Tanzania - Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative Project

40342 INTERNATIONAL MONETARY FUND AND INTERNATIONAL DEVELOPMENT ASSOCIATION TANZANIA Completion Point Document for the Enhanced Heavily Indebted Poor Countries (HIIPC) Initiative Prepared by the Staffs of the International Monetary Fund and the International Development Association November 8, 2001 Contents Page L INTRODUCTION ............... 4 IL ASSESSMENT OF REQUIREMENTS FOR REACHING THE COMPLETION POINT ... 5 A. THE PRSP AND THE IMPLEMENTATION OF TANZANIA'S POVERTY REDUCTION STRATEGY . 5 B. THE ECONOMIC PROGRAM .6 C. KEY POLICY MEASURES AND REFORMS .6 Governance.8 Government financial maagement .8 Tax reform .9 Improvement of the business environment .9 Improvement of utility performance .10 Improvement of the poverty database and monitoring capacity .11 Priority sector expenditures .11 Education.12 Health.12 IIL . DELIVERY OF DEBT RELIEF AND MEDIUM-TERM DEBT SUSTAINABILTY 13 A. STATUS OF CREDTOR PARTICIPATION .13 Multilaterl creditors .13 Bilateral and comnnercial creditors .15 B. DATA RECONciLiATioN AND AsSISTANCE .15 C. UPDATED DEBT SUSTAINABITy ANALYSIS.16 D. COMPARISON OF REVISED DSA WITH DSA AS OF THE DECISION POINT .18 E. SENSITIviTY ANALYSI .19 Scenario 1: lower growth .19 Scenario 2: lower grants .20 IV. CONCLUSIONS .20 V. ISSUES FOR DISCUSSION .21 ' Approved by Callisto E. Madavo and Gobind T. Nankani (IDA) and Michael Nowak and Michael Hadjimnichael (IMF).  -2- Boxes Box 1: Tanzania - Policy Reforms for the Floating Completion Point ........................................................ 7 Box 2: Tanzania Macroeconomic Assumptions Underlying the Debt Sustainability Analysis ................... 17 Tables Table 1: Tanzania: Selected Economic and Financial Indicators, 1999-2004 ............................................. 22 Table 2: Tanzania: Central Government Expenditure on Priority Sectors, 1999/2000-2001/02 ................. 23 Table 3: Tanzania: Assistance Under the HIPC Initiative as Approved at the Decision Point .................... 24 Table 4: Tanzania: Status of Creditor Participation Under the Enhanced HIPC Initiative .......................... 25 Table 5: Tanzania: Delivery of IDA Assistance Under the Enhanced HIPC Initiative, 1999/2000-2019/20 ......... I................................................................................................................................................... 26 .......................... Table 6: Tanzania: Delivery of IMF Assistance under the Enhanced HIPC Initiative ............................... 27 Table 7: Paris Club Creditors' Delivery of Debt Relief Under Bilateral Initiatives Beyond the Enhanced HIPC Initiative ........................................................................... 28 Table 8: Comparison of Discount Rate and Exchange Rate Assumptions at end-June 1999 and end-June 2001 ........................................................................... 29 Table 9: Tanzania - Main Macroeconomic Assumptions, 2001-2020 ........................................................ 30 Table 10: Tanzania - Medium- and Long-Term Balance of Payments, 1999-2020 .................................... 31 Table I 1: Tanzania - Net Present Value of External Debt, 2000-2020 ....................................................... 32 Table 12: Tanzania - Nominal and Net Present Value of External Debt Outstanding at End-June 2001 ... 33 Table 13: Tanzania - External Debt Indicators, 2001/02-2019/20 .............................................................. 34 Table 14: Tanzania - Main Assumptions used for DSA at Decision Point and Completion Point, 1999/00- 2017/18 ........................................................................... 35 Table 15: Tanzania: Comparison of NPV of External Public Debt Between Decision and Completion Points ........................................................................... 36 Table 16: Tanzania: External Debt-Service After Full Implementation of Debt-Relief Mechanisms, 2001/02-2020/21 ........................................................................... 37 Table 17: Tanzania: Sensitivity Analysis of Debt Sustainability, 2001/02-2020/21 ................................... 38 Table 18: HIPC Initiative: Status of Country Cases Considered Under the initiative, November 8, 2001. 39 Figures Figure 1: Sensitivity Analysis of Debt Sustainability, 2001/02-2020/21 ..................................................... 40 APPENDIX 1 Tanzania: Debt Management ........................................................................... 41  -3 - CURRENCY EQUIVALENTS Currency unit Tanzania shilling (T Sh) US$1 T Sh 890.8 (September 30, 2001) WEIGHTS AND MEASURES Metric system FISCAL YEAR July-June ABBREVIATIONS AND ACRONYMS AfDB/F African Development Bank/Fund AIDS Acquired immunodeficiency syndrome BADEA Arab Bank for Economic Development in Africa DAWASA Dar es Salaatn Water and Sewerage Authority DPT Diphtheria, Pertussis, and Tetanus DSA Debt sustainability analysis EADB East African Development Bank EC European Commission EIB European Investment Bank ESAF Enhanced Structural Adjustment Facility ESDP Education Sector Development Program EU European Union GDP Gross domestic product HIPC Initiative Initiative for Heavily Indebted Poor Countries HIV Human immunodeficiency virus IBRD International Bank for Reconstruction and Development IDA Intemational Development Association IFAD International Fund for Agricultural Development IFMS Integrated Financial Management System IMF Intemational Monetary Fund MDF Multilateral debt fund MTEF Medium-term expenditure framework NDF Nordic Development Fund NPES National Poverty Eradication Strategy NPV Net present value ODA Official Development Assistance OPEC