio Tanzania 27 0.0 09 00 0.3 05 550 Inxestment Promotion 00 00 00 00 00 00 56 0 Regional Adminisstration and Local Gov 00 00 00 0.0 00 04 570 Defence & National 64 0.2 43 00 00 1.6 590 Lax\ Reform. Commi 00 0.0 00 00 00 0.0 600 Industrial Court Of Tz. 00 0.0 00 00 00 0.0 61 0 Electoral Commision 00 00 0.0 0.0 0.0 63 0 Local Govt. Servi. Comm 0.0 00 0.0 0.0 00 0.0 640 Infonnation and Broad. 06 0.0 00 0.0 00 660 Planning Commission 2 1 1.2 1 7 0.6 1 4 34 Sub Total 21.4 49.0 24.2 1.4 18.8 27.6 DEFENCE AND SECURITY 280 Police Force 1.0 07 02 00 0.0 00 290 Prison Services 0.3 02 00 00 00 00 380 Defence 0.0 00 00 00 00 00 39.0 National Service 00 00 00 00 00 00 Sub Total 1.3 0.9 0.2 0.0 0.0 0.0 SOCIAL SERVICES 460 Education 46 87 69 93 108 32 49.0 Water, 0.6 0.5 06 17.3 8.1 3.2 520 Health 0.6 09 63 105 96 39.9 530 Comm. Dev.Wome Aff 05 00 0.0 1 4 1.3 2.3 65.0 Labour Youth Develop. 15.6 6.5 1 4 0.3 06 0 1 67(0 Teachers Service Comm 00 00 00 00 00 66 6S0 Science. Tech & H Ed 25 42 09 1 9 1 5 103 70 & 89 Reiions 13.0 5 I 65 89 00 103 Sub Total 37.5 26.0 22.5 49.6 31.8 67.2 ECONOMIC SERVICES 470 Works 229 83 00 173 194 4.1 48 0 Lands. I oUs .& Urb De\ 02 00 0.0 00 00 00 58 0 Enerp\ and Minerals 00 3.2 77 14.6 93 02 620 Comm & Transport 00 10.2 32.4 8 3 94 0.0 Sub Total 23.1 21.7 40.1 40.2 38.1 4.3 PRODUCTIVE 430 Agriculture & Livestock 59 03 61 86 Il 1 09 44(0 Industries and Trade 29 0.1 03 01 0.3 00 690 Tour. Nat Res & Env 79 21 65 0.1 00 0.0 Sub Total 16.7 2.5 13.0 8.8 11.3 0.9 CONSOLIDATED FUND SERVICE 200 State house 0.0 00 00 0.0 00 00 220 Public Debt 00 0.0 00 0.0 00 0(0 Sub Total 0.0 0.0 0.0 0.0 0.0 0.0 GRAND TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Source: Table 6a. 6b. and 6c 99 TABLE 7b: ACTUAL TOTAL EXPENDITURE BY VOTE AS THE SHARE OF TOTAL EXPENDITURE, FY96-FYO1 VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 TOTAL TOTAL TOTAL TOTAL TOTAL TOTAL ADMINISTRATION 270 Registrar of Political Parties 0.0 0.0 04 0 3 0 1 0.3 300 Presidents Office 1.5 16 1.4 1.7 2.3 28 310 2nd Vice President 00 01 0 1 02 03 02 320 Civil Service Dept 03 0.3 03 04 1.2 1.0 33 0 Ethics Secretariat 00 0.0 00 0.0 00 00 340 Foreign Affairs 30 2.0 20 22 1 7 1.8 350 Perm Comm. Enq 00 00 00 00 0.0 0.0 360 Ci% il Service Comm 00 00 00 00 00 0 0 370 Prime Ministers Office 1.3 1 2 1 5 07 08 0.5 400 Judiciary 0.6 06 06 06 0.6 0.9 41 0 Justice 0.1 0.2 0.1 02 01 01 420 Office Of The Speaker 05 0.5 05 0.6 06 06 45 0 Exchequer and Audit 0.1 0.1 01 01 0.1 0.2 500 Finance 33 56 47 58 5.1 3.8 51 0 Home Affairs 0.3 03 02 05 0.5 05 54 0 Radio Tanzania 02 00 01 0.1 0.1 0.1 550 Investment Promotion 00 00 0 1 0.1 00 0.0 560 Regional Adminisstration and Local Gov. . .. 