Statement by Sun Vithespongse at the Board meeting of June 19, 1997

International Bank for Reconstruction and Development International Development Association 86600 International Finance Corportation Multilateral Investment Guarantee Agency FOR OFFICIAL USE ONLY CONFIDENTIAL EDS97-232 June 18, 1997 Board Meeting of June 19,1997 Statement by Sun Vithespongse Tanzania: Country Assistance Strategy We welcome the opportunity of discussing this CAS for Tanzania and would like to commend staff for a well written document which presents development objectives, challenges, strategies faced by the country. We find the role of the Bank in helping the government to achieve growth and poverty reduction is appropriate and balanced, therefore, we fully support the CAS. After several years of good policy performance, Tanzania now begins to make some progress in the macroeconomic front. In 1996, GDP growth rate achieved nearly 5 percent. And as the result of increased tax measures and tight expenditu~e conh·ols, inflation, although still high, is on a decline. Strong export growth during 1996 contributed to the reduction in the current account deficit and increase in foreign exchange reserves. We are pleased to note that the progress is being consolidated in order to address other economic and social problems such as rural poverty, stagnation of social services, declining infrastructure, unsatisfactory portfolio performance, and high external indebtedness. We note with approval the government's objective of reducing poverty by increasing growth performance and extending access to basic social and economic services. In this regard, the Bank's efforts to improving fiscal management, increasing agricultural productivity, creating enabling environment for private sector growth, and improving the social services are in line with the government and the CAS's objective of poverty alleviation. From the performance assessment under the preceding CAS, we note that the limited progress achieved in the implementation of reforms was caused by the lack of capacity and monitoring of institutional performance on the part of the Tanzanian administration. In this regard, we welcome the Bank's programs of capacity building in the reform of public institutions. And in light of unsatisfactory portfolio quality of the Bank's projects, the ongoing effort to improving portfolio management should be closely monitored and when necessary strengthened in the form of a specific program. This document has a restricted distribution and may be used by recipients only in the petformance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  2 We are supportive of the base case scenario which focuses on priority activities that would increase economic growth and reduce poverty. In this case, we would like to emphasize that careful expenditure management and enhanced revenue mobilization are important steps to achieve effective macro-fiscal management. Regarding the triggers for lending program scenarios, we are pleased to note that they are based on policy performance rather than outcome. They seem comprehensive enough to accommodate government performance in implementing the CAS programs. Although we are a little bit skeptical whether the base case could be achieved due to the past record, the commitment of the present administration gives us hope that the reform programs could yield expected results. We are pleased with IFC and MIGA's involvement in private sector development in Tanzania as well as EDI support on capacity building in the social and economic sectors and would like to encourage them to do more. Finally, we would like to emphasize that the success of the CAS very much depends on the government determination to implement the reform program. In this regard, we are pleased to note the improvement in donor coordination which is essential part in the development of this country that has been largely dependent on concessional flow.