Organization of Petroleum Exporting Countries PER Public expenditure review PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper TANESCO Tanzania Electric Supply Company Ltd. TIC Tanzania Investment Center  -4 - I. INTRODUCTION 1. In April 2000, the Executive Boards of the IMF and IDA agreed that Tanzania had met the requirements for a decision point under the enhanced Initiative for Heavily Indebted Poor Countries (HIPC Initiative).2 The debt relief agreed was US$2,026 million in net present value (NPV) terms, calculated to reduce the NPV of Tanzania's external debt to 150 percent of average 1996/97-1998/99 exports (July-June) as of end-June 1999.3 This relief represents a reduction of 54 percent of the NPV of debt as of end-June 1999 (and a reduction of 42 percent in the nominal value of the debt service over time). At the same time, the Boards also agreed to provide interim debt relief until Tanzania reaches its completion point; the IMF approved interim debt relief of SDR 26.7 million (about US$35 million) in nominal terms for the period April 2000-March 2002, and IDA's interim relief amounted to about US$59 million in nominal terms through end- October 2001. 2. This paper recommends that the Boards approve the completion point for Tanzania under the enhanced HIPC Initiative. The Boards had agreed that this completion point would be reached when Tanzania (i) had prepared a poverty reduction strategy paper (PRSP) and satisfactorily implemented its poverty reduction strategy for at least one year; (ii) had a stable macroeconomic position and had kept on track with its IMF-supported program; and (iii) had satisfactorily implemented a set of policy reforms (described in Box 1). The government of Tanzania approved its first full PRSP on August 31, 2000; it was sent to IDA and the IMF on October 11, 2000 and the Boards of IDA and the IMF endorsed the staffs' assessment of the PRSP on November 30 and December 1, 2000, respectively. The first annual progress report of the PRSP, including an additional short update note on further developments with respect to the implementation of the PRSP through October 2001, and the accompanying joint staff assessment (JSA) will be considered by the Boards of IDA and the IMF, along with the present paper. Tanzania has maintained a stable macroeconomic position and has remained on track with its IMF-supported program; the Board of the IMF completed the third review under the current Poverty Reduction and Growth Facility (PRGF) arrangement on September 24, 2001. In the opinion of the staffs, the policy reforms for the completion point have been implemented satisfactorily and give evidence of strong and sustained policy performance. 3. This paper is organized as follows. Section II assesses Tanzania's performance in meeting the requirements for reaching the completion point, as set out in the decision point docurnent. Section III reviews the status of creditor participation and the delivery of debt relief to Tanzania under the enhanced HIPC Initiative, and presents the results of the updated debt sustainability analysis (DSA). Sections IV and V present the conclusions and issues for discussion. 2 EBS/00/54, Supplement 2, (4/6/2000) and IDA/SecM2000-151 (4/4/2000). 3"Tanzania-Enhanced Heavily Indebted Poor Countries Initiative-Decision Point Document," EBS/00/54 (3/20/2000) and IDA/R2000-32 (3/21/2000).  II. ASSESSMENT OF REQUIREMENTS FOR REACHING THE COMPLETION POINT A. The PRSP and the Implementation of Tanzania's Poverty Reduction Strategy 4. The PRSP has been welcomed within Tanzania and by the donor community as an important step forward in the process of focusing explicitly on poverty reduction as the objective of public policy. It built on a process that had started with the adoption of the National Poverty Eradication Strategy in 1997, and that has been continued in the context of annual public expenditure reviews (PERs) and the medium-term expenditure framework (MTEF) consultations. The range of participants in the discussions was broadened under the PRSP from the earlier initiatives, and the document represents a truly homegrown development strategy statement. However, as noted in the JSA of the PRSP, the PRSP suffered from a number of important gaps: recent data for assessing the poverty situation were not available; strategies were not in place for some of the key sectors, notably agriculture and education; the strategies and programs for poverty reduction were not adequately costed; and a system was not in place to monitor the impact of the strategy. 5. Tanzania has made significant progress in filling these gaps. This progress and the success in implementing the overall poverty reduction strategy are documented in detail in its PRSP progress report and the additional update note and discussed in the associated JSA. These documents indicate that Tanzania is on track to meet the goals for service delivery and social programs set for 2003 in the PRSP. Many of the poverty reduction programs described in the PRSP were already reflected in the budget for 2000/01 (July-June), which included major increases in spending for education, health, and water supply. A Household Budget Survey (HBS) has been completed; national strategies for education and agriculture have been developed, and a rural development strategy is under preparation; programs have been costed in the context of a strengthened public expenditure management system; and a poverty-monitoring system has been established. An interim poverty analysis indicated limited change in household welfare during the 1990s. However, some of the preliminary findings on poverty measures were statistically unreliable. A more accurate analysis, based on the full HBS, is under way and expected to be completed by February 2002. 