0.3 1.7 0.4 570 Defence & National 05 03 07 0.3 02 05 59.0 Law Reform. Commi 0.0 00 00 0.0 00 0.0 600 Industrial Court Of Tz 00 00 00 0.0 0.0 0.0 61 0 Electoral Commision 4.7 02 02 .. 06 2.8 63.0 Local Govt. Servi. Comm 00 00 00 00 00 0.0 640 Information and Broad. 0.1 660 Planning Commission 02 02 03 0.4 0.3 0.4 Sub Total 17.0 13.1 13.6 15.0 16.4 16.9 DEFENCE AND SECURITY 280 Police Force 4 1 39 3 3 3 3 3 3 3 9 29.0 Prison Services 24 2.0 20 1 8 1.6 1.9 380 Defence 10.7 10.4 87 7.9 8.2 390 National Service 12 12 12 1.3 II 1.2 Sub Total 18.4 17.6 15.1 14.8 14.0 15.1 SOCIAL SERVICES 460 Education 26 2 5 32 3.3 3 3 28 490 Water. 04 0.3 04 29 1 2 0.8 520 Iealth 27 2.7 4 1 5.5 43 60 530 Comm Dev.Wome. Aff 0.2 0.1 02 04 0.3 0.3 650 Labour Youth Develop. 09 06 03 0.3 02 03 67.0 Teachers Service Comm 00 00 00 0.0 00 0.1 68.0 Science, Tech.& H Ed 39 34 29 39 3 3 45 70 & 89 Regions 18.2 165 160 156 160 193 Sub Total 28.8 26.2 27.1 31.8 28.5 34.1 ECONOMIC SERVICES 470 Works 21 43 23 29 50 54 4810 Lands. lous.& Urb De% 03 0 1 01 0.3 04 04 580 Energy and Minerals 00 03 09 2.0 1 3 03 620 Comm & Transport 01 10 40 2.5 22 1.0 Sub Total 2.5 5.7 7.3 7.7 8.9 7.1 PRODUCTIVE 43 0 Agriculture & Livestock 25 2 0 23 3 I 1.9 II 440 Industries and Trade 06 02 04 05 04 04 690 Tour. Nat Res & En% 16 05 10 0.9 08 1 1 Sub Total 4.6 2.7 3.7 4.6 3.1 2.6 CONSOLIDATED FUND SERVICE 200 State house 01 01 01 01 01 01 220 Public Debt 286 346 33 1 261 290 240 Sub Total 28.7 34.7 33.2 26.2 29.1 24.1 GRAND TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Source: Table 6a. 6b. and 6c 100 TABLE 8a: ACTUAL RECURRENT EXPENDITURE AS A PERCENTAGE OF BUDGETED EXPENDITURE BY VOTE, FY95-FYO1 VOTE VOTE HOLDER 1995/96 1996/97 1997(98 1998/99 1999100 2000101 ADMINISTRATION 270 Registrar of Political Parties 100.1 100.4 49.6 988 300 Presidents Office 996 100.0 100.0 990 98.7 100.4 SI 0 2nd Vice President 90.8 99.9 90.5 99.8 1000 1000 720 Civil Service Dept 880 1006 101.3 100.0 996 99.9 33 0 Ethics Secretariat 100.3 98.6 97.8 82 8 99 8 340 Foreign Affairs 1119 114.1 1146 105.7 970 974 35 0 Pern Comm. Enq 93.1 100.0 100.1 99.3 952 118.1 360 Civil Service Comm 83.4 98.4 111.4 99.5 999 1000 37 0 Prime Ministers Office 999 100.2 630 42.7 100.0 103 1 400 Judiciary 89.2 100 1 982 98.8 