Tanzania - Programmatic Structural Adjustment Credit (PSAC) Project

Document of The World Bank Report No: 33788-ET IMPLEMENTATION COMPLETION REPORT (IDA-33790 IDA-33791 IDA-33792 IDA-33793) ON A CREDIT IN THE AMOUNT OF SDR 141.8 MILLION TO THE UNITED REPUBLIC OF TANZANIA FOR A PROGRAMMATIC STRUCTURAL ADJUSTMENT CREDIT (PSAC) September 30, 2005 Poverty Reduction and Economic Management Unit 2 Tanzania and Uganda Country Management Unit (AFCO4) Africa Region This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization  CURRENCY EQUIVALENTS (Exchange Rate Effective June 16, 2005) Currency Unit = Tanzania Shillings (Tsh) Tsh 1.00 = US$ US$ 0.00846 US$ US$1.00 = Tsh 1182 FISCAL YEAR July 1 June 30 ABBREVIATIONS AND ACRONYMS Vice President: Gobind T. Nankani Country Director Judy O'Connor Sector Manager Kathie Krumm Task Team Leader/Task Manager: R.Sudharshan Canagarajah/Robert Utz  TANZANIA Programmatic Structural Adjustment Credit CR.no.3379-TA CONTENTS Page No. 1. Project Data 1 2. Principal Performance Ratings 1 3. Assessment of Development Objective and Design, and of Quality at Entry 2 4. Achievement of Objective and Outputs 6 5. Major Factors Affecting Implementation and Outcome 11 6. Sustainability 13 7. Bank and Borrower Performance 14 8. Lessons Learned 17 9. Partner Comments 18 10. Additional Information 18 Annex 1. Key Performance Indicators/Log Frame Matrix 19 Annex 2. Project Costs and Financing 25 Annex 3. Economic Costs and Benefits 26 Annex 4. Bank Inputs 27 Annex 5. Ratings for Achievement of Objectives/Outputs of Components 28 Annex 6. Ratings of Bank and Borrower Performance 29 Annex 7. List of Supporting Documents 30  Project ID: P002822 Project Name: Programmatic Structural Adjustment Credit CR.no.3379-TA Team Leader: R. Sudharshan Canagarajah TL Unit: AFTP2 ICR Type: Core ICR Report Date: September 30, 2005 1. Project Data Name: Programmatic Structural Adjustment Credit L/C/TF Number: IDA-33790; IDA-33791; CR.no.3379-TA IDA-33792; IDA-33793 Country/Department: TANZANIA Region: Africa Regional Office Sector/subsector: Central government administration (60%); General transportation sector (13%); General industry and trade sector (10%); Law and justice (10%); General agriculture, fishing and forestry sector (7%) Theme: State enterprise/bank restructuring and privatization (P); Administrative and civil service reform (S); Tax policy and administration (S); Regulation and competition policy (S); Other accountability/anti-corruption (S) KEY DATES Original Revised/Actual PCD: 08/01/1999 Effective: 08/01/2000 08/01/2000 Appraisal: 04/01/2000 MTR: 05/01/2001 05/01/2001 Approval: 06/15/2000 Closing: 06/30/2002 05/31/2004 Borrower/Implementing Agency: United Republic of Tanzania/Ministry of Finance (MoF) Other Partners: STAFF Current At Appraisal Vice President: Gobind T. Nankani Callisto E. Madavo Country Director: Judy M. O'Connor James W. Adams Sector Manager: Kathie L. Krumm Frederick Kilby Team Leader at ICR: R. Sudharshan Canagarajah Benno J. Ndulu ICR Primary Author: Ben Tarimo 2. Principal Performance Ratings (HS=Highly Satisfactory, S=Satisfactory, U=Unsatisfactory, HL=Highly Likely, L=Likely, UN=Unlikely, HUN=Highly Unlikely, HU=Highly Unsatisfactory, H=High, SU=Substantial, M=Modest, N=Negligible) Outcome: S Sustainability: L Institutional Development Impact: SU Bank Performance: S Borrower Performance: S QAG (if available) ICR Quality at Entry: S Project at Risk at Any Time: No  3. Assessment of Development Objective and Design, and of Quality at Entry 3.1 Original Objective: Background 3.1.1 Tanzania's renewed reform efforts in the mid-nineties have led to higher economic growth in recent years. Following its earlier attempt at economic reform in the mid-eighties, which produced mixed results, Tanzania resumed its reform process in the mid-nineties with a clear commitment to macro-economic stability and economic growth through sound fiscal and monetary policies and structural reforms. Economic growth was slow in the initial years of renewed reform, but improved to an average GDP growth of 5.2 percent between 1998 and 2003, which compared favorably with South Asia (5.4 percent) and East Asia (5.6 percent). More recently, real GDP growth averaged 6.0 percent for the years 2003-2004. Inflation has dropped substantially from about 30 percent in the early 1990s to around 4 percent since 2000. Foreign exchange reserves were much healthier in 2003/04 at an equivalent of 8 months of imports, compared to less than 2 months equivalent during the early 1990s. Foreign Direct Investment has grown to US$350 million per annum in 2003/04 compared to US$100 million in the early 1990s. Tanzania also made perceptible gains against poverty in the 1990s. A comprehensive Household Budget Survey (HBS) completed in FY02 showed a decline in basic needs poverty from 38.6 percent in FY92 to 35.4 percent in FY01. 