6. The implementation of the PRSP has been further strengthened with the budget for 2001/02, which was approved by parliament in August 2001. As described in the progress report, this budget is a key element in the implementation of the PRSP. Reflecting the progress in costing the policies included in the PRSP, allocations to the priority sectors were increased sharply again, and the budget also included a series of specific policy measures in line with the poverty reduction strategies, including the abolition of primary school fees and other enrollment contributions and tax measures to improve the business climate. Actual allocations to the priority sectors through October 2001 have been fully in line with the annual budget. 7. The PRSP process is now well established in a manner that will ensure its continuation beyond the HIPC Initiative completion point. The PRSP has thus become a framework for discussion of government policies and on progress with respect to poverty  -6- reduction policies. Furthermore, it has become the basis for much interaction with the donor community and has reinforced the process of unification in donor support behind a common program. Moreover, it is now embedded in the other ongoing processes, such as the MTEF and the PER, the Tanzania Assistance Strategy, and the Consultative Group meetings. Most important, however, it has become fully owned in-country. The wide- ranging and open process of public consultation and substantive involvement of civil society have combined to create the expectation in civil society that the PRSP is a central element of the development strategy and of the public's interaction with the government. B. The Economic Program 8. Tanzania's economy has performed well in 2000 and 2001 (Table 1). The annual growth rate increased to 4.9 percent in 2000 and is projected to remain at a similar level in 2001, despite the negative effects on commodity prices and tourism of the slowdown in the world economy. Conservative fiscal policies, supported by a cautious monetary policy, contributed to a decline in inflation from 7 percent at end- 1999 to some 5 percent by September 2001. The current account deficit (before grants) of the balance of payments declined from 12 percent of GDP in 1999 to less than 10 percent of GDP for 2000, reflecting in particular the coming onstream of gold exports. These developments, contributed, together with higher foreign program assistance and (interim) debt relief under the HIPC Initiative, to a further strengthening of international reserves. Gross official reserves increased from the equivalent of 4.2 months of imports of goods and nonfactor services at end-1999 to 5 months of import cover by end-September 2001. 9. Reflecting these positive economic developments, Tanzania observed all quantitative performance criteria and most quantitative benchmarks under the PRGF- supported program during the period March 2000-September 2001. Structural reforms envisaged under the program focused especially on public expenditure management, but the program also included reforms of the tax and trade systems. The authorities made good progress in all areas, and most structural performance criteria and benchmarks were also observed. The completion of an audit of budgetary arrears-a structural performance criterion for end-March 2001-was delayed for technical reasons but completed in June 2001. C. Key Policy Measures and Reforms 10. As set out in the decision point document, in order for Tanzania to reach the floating completion point a series of specific measures would need to be implemented in the areas of governance, government financial management, tax reform, improvement of the business environment, improvement of utility performance, and poverty reduction. The implementation status of reforms in these areas is summarized in Box 1. As described in the following paragraphs, progress in several areas has exceeded the expectations for the completion point; in only two areas - the signing of the concessioning agreement for DAWASA and the updating of poverty lines and indicators - progress was less than envisaged.  -7- Box 1: Tanzania - Policy Reforms for the Floating Completion Point Measure Status Governance. Adoption, publication, and dissemination of the national Implemented. action plan for the control of corruption, including dissemination to all district authorities, implementation of workshops with district authorities and civil society, and adoption of sector-specific anticorruption plans for tax administration, national tender system, the judiciary, and works. Government financial management. Submission to parliament of the Implemented. Public Finance Management Bill and Public Audit Bill. Full implementation of the IFMS, including all budgetary votes and tax and nontax revenues, and recording of all expenditure commitments, payments, and arrears. Tax reform. Substantial completion of the remaining tax reform agenda Implemented. through: application of VAT on petroleum products and consolidation of all other taxes on them; repeal of import-specific partial remissions on customs duties and abstention from imposing additional minimum dutiable values and basing existing ones on international prices (except for sugar); harmonization of investment incentives; reduction in scope of exemptions; reduction in the number of excise taxes from 52 to 6; abolition of the withholding tax on goods and services; starting operation of a unified tax appeals system; and the establishment of a more efficient duty drawback system based on technical assistance recommendations. Improvement of the business environment. Submission to parliament Implemented; required of amendments to the TIC Act