753 996 41 0 Justice 76.9 999 105.7 89.7 858 103 1 42.0 Office Of The Speaker 101 8 99.4 990 1008 998 99.9 450 Exchequer and Audit 971 993 98.6 97 1 100.0 98 8 50 ( Finance 63 8 96 I 84.3 101.5 97.6 795 51 0 Home Affairs 85.9 983 85 1 101.4 82.7 93.1 54 0 Radio Tanzania 79.1 100.2 998 933 95.6 75.1 55 0 Investment Promotion 66.0 96.2 99.9 98 I 92 7 56 0 Regional Adminisstration and Local Gov. 44.4 314.9 22 1 57 0 Defence & National 96.3 999 70.8 68.2 1000 101.5 59 0 Law Reform. Commi. 61.2 1028 101 5 992 944 99.6 600 Industrial Court Of Tz. 35.0 99 8 100.5 997 88 1 1000 61 0 Electoral Commision 241 9 99.5 106.1 995 36.5 992 63.0 Local Govt Servi. Comm 585 998 999 99.8 990 95 9 640 Information and Broad. 71.0 660 Planning Commission 700 100.1 96.7 96.1 70.3 1000 Sub Total ' 106.0 101.1 91.5 91.0 95.9 86.8 DEFENCE AND SECURITY 280 Police Force 101.0 1000 870 999 922 998 :90 Prison Services 95.4 1000 87.9 99.9 83.4 99.7 310 Defence 100.4 995 920 1010 961 999 39 0 National Service 946 100.0 93.7 103.2 904 1000 Sub Total 99.5 99.7 90.5 100.8 93.0 99.9 SOCIAL SERVICES 460 Education 99 8 99.3 109.7 99.7 98 5 997 490 Water. 81 5 100.0 90.1 100.1 100.0 906 520 Health 87.1 844 100.4 997 94.9 99.6 53 0 Comm Dev Wome Aff. 91.7 99.9 100.0 1027 624 1000 650 Labour Youth Develop. 960 999 100.4 101 9 51 3 943 670 Teachers Service Comm. 75.9 99 8 980 998 99.7 59.2 68 0 Science. Tech.& H Ed 96.4 911 922 999 94.7 998 70 & 89 Regions 91 3 99 I 99.2 106.7 93 8 98.4 Sub Total 92.1 96.3 99.3 103.6 93.8 98.5 ECONOMIC SERVICES 470 Works 23.9 10042 726 1278 764 1001 48 0 Lands. -ous .& Urb Dcv. 93.8 72.9 324 80.1 998 970 58 0 Enerey and Minerals. 406 1000 90.5 98.3 969 119 3 620 Comm.& Transport 61 7 1000 63.3 97.0 Ill 3 1000 Sub Total 28.8 462.4 69.4 101.1 85.8 100.7 PRODtCTIVE 43 0 Agriculture & Livestock 84 8 992 895 947 602 95 8 44 0 Industries and Trade 1198 988 999 98 8 926 1007 6Q0 Tour. Nat Res & Env 97.6 993 822 100.8 850 86 2 Sub Total 91.6 99.2 90.0 96.8 73.7 92.1 CONSOLIDATED FUND SERVICE 200 State house 1029 963 1000 1000 1000 999 0 Public Debt 734 969 122.3 975 974 90.8 Sub Total 73.5 96.9 122.2 97.6 97.4 90.9 GRAND TOTAL 85.7 101.5 101.9 98.7 94.1 94.6 101 TABLE 8a: ACTUAL DEVELOPMENT EXPENDITURE AS A PERCENTAGE OF BUDGETED EXPENDITURE BY VOTE, FY95-FYO VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 ADMINISTRATION 27.0 Registrar of Political Parties 300 Presidents Office 72.9 63 8 26.3 100.0 31 0 2nd Vice President 14.8 336 27.0 320 CiNil