3.1.2 Despite encouraging growth in recent years, Tanzania's developmental challenges remain daunting. A variety of analytical and advisory activities (AAA) have highlighted the pressing need for Tanzania to maintain higher growth while pursuing institutional reform, and to ensure that economic gains reach all regions and poorer sections of society through improved governance and service delivery. These issues are also central to the Country Assistance Strategy (CAS) presented to the Board in FY00. The annual Public Expenditure Reviews (PERs) note important improvements in public finance management, while highlighting the need to better align the spending plans of various sectors with the approach laid out in the Poverty Reduction Strategy Paper (PRSP; FY01). 3.1.3 Several recent projects financed by the Bank have sought to support Tanzania's development in a complementary manner. Among these were: the Structural Adjustment Credit I (SAC I) approved in FY00, Privatization and Private Sector Development Project (PPSD) approved in FY00, Public Sector Reform Project (PSRP) approved in FY99, the Tax Administration Project approved in FY99, the Financial Institutions Development Project II approved in FY00, the Rural and Micro-finance Project (a LIL or Learning and Innovation Loan) approved in FY00, and the older Integrated Roads Project II (IRP) approved in FY94. The objectives of these projects were in consonance with the CAS, and built upon the reforms agreed to under the Policy Framework Paper (PFP) prepared by Tanzania in collaboration with the Bank and the IMF. These operations assisted in improving macroeconomic and public expenditure management, and helped deepen reforms on all major fronts, thus complementing and/or setting the stage for the PSAC program. 3.1.4 Among others, the PSAC program built upon the achievements of and complementarities with the SAC I program. Achievements under SAC I included a sustained improvement in macroeconomic stability, divestiture of key public enterprises, a strengthened foundation for more effective public service delivery, and more efficient operation of key product and factor markets. The PSAC program gained from the SAC I experience with objectives for strengthening core policy institutions within GOT, as well as incorporating stakeholders' concerns. The program aimed to fill financing gaps resulting from more aggressive and cost-effective poverty-reduction expenditure programs, offering a sustainable means for moving out of the debt trap. Further, the PSAC program also sought to improve prospects for achieving the objectives of the enhanced Highly Indebted Poor Countries (HIPC) operation. 3.1.5 The PSAC program was aligned with GOT's vision for development. The objectives of the PSAC program support the Government's Policy Framework Paper (PFP) that was presented to the board in January 1999. The PFP set out GOT's medium term strategy for policy and institutional reforms aimed at supporting private sector development in Tanzania through accelerating economic growth in general and more specifically - 2 -  through private sector development. The PSAC program serves these objectives by advancing economic reforms and an enabling environment for private sector development (PSD) to enhance investment, increase growth and ultimately reduce poverty in the country. The program is consistent with Tanzania's National Vision 2025, which aims to make Tanzania a middle income country by 2025, through an annual real GDP growth rate of over 8 percent that would make a dent in widespread poverty. The PSAC program was originally conceived as a two-part operation