transforming it into an effective service legal changes for the center for investors; issuance of land regulations ensuring that land can restructuring of TIC were be used as collateral for commercial transactions. effected through the Public Finance Act. Improvement of utility performance. Signing of concession agreement Implemented in part; assigning assets of DAWASA to private management companies; process for the initiation of the process for unbundling TANESCO into autonomous concessioning of commercial entities by appointing advisers; and adoption by the DAWASA ongoing. government of the framework for the establishment of regulatory authorities for the utilities. Improvement of the poverty database and monitoring capacity. Substantially implemented. Implementation of a Household Budget Survey and the establishment of Preliminary poverty poverty lines and indicators based thereon; approval of the institutional analysis completed and setup and a monitoring system for tracking changes in income poverty, included in the PRSP social indicators, and community needs. Strengthened capacity in the progress report. Poverty Vice-President's Office and the National Bureau of Statistics to collect lines and income poverty and analyze poverty data. analysis to be completed in early 2002. Adoption of a MTEF and provision of allocations in the budget for Implemented. 2000/01 in line with poverty reduction objectives, including for a rationalization of higher education and the introduction of a revolving fund in all hospitals. Education. Completion of mapping of schools covering 50 percent of all Implemented. local authorities. Health. Complete immunization of at least 75 percent of children under Implemented. 2 years against measles and DPTs. Implementation of the national spearhead campaign against HIV/AIDS, including completion of visits to 75 percent of all districts.  -8 - Governance 11. The government has made significant progress in its efforts to improve governance and reduce corruption, and all measures to be undertaken for the completion point were implemented. The National Anti-Corruption Strategy and Action Plan was adopted and published and provides the overall framework for all efforts to curb corruption. Since its adoption, it has been widely disseminated, including through the holding of workshops with district authorities and civil society. The Prevention of Corruption Bureau in the President's office is engaged in a wide variety of outreach activities including regular meetings and outreach programs through radio, TV, news letters, posters, leaflets and debates to raise awareness of the National Anti Corruption Strategy and Action Plan and to inform the public of their rights and obligations in minimizing corrupt practices in all sectors. 12. Sector-specific anticorruption plans were adopted in May 2001. The latter cover all ministries, departments, and agencies, including those specified under the HIPC Initiative completion point conditions, that is, tax administration, the national tender system, the judiciary, and the Ministry of Works. The government has made provisions in the budget for 2001/02 to fund the implementation of these plans and has undertaken to issue quarterly progress reports on their implementation; a first progress report was submitted to the donors and civil society groups at a Consultative Group meeting in September 2001. Parliament approved a new procurement law in February 2001, following which the Ministry of Finance issued regulations promoting greater transparency and integrity in procurement. Also, results of public tenders are being published. Government financial management 13. The government's recent efforts to strengthen expenditure management have been along three lines. First, the legislative base for the financial and accounting responsibilities within the central government was modernized through the approval by parliament of a new Public Finance Act (which incorporated the Public Finance Management Bill and the Public Audit Bill) in February 2001. Implementation regulations strengthening the supervisory roles of the Accountant-General and the Auditor-General became effective in July 2001. Second, the coverage of the new Integrated Financial Management System (IFMS)-facilitating enforcement of the regulation that ministries can only legally engage in spending commitments if funds are available-was gradually broadened; following initial delays to address data security issues, all central government spending units in Dar es Salaam were included in the IFMS as from January 2001. With the inclusion of expenditures of the 20 regional authorities in the IFMS since July 1, 2001,4 all central government spending is being channeled through the IFMS, thereby allowing the generation of comprehensive commitment and spending reports, as well as control over arrears. Furthermore, all tax revenue collection 4The data from the regional authorities-as well as for some ministries-is included in the system monthly on an off-line basis; work is continuing to allow on-line inclusion of these entities in the system at a later stage.  -9- points in Dar es Salaam-covering 75-80 percent of total tax revenue-have been included in the system on a real-time basis; revenues collected outside the capital are being entered in the IFMS on a manual basis and will be included "on-line" gradually, as donor financing for the purchase of equipment becomes available. Third, the government has taken measures to strengthen budget preparation and execution, issuing the Budget Guidelines one to two months earlier than in the past and thus giving ministries, departments, and agencies more time for the preparation of their budgets, and requesting the ministries to prepare monthly cash-flow estimates to assist in the budget's cash management system. Funds for the priority sectors have been allocated on a quarterly instead of a monthly basis since January 2001, thus improving planning and budget execution in these sectors. Steps have also been taken to improve the expenditure management of the local governments, starting with better reporting to the central government and the publication of their revenue and expenditure data. Tax reform 14. Tanzania made substantial progress in reforming its tax system in the second half of the 1990s. A cascading sales tax system was replaced by a value-added tax (VAT) in 1998, and the import tariff system was extensively overhauled, and rates reduced, in 1999, at which time the government also implemented a comprehensive reform of the income tax system. Following these major steps, tax reforms addressed a wide range of remaining smaller issues during the last two fiscal years. In this respect, all measures to be undertaken for the completion point have been implemented; important additional measures concerned the elimination of tax exemptions for the government in 2000 (on petroleum products) and 2001 (VAT on other products) and a reduction in the number of bands for import tariffs from four to three (thereby further reducing the average rate) in the budget for 2001/02. Nevertheless, although the thrust of tax reforms has remained unchanged, there have been some setbacks as well, including some new exemptions under the VAT (including, in support of the poverty reduction strategy, on imports related to education and computers) and the imposition of a number of surcharges on imports (e.g. on dairy products, sugar, cement, and tires) in the budget for 2001/02. Improvement of the business environment 15. A key government goal is to improve the investment climate in order to stimulate a more rapid expansion of local and foreign private investment. As part of the conditions for reaching the HIPC Initiative completion point, the government undertook to strengthen the effectiveness of the Tanzania Investment Center (TIC) in promoting and facilitating private investment and to issue regulations that would ensure land can be used as collateral for commercial transactions. 16. The TIC has been restructured and competitively restaffed. Its role has been transformed from granting investment certificates and tax incentives to providing the services of a modem investment facilitation center. Its previous powers to grant tax incentives were stipulated under the 1997 TIC Act and at the decision point it was thought that a change in law was necessary to remove these functions from TIC prior to the restructuring. Further discussions with the Government revealed that it was not necessary to amend the law in order to change the functional focus of TIC, as the Finance  - 10- Act could be used to withdraw the delegated tax-incentive granting role from TIC. In 2000 and 2001, various steps were taken to enhance TIC's role in investment facilitation, including visits to sites of ongoing investments by TIC professional staff; setting up a computerized investor tracking system; and handling of new enquiries within 48 hours and all new applications within one week. 17. Land regulations were issued and gazetted in May 2001, bringing the 1999 Land Act and the Village Land Act into effect. The regulations took into account agreements reached in two stakeholder meetings, which were held to discuss, inter alia, the provisions under the acts and draft regulations to enable the use of land as collateral for commercial purposes. As a follow-up to these stakeholder meetings and to address concerns expressed by the banking sector concerning the effectiveness of the legal framework in achieving the stated objectives, the government agreed to review the Land Act to see whether additional legal changes were necessary to further facilitate the use of land as collateral for commercial transactions. Improvement of utility performance 18. Substantial progress has been made in restructuring and privatizing public utilities and in establishing an appropriate legislative framework for them. Following the privatization of many smaller entities, the government's privatization policy has focused in the past two years on the restructuring and privatization of the remaining large monopolies and utilities. Major progress in this area included the closure of the government-owned oil refinery in October 1999 and the subsequent completion of the liberalization of the petroleum sector, as well as the privatization of the telecommunications parastatal, the container harbor, and the National Bank of Commerce (1997) in 2000. The unbundling of the electricity company TANESCO into autonomous commercial entities was initiated in September 2001 with the appointment of a consultant for the design of trading arrangements, industry restructuring, the development of TANESCO reorganization, and the design of regulatory provisions for transmission and distribution. Consultant recommendations on the restructuring strategy and trading options are expected to be issued by January 2002. 19. With respect to the framework for the establishment of regulatory authorities for the utilities, legislation was passed in April 2001 establishing such agencies for surface and marine transport and for the energy and water utilities. Meanwhile, the responsibility for safety regulations for railways and ports, as well as for the treatment of telecommunications, aviation, and broadcasting in the new multisector regulatory framework, remains to be decided. 