Service Dept 232 85 8 123 03 211.5 33.0 Ethics Secretariat 340 Foreirn Affairs 00 00 35 0 Perm Comm Enq. 36 0 Civil Ser% ice Comm 37 0 Prime Ministers Office 15 7 93 5 349 1000 87.5 400 Judiciary 0.0 00 00 410 Justice 25.4 952 78 20 420 Office Of The Speaker 1000 686 36.9 45 0 Exchequer and Audit 0 (I Finance 1 8 256 89 0.0 255 51 Ilome Affairs 14.8 00 54.0 Radio Tanzania 1000 100.0 68 3 55 () Investment Promotion 56 0 Regional Adminisstration and Local Gov 0.3 570 Defence & National 42.9 42 3549 0.0 00 590 Law Reform Commi. 600 Industrial Court Of Tz. 61.0 Electoral Commision 0.0 630 Local GoN t Servi. Comm. 64.0 Infornation and Broad 35 6 660 Planning Commission 21 9 31 8 196 41 S 120.3 Sub Total 8.4 29.2 17.5 6.4 45.3 DEFENCE AND SECURITY 280 Police Force 228 328 54.7 290 Prison Services 11.3 11 7 00 38 0 Defence 00 390 National Service Sub Total 18.7 25.1 34.5 SOCIAL SERVICES 460 Education 9 5 80 8 73.2 94.5 68.7 490 Water. 1 2 154 65 62.3 278 520 Health 1 4 88 20.1 540 440 530 Comm Dev Wome Aff 9 1 0.0 0.0 65.0 51.1 650 Labour Youth Develop. 121.0 103 8 267 20.6 303 67 0 Teachers Service Comm. 680 Science. Tech.& H Ed 8.4 55.6 140 43.6 309 70 & 89 Regions 12.3 178 24.8 33.7 0.0 Sub Total 12.2 35.4 24.6 54.2 30.8 ECONOMIC SERVICES 470 Works 28.4 380 0.0 374 57.6 48 0 Lands. Hous .& Urb. Dev. 3.5 00 0.0 00 58 Enerpv and Minerals. 2.0 21 7 26 5 67.5 46 5 620 Comm & Transport 0.0 973 99.6 100.0 100.0 Sub Total 20.0 44.4 34.0 52.7 60.0 PRODUCTIVE 43 0 Agriculture & Livestock 1000 3 3 95.0 408 41 9 44 0 Industries and Trade 41 5 5.1 79.4 366 24 3 690 Tour. Nat. Res. & En 647 41 7 889 1.5 00 Sub Total 66.6 16.5 91.4 31.1 36.6 CONSOLIDATED FUND SERVICE 20.0 State house 22 0 Public Debt Sub Total GRAND TOTAL 14.1 32.4 27.6 45.9 41.8 102 Table 9a: RECURRENT BUDGETED EXPENDITURE - REGIONS, FY96 (TShs. Billion) VOTE roTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 BUDGETBUDGETBUDGETBUDGETBUDGETBUDGET 70 Arusha 5.5 6.3 7.6 7.7 12.2 15.1 71 Coast 3.1 3.1 3.7 3.8 5.9 7.1 72 Dodoma 4.5 5.2 6.1 6.1 8.9 10.5 73 Iringa 5.2 5.6 6.6 6.8 7.3 11.4 74 Kigoma 3.4 3.7 4.4 4.7 5.1 7.9 75 Kilimanjaro 5.6 7.4 8.6 8.8 12.7 15.2 76 Lindi 2.7 3.0 3.5 3.6 5.1 6.4 77 Mara 4.6 5.0 6.1 6.1 8.6 11.0 78 Mbeya 5.5 6.3 8.0 8.2 11.5 13.4 79 Morogoro 4.9 5.6 6.7 6.8 9.9 11.5 80 Mtwara 3.3 3.7 4.3 4.4 6.4 7.7 81 Mwanza 7.1 6.9 8.4 8.4 12.3 13.9 82 Ruvuma 3.8 4.4 5.2 5.2 7.6 8.8 83 Shinyanga 5.0 5.4 6.4 - 6.6 7.3 11.3 84 Singida 3.1 3.6 4.1 4.2 5.9 7.0 85 Tabora 