20. The privatization of the Dar es Salaam Water and Sewerage Authority (DAWASA) is well advanced, although it experienced delays because of circumstances outside government control. At the decision point, the bidding process for a concessioning agreement that would assign the assets of DAWASA to private management companies was almost completed with the imminent selection of one of the bidders to serve as operator. The actions to be monitored in the context of the completion point under the HIPC Initiative concerned the remainder of the process. However, once the bids were scrutinized, they turned out to be noncompliant, reflecting bidders'  - I1 - concerns about a consistent regulatory framework not yet being in place. To resolve these concerns, the DAWASA Act needed to be amended to ensure consistency with the multisector regulatory framework, prior to a new invitation for bids; this legislation was approved by parliament in October 2001. Tender documents are scheduled to be issued to the pre-qualified bidders in December 2001; and selection of a successful bidder is expected by June 2002. Improvement of the poverty database and monitoring capacity 21. A Tanzania Reproductive and Child Health Survey was carried out in 1999, and the results have been analyzed and disseminated. The 2000/01 Household Budget Survey (HBS) and the Labor Force Survey have been completed on schedule, and the data are being processed. As indicated in the PRSP, an analysis of partial data from the 2000/01 HBS was undertaken for the PRSP progress report, and a number of non-income poverty indicators in the poverty database were updated. For technical reasons, the sample size was considerably smaller than anticipated, reducing the statistical significance of the results. Accordingly, the authorities decided to wait with updating the poverty lines and indicators until the completion of the work on the HBS, which is expected in February 2002. 22. To strengthen the national capacity for poverty monitoring, the government has prepared a poverty-monitoring master plan and set up an institutional framework for poverty monitoring consistent with this plan. Four poverty-monitoring groups have been set up covering the areas of censuses and surveys, research and analysis, administrative data, and dissemination and sensitization. Local research institutes, the University of Dar es Salaam, donors, and other stakeholders have been given a role in poverty monitoring and analysis through participation in these working groups. The capacity in the Vice- President's Office and the National Bureau of Statistics, which carry primary responsibility for the collection and analysis of poverty data, has been strengthened through specific training and capacity development measures. Priority sector expenditures 23. Since the adoption of the PER and MTEF process in 1998, the government has conducted annual consultations with donors and representatives of civil society to set priority sector expenditure. 5 Under the MTEF, allocations to the priority sectors increased, partially financed from higher foreign grants through the multilateral debt fund (MDF). 6 The monitoring of the use of the MDF support was ensured through quarterly reports to the donors on the execution of the budget, especially with regard to priority- sector expenditure. These arrangements allowed close integration of the discussions on the PRSP and the MTEF for the budget for 2000/01, ensuring that the latter already included allocations to the priority sectors in line with the poverty reduction strategy. 5The priority sectors are (basic) education, (primary) health, water, roads, agriculture, lands, the judiciary, and HIV/AIDS. 6Following the granting of interim debt relief under the HIPC Initiative, the MDF was succeeded by the Poverty Reduction Budget Support Fund.  - 12 - 24. The increase in priority-sector expenditure (Table 2) was further facilitated by (interim) debt relief under the HIPC Initiative. Following the reaching of the decision point in April 2000, total HIPC Initiative debt relief amounted to T Sh 52 billion in 1999/2000, increasing to T Sh 141 billion (1.9 percent of GDP) in 2000/01. Recurrent spending on priority sectors increased by about T Sh 116 billion from 1998/99 to 2000/01 despite a large claim on available resources from the costs of the general elections in October 2000; allocations for recurrent expenditures of the priority sectors in the budget for 2001/02 have been increased by a further T Sh 103 billion, while the savings from HIPC debt relief are expected to increase by a modest T Sh 7 billion. Education 25. In recent years, the government has undertaken important initiatives to improve access to, and the quality of, education. In close collaboration with donors and stakeholders, the govermnent has developed an Education Sector Development Program (ESDP). The first three-year phase of the ESDP focuses on policy measures, investments, reinforcement of the capacity to manage schools at the grassroot level, and provision of sufficient public funding for primary education. The main goals are to alleviate the cost burden on households, enhance education quality and internal efficiency, and increase access to primary education, particularly in poor areas and among demographic groups that are socially and economically disadvantaged. 