3.8 4.4 5.1 5.3 7.1 8.4 86 Tanga 5.2 5.9 7.0 7.1 10.1 12.0 87 Kagera .6 5.2 6.2 6.3 9.0 10.8 88 D'Salaam 5.5 5.6 6.4 6.7 10.0 10.6 89 Rukwa 2.9 3.2 3.8 4.0 5.6 6.3 Total 85.3 99.4 118.3 120.9 168.6 206.5 Note:Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 103 Table 9b: BUDGETED DEVELOPMENT EXPENDITURE - REGIONS, FY (TShs. Billion) VOTE OTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 70 Arusha 1.0 1.6 2.9 3.5 3.5 3.4 71 Coast .4 .5 .8 .5 .5 .6 72 Dodoma 1.2 .8 .5 2.4 2.4 2.6 73 Iringa 1.7 .9 1.8 2.8 2.8 5.0 74 Kigoma 1.1 .5 .3 1.4 1.4 .2 75 Kilimanjaro .6 .2 .2 .3 .3 .4 76 Lindi 1.6 .3 .8 .4 .4 1.3 77 Mara .5 .5 .7 1.7 1.7 3.5 78 Mbeya .8 .4 .4 .4 .4 .7 79 Morogoro .5 .3 1.7 .6 .6 3.2 80 Mtwara .2 .5 .8 .6 .6 1.3 81 Mwanza .4 .8 1.3 1.8 1.8 2.2 82 Ruvuma .6 .2 .3 .4 .4 .5 83 Shinyanga .5 .3 1.6 .3 .3 .3 84 Singida .5 .4 .5 .4 .4 .9 85 Tabora .3 .2 .2 .2 .2 .3 86 Tanga 1.5 .8 1.4 1.5 1.5 .9 87 Kagera 2.8 .7 2.2 5.6 5.6 9.3 88 D'Salaam 1.9 .7 3.1 4.0 4.0 .2 89 Rukwa 1.5 .4 .3 .3 .3 .3 Total 19.4 10.9 21.7 29.2 29.2 37.0 Note: Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 104 Table 9c: BUDGETED TOTAL EXPENDITURE - REGIONS (TShs. Billion) VOTE OTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 70 Arusha 6.4 7.9 10.5 11.2 15.7 18.6 71 Coast 3.5 3.6 4.5 4.3 6.4 7.7 72 Dodoma 5.8 6.0 6.6 8.5 11.4 13.1 73 Iringa 6.9 6.4 8.5 9.6 10.1 16.4 74 Kigoma 4.5 4.2 4.7 6.1 6.5 8.1 75 KilimaRjaro 6.1 7.6 8.8 9.0 13.0 15.6 76 Lindi 4.3 3.3 4.3 4.0 5.5 7.7 77 Mara 5.0 5.5 6.8 7.9 10.3 14.5 78 Mbeya 6.3 6.7 8.4 8.7 11.9 14.1 79 Morogoro 5.4 5.9 8.4 7.4 10.6 14.7 80 Mtwara 3.5 4.2 5.1 5.0 7.0 9.0 81 Mwanza 7.4 7.7 9.7 10.2 14.0 16.1 82 Ruvuma 4.4 4.6 5.5 5.6 8.0 9.3 83 Shinyanga 5.5 5.7 8.0 6.9 7.6 11.6 84 Singida 3.6 4.0 4.6 4.6 6.3 7.9 85 Tabora 4.1 4.6 5.3 5.6 7.4 8.8 86 Tanga 6.7 6.7 8.4 8.5 11.6 12.9 87 Kagera 3.4 5.8 8.4 11.9 14.6 20.1 88 D'Salaam 7.4 6.3 9.5 10.7 14.0 10.7 89 Rukwa 4.4 3.7 4.2 4.3 5.9 6.5 Total 104.7 110.3 140.0 150.1 197.8 243.5 Note: Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 105 Table 10a: ACTUAL RECURRENT EXPENDITURE AS PERCENTAGE OF BUDGETED RECURRENT EXPENDITURE - REGIONS, FY96-FY01 VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 70.0 Arusha 91.2% 100.0% 93.3% 108.2% 95.8% 99.9% 71.0 Coast 80.3% 99.6% 97.8% 108.5% 96.6% 94.4% 72.0 Dodoma 93.1% 99.9% 99.2% 106.0% 99.7% 99.9% 730 Iringa 78.5% 95.0% 98.5% 108.3% 31.9% 99.6% 74.0 Kigoma 87.4% 99.8% 98.8% 104.3% 124.4% 100.0% 75.0 Kilimanjaro 110.3% 99.9% 99.4% 105.7% 98.8% 100.0% 76.0 Lindi 45.9% 99.9% 99.1% 108.9% 98.6% 84.9% 77.0 Mara 94.1% 99.6% 97.6% 109.6% 99.7% 99.4% 78.0 Mbeya 97.5% 99.5% 99.3% 103.9% 99.0% 98.4% 79.0 -Morogoro 93.4% 99.8% 98.9% 109.8% 99.3% 99.6% 80.0 Mtwara 91.5% 99.6% 98.7% 104.7% 99.9% 98.6% 81.0 Mwanza 90.4% 101.8% 69.5% 108.5% 99.9% 100.0% 82.0 Ruvuma 96.0% 100.0% 97.5% 106.4% 99.1% 100.0% 83.0 Shinyanga 91.2% 100.3% 91.9% 111.5% 131.9% 100.0% 84.0 Singida 92.6% 99.6% 99.2% 105.9% 98.6% 99.3% 85.0 Tabora 94.8% 98.8% 99.3% 102.1% 99.2% 99.8% 86.0 Tanga 92.3% 99.9% 98.2% 106.3% 99.3% 99.6% 87.0 Kagera 105.4% 100.3% 98.8% 109.0% 98.9% 84.0% 88.0 D'Salaam 97.6% 100.0% 98.7% 100.7% 27.1% 107.9% 89.0 Rukwa 88.4% 99.6% 92.1% 103.7% 97.8% 94.3% _Total 91.3% 99.7% 95.7% 106.7%1 93.8% 98.4% Note: Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 106 Table 10B: ACTUAL DEVELOPMENT EXPENDITURE AS PERCENTAGE OF BUDGETED DEVELOPMENT EXPENDITURE - REGIONS, FY96-FYO1 VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 70 Arusha 1.3% 0.6% 4.3% 3.0% 0.6% 14.3% 71 Coast 92.8% 17.8% 19.0% 63.8% 56.3% 49.3% 72 Dodoma 1.1% 1.3% 23.1% 4.4% 0.2% 10.5% 73 Iringa 1.3% 2.3% 5.0% 47.1% 82.7% 7.0% 74 Kigoma 21.1% .13.9% 37.9% 0.0% 0.4% 100.0% 75 Kilimanjaro 0.5% 17.1% 58.5% 0.0% 2.0% 100.0% 76 Lindi 0.8% -12.5% 13.3% 25.4% 2.4% 22.3% 77 Mara 51.8% 65.7% 191.6% 149.3% 85.1% 0.0% 78 Mbeya 13.0% 13.8% 25.3% 23.4% 9.1% 71.1% 79 Morogoro 15.3% 57.2% 17.6% 17.1% 0.0% 9.5% 80 Mtwara 6.7% 4.3% 12.2% 17.6% 0.8% 21.7% 81 Mwanza 42.1% 72.7% 56.4% 45.5% 37.0% 18.1% 82 Ruvuma 23.8% 66.9% 34.2% 58.0% 41.4% 58.6% 83 Shinyanga 2.6% 9.7% 7.1% 0.0% 0.0% 100.0% 84 Singida 2.4% 4.9% 21.2% 25.0% 1.2% 23.3% 85 Tabora 4.3% 7.8% 40.9% 44.3% 2.1% 100.0% 86 Tanga 0.8% 2.6% 6.9% 7.2% 61.9% 100.0% 87 Kagera 8.3% 17.9% 55.5% 61.5% 66.9% 3.6% 88 D'Salaam 1.5% 2.8% 2.4% 1.8% 0.1% 100.2% 89 Rukwa 46.4% 39.8% 45.6% 36.2% 1.7% 100.0% 'ITotal 12.3% 17.8% 24.8% 33.7% 33.1% 17.8% Note: Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 107 Table 1OC: ACTUAL TOTAL EXPENDITURE AS PERCENTAGE OF BUDGETED TOTAL EXPENDITURE - REGIONS, FY96-FYO1 VOTE VOTE HOLDER 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 70 Arusha 77.7% 79.5% 69.0% 75.4% 74.5% 84.2% 71 Coast 81.8% 88.4% 84.2% 103.2% 93.5% 90.9% 72 Dodoma 73.7% 86.9% 93.4% 77.2% 78.6% 82.4% 73 Iringa 59.4% 82.5% 78.4% 90.4% 46.0% 71.1% 74 Kigoma 71.9% 90.1% 95.5% 80.0% 97.5% 100.0% 75 Kilimanjaro 100.3% 97.6% 98.5% 102.7% 97.0% 100.0% 76 Lindi 29.2% 91.2% 83.9% 100.3% 91.4% 74.4% 77 Mara 90.1% 96.7% 107.7% 118.3% 97.2% 75.6% 78 Mbeya 87.1% 94.8% 95.7% 99.7% 95.6% 97.0% 79 Morogoro 85.8% 97.3% 82.6% 102.1% 93.5% 80.2% 80 Mtwara 86.8% 89.0% 85.3% 94.4% 91.5% 87.7% 81 Mwanza 87.8% 98.8% 67.8% 97.7% 92.0% 88.8% 82 Ruvuma 86.5% 98.5% 94.2% 103.0% 96.2% 97.9% 83 Shinyanga 82.8% 96.2% 74.9% 106.0% 126.0% 100.0% 84 . Singida 79.4% 89.9% 91.1% 98.6% 92.1% 91.1% 85 Tabora 88.3% 94.0% 96.6% 99.6% 96.1% 99.8% 86 Tanga 71.6% 88.6% 82.5%/ - 89.3% 94.6% 99.6% 87 Kagera 25.6% 90.8% 87.5% 86.5% 86.5% 46.6% 88 DSalaarn 73.4% 89.1% 67.7% 64.0% 19.4% 107.7% 89 Rukwa 74.4% 92.3% 88.3% 99.1% 93.0% 94.6% -_-_ ]Total 76.7°- 91.6% ¯84'7° 92.5% 84¯9° 86.% Note: Data for FY 01 are from the Expenditure Flash Report. Source: MoF, Appropriations Accounts and Expenditure Flash Reports 108 Table 11: SECTORAL - RECURRENT EXPENDITURE BEFORE AND AFTER REALLOCATIONS, FY00 (TSHS. Mill BUDGET AFTER TUAL EXPENDITURE AS VOTE VOTE HOLDER APPROVED BUDGET REALOCATION RALOCAO ACTUAL EXPENDITURE REALLOCATION ASOF % OF APPROVED BUDGET APPROVED BUDGET AFTER REALLOCATION ADMINISTRATION 23 Accountant General .. .. .. 27 Registrar of Political Parties 2.68 .. 2.68 1.33 100% 50% 30 Presidents Office 14.41 5 17 19.58 19.32 136% 99% 26 & 31 Vice President .55 13 .68 .68 124% 100% 32 Civil Service Dept. 2.48 .92 3.40 3.39 137% 100% 33 Ethics Secretariat .16 .01 .17 .13 107% 77% 34 Foreign Affairs 11.32 258 * 13.89 16.61 123% 120% 35 Perm Comm. Enq 20 01 .21 .20 107% 95% 36 Civil Service Comm. 15 04 19 19 126% 100% 25 & 37 Prime Ministers Office 2.51 2 19 4.70 4 70 187% 100% 40 Judiciary 795 . 7.95 5.95 100% 75% 41 Justice 1 02 .05 1 07 .92 105% 86% 42 Office Of The Speaker 5.22 .68 5.90 5.89 113% 100% 45 Exchequer and Audit 1.01 06 1.07 1.07 106% 100% 50 Finance 128.41 454 61.00 48.54 48% 80% 5I Home Affairs 5.36 .49 585 4.83 109% 83% 54 Radio Tanzania 1.18 .03 1.21 1.08 102% 89% 55 Investment Promotion .19 00 19 .18 101% 97% 56 NIORALG 1743 .. 17.43 17.62 100% 101% 57 Defence & National. 2.05 .29 233 2.33 114% 100% 59 Law Reform. Commi. .12 .. 12 .11 100% 94% 60 Industrial Court OfTz. 17 . 17 15 100% 88% 61 Electoral Commision 1621 .03 1624 5.93 100% 36% 63 Local Govt Servi. Comm 19 .01 20 20 103% 99% 64 Information and Broad. 66 Planning Commission 1 60 32 1.92 1 35 120% 70% Sub Total 222.56 17.55 168.16 142.71 76% 85% DEFENCE AND SECURITY 28 Police Force 34.90 .. 34.90 32.20 100% 92% 29 Prison Services 19.42 . 19.42 16.19 100% 83% 38 Defence 77.10 6.12 83.22 78.96 108% 95% 39 National Service 10.15 1.96 12.10 1095 119% 90% Sub Total 141.57 8.08 149.65 138.30 106% 92% SOCIAL SERVICES 46 Education 18.02 2.95 20.97 20.66 116% 98% 49 Water. 2.80 .58 3.39 3.39 121% 100% 52 Health 31.58 2.19 3378 32.01 107% 95% 53 Comm Dev Wome. Al 2.18 .15 2.33 1.45 107% 62% 65 Labour Youth Develop. 2.77 .21 2.98 1.53 108% 51% 67 Teachers Service Comm 20 03 .24 24 116% 100% 68 Science. Tech & H Ed 30.92 1 58 32 51 31.04 105% 96% 70-89 Regions 134.09 41.10 175 19 172.89 131% 99% Sub Total 222.57 48.81 271.38 263.21 122% 97% ECONOMIC SERVICES 47 Works . 3800 .. 38.00 4.62 100% 12% 48 Lands, Hous & Urb. Dev. 3 55 .09 3.65 3.64 103% 100% 58 Energy and Minerals. 2.23 .76 299 2 89 134% 97% 62 Comm & Transport 1066 1.21 11.87 11.86 111% 100% Sub Total 54.45 2.06 56.50 23.01 104% 41% PRODUCTIVE 43 Agriculture & Livestock 15.72 -3.39 12.33 7.42 78% 60% 44 Industries and Trade 2.80 84 3 64 3.37 130% 93% 69 Tour.. Nat. Res & Eny 8.31 43 873 7.43 105% 85% Sub Total 26.82 24.70 18.21 92% 74% CFS 20 State house .94 .05 * .99 .99 105% 100% 22 Public Debt 265.36 29.00 ** 294.36 28669 111% 97% Sub Total 266.30 .. 295.34 287.68 111% . 97% GRAND TOTAL Note: * Retention Scheme Funds (Approved Estimates) Req. no. TY/G/86/111/100 "* Special Requisition Source: MoF. Appropriations Accounts and Expenditure Flash Reports for vote 38, 68, 73 & 75. 109 Table 12: REGIONS - RECURRENT EXPENDITURE REALLOCATIONS, FY00 (TShs. Billion) BUDGET AFTER ACTUAL EXPENDITURE AS A VOTE VOTE HOLDER APPROVED BUDGET REALLOCATION BUDGET AFTER ACTUAL EALLOCATION AS A PERCENTAGE BUDGET REALLOCATION PERCENTAGE OF APPROVED RTGOFBDE BUDGET AFTER REALLOCATION BUDGET 70 Arusha 9.3 2.9 12.2 11.7 131% 96% 71 Coast 4.9 .9 5.9 5.7 119% 97% 72 Dodoma 6.5 2.4 8.9 8.9 137% 100% 73 Iringa 74 Kigoma 5.1 1.3 6.4 6.4 126% 99% 75 Kilimanjaro 9.7 3.0 12.7 12.6 131% 99% 76 Lindi 4.2 .9 5.1 5.1 123% 99% 77 Mara 6.4 2.2 8.6 8.6 135% 100% 78 Mbeya 8.8 2.6 11.5 11.4 130% 99% 79 Morogoro 7.6 2.3 9.9 9.9 131% 990/0 80 Mtwara 5.1 1.3 6.4 6.4 126% 100% 81 Mwanza 9.1 3.2 12.3 12.2 135% 100% 82 Ruvuma 6.0 1.6 7.6 7.6 126% 990/ 83 Shinyanga 7.3 2.7 10.0 9.6 137% 96% 84 Singida 4.8 1.1 5.9 5.8 123% 99% 85 Tabora 5.5 1.6 7.1 7.1 129% 990/0 86 Tanga 7.9 2.2 10.1 10.1 129% 990/ 87 Kagera 6.9 2.1 9.0 8.9 130% 99% 88 D'Salaam 7.5 2.5 10.0 2.7 134% 27% 89 Rukwa 4.1 1.5 5.6 5.5 137% 98% Total 126.8 38.6 165.3 155.8 130% 94% Source: MoF, Appropriations Accounts 110