26. Progress in the implementation of the ESDP includes increased budgetary allocations to education, especially primary education, the abolition of school fees at the primary level, and a school-mapping exercise, covering 63 out of the 114 local authorities. The results from school mapping provide baseline data on the availability and condition of schools, the quality and distribution of teachers, the quality of school management, and school enrollment and dropout rates, and they allow the identification of the key problems in the delivery of quality primary education. Districts have already begun using these results to prepare their education plans. A key measure to support access to primary education for children from poor households is the introduction of a capitation grant of US$10 equivalent per pupil, starting in school-year 2002, to cover expenditures on textbooks, other teaching and learning materials, school operation and administration, and the cluster-based professional development of teachers. Health 27. Under a donor-supported health sector development program (HSDP), the government continues to implement sector reforms and expand the provision of basic health services. The initial target of achieving complete immunization of at least 75 percent of children under 2 years against measles and DPT has been exceeded. Instrumental in the achievement of this objective was the increase in the coverage of the Integrated Management of Child Illness program in health facilities from 17 to 31 districts. At present, 78 percent of children under 2 years have been immunized, and the new target is to achieve and maintain an immunization rate of 85 percent. 28. The fight against HIV/AIDS has been intensified, and the act establishing the Tanzania Commission on AIDS (TACAIDS) was approved by parliament in October  - 13 - 2001. The new commission will be the central coordinating institution for the multisectoral response in the country. All districts have been covered by an active HIV/AIDS awareness campaign, following the preparation of HIV/AlDS plans for all districts (the HIPC Initiative completion point target was 75 percent of all districts). The government has made provisions in the 2001/02 budget for TACAIDS and the multisector programs. III. DELIVERY OF DEBT RELIEF AND MEDIUM-TERM DEBT SUSTAINABILITY A. Status of Creditor Participation 29. The assistance required at the decision point to bring Tanzania's external debt to a sustainable level, as defined by the threshold of NPV of debt-to-exports ratio of 150 percent, amounted to US$2,026 million in NPV terms (Table 3). This implied a common reduction factor for multilateral, bilateral, and commercial creditors of 54 percent of debt outstanding at end-June 1999 after application of traditional debt-relief mechanisms. Preliminary estimates suggested that Paris Club creditors could provide their share of assistance with an NPV reduction of about 85 percent of eligible debt. The status of creditor participation under the enhanced HIPC Initiative is discussed below and summarized in Table 4. Multilateral creditors 30. As agreed at the decision point, the enhanced HIPC Initiative assistance required from the multilateral creditors amounts to US$1,020 million in NPV terms. IDA, the IMF, and the African Development Bank and Fund (AfDB) granted interim debt relief starting from the decision point. Other multilateral creditors have indicated their commitment to provide the debt relief required under the enhanced HIPC Initiative as soon as Tanzania reaches the completion point. 31. The details of the debt relief by multilateral creditor are as follows:7 * The enhanced HIPC Initiative assistance from IDA is being delivered through a 69.1 percent reduction in debt service on IDA credits disbursed and outstanding as of end-June 1999 (Table 5). The debt relief from IDA amounts to US$694.5 million inNPV terms (US$1,157.1 million in nominal terms through 2020). Interim assistance over the period April 2000 to October 2001 amounts to US$59 million in nominal terms. * The debt relief from the IMF, amounting to SDR 88.95 million in NPV terms (approximately US$120 million), is being delivered through debt- service reduction through grants provided from the PRGF-HIPC Trust (Table 6). The value of interim assistance in nominal terms is SDR 26.7 7These details were confirmed at the recent Multilateral Development Banks' meeting (see also HIPC Debt Initiative-Multilateral Development Banks' Meeting-October 10- 1, 2001, Chairrnan's Summary, IDA/SecM2001-0614 (10/18/2001).  - 14- million over the period April 2000 to March 2002. The share of debt service to the IMF covered by HIPC Initiative relief is front-loaded, amounting to 77.5 percent in 2000/01, 92.8 percent in 2001/02 and 82.6 percent in 2002/03, before falling to an average of 26.9 percent during the period 2003/04-2008/09. * The AfDB is providing interim relief backdated to the April 2000 decision point, yielding a debt service reduction of about 80 percent (US$13.1 million in nominal terms through October 2001). The interim assistance is expected to be followed by a commitment at the completion point to provide a further debt-service reduction of 80 percent until 2017. The cumulative savings on debt service to the AfDB would amount to US$124.9 million in NPV terms (US$190.7 million, or about US$10.6 million annually, in nominal terms). * The European Commission/European Union (EC/EU) will deliver its assistance under the HIPC Initiative by providing grants at the completion point to pay off outstanding loans. The NPV of total assistance due from the EC/EU is US$37.9 million. No interim assistance was provided because of the late issuance of an agreement on modalities to provide that assistance. * The International Fund for Agricultural Development (IFAD) will begin delivering front-loaded relief starting at the completion point, providing up to 100 percent relief of debt service due, equivalent to US$15.3 million in NPV terms. It is estimated that the debt-service reduction could be provided by IFAD until 2016, with cumulative debt- service savings of US$24.5 million in nominal terms. * The Nordic Development Fund (NDF) will also provide front-loaded assistance at the completion point. This relief covers 100 percent relief of debt service due and operates through the HIPC Trust Fund administered by the World Bank. The NDF's debt-service reduction could be provided until 2017, with cumulative debt-service savings of US$3.2 million in nominal terms. * Assistance committed by the Organization of Petroleum Exporting Countries (OPEC) Fund at the decision point is US$9.8 million in NPV terms. This relief will be delivered through a concessional loan that will finance the restructuring of existing debt. * The East African Development Bank (EADB) has proposed a modality to provide assistance of US$0.6 million in NPV terms by reducing the interest rate and extending the repayment period on the remaining outstanding loan. The EADB's share of required relief is US$1.6 million in NPV terms. Discussions are underway to finance the remaining US$1 million (NPV) of EADB's assistance.  - 15 - * The assistance provided by the Arab Bank for Economic Development in Africa (BADEA) will consist of a concessional rescheduling of the debt and a reduction in the interest rate, for a total debt relief in NPV terms of US$14.7 million. Bilateral and commercial creditors8 32. Tanzania and the Paris Club, involving 13 official bilateral creditors, concluded a new debt rescheduling on Cologne terms (a debt reduction of 90 percent in NPV terms) in April 2000. The agreement included a goodwill clause requiring participating countries to meet at the completion point to make the necessary effort to reach the objective of debt sustainability in the context of equitable burden sharing among creditors, provided Tanzania maintained satisfactory relations with the participating creditor countries. The difference between the debt service on Cologne terms and on Naples terms is considered interim relief; the remaining amount of the assistance will be provided through a stock-of-debt operation on Cologne terms at the completion point. A number of Paris Club creditors have indicated that they would provide debt relief beyond that required under the terms of the enhanced HIPC Initiative (Table 7). 33. Non-Paris Club bilateral and commercial creditors are expected to provide comparable treatment to that of Paris Club creditors. The NPV of debt outstanding to these creditors is US$ 1.1 billion. Of these creditors, China and Kuwait (accounting for 16 percent of the NPV of debt outstanding to non-Paris Club bilateral and commercial creditors) have indicated their intention to provide debt relief in the context of the HIPC Initiative. The Tanzanian authorities are continuing their efforts to obtain HIPC Initiative debt relief from the other non-Paris Club official bilateral creditors. The government of Tanzania is also the guarantor of US$194.8 million in NPV terms of commercial credit; there has been little progress in concluding debt-relief agreements with these creditors. 9 The Tanzanian authorities are continuing their efforts to obtain comparable treatment from their commercial creditors. B. Data Reconciliation and Assistance 34. As part of the process of updating the DSA, the staffs and the authorities solicited new creditor statements and reviewed the calculations of the stock of debt based thereon. In the course of this review, most of the debt was reconciled and the original data on the overall debt stock outstanding at end-June 1999 and used for the DSA of the decision point were substantially confirmed. Some revisions, pertaining mainly to bilateral and commercial debt were largely offsetting, leaving a net increase in the overall NPV of debt 8 Paris Club and non-Paris Club creditors are listed in Table 13. 9 In addition, the authorities implemented a debt-buy back operation financed by IDA and German and Swiss donors. The operation concerned non-public and non-publically guaranteed commercial debt which had been paid in local currency to the Bank of Tanzania but for which the foreign currency could not be provided at the time. In June 2001, a first round under the operation allowed the cancellation of US$155.7 million in debt owed to 145 large creditors at a sharply discounted price; all accrued interest was cancelled simultaneously. The offer to creditors under this facility remains open.  - 16- after traditional relief of only 0.07 percent (US$2.5 million). Given remaining uncertainties in the debt reconciliation and the very marginal net revision to the calculated NPV of debt, the staffs have not changed their assessment of the required debt relief from that agreed at the time of the decision point under the enhanced HIPC Initiative. C. Updated Debt Sustainability Analysis 35. The DSA included in the decision point document has been updated jointly by the authorities and the staffs of the IMF and IDA. The stock of debt outstanding was updated on the basis of loan-by-loan debt data provided by the Bank of Tanzania for nominal debt outstanding at end-June 2001; this information has been reconciled with creditor statements from all multilateral and Paris Club creditors and from most of the non-Paris Club official bilateral and commercial creditors.' 0 The exchange rates used for converting the debt into U.S. dollars and the discount rates used for the calculation of the NPV of debt are reported in Table 8. 36. The long-term macroeconomic framework for the DSA was also revised, compared with the decision point document. The new projections are based on the authorities' medium-term framework included in the PRSP progress report (Box 2, Table 9). Compared with the assumptions underlying the DSA of the decision point," the projected long-term growth rate remains at 6 percent. Exports are projected to grow more slowly than assumed at the decision point. Actual exports in 2000/2001 were higher than projected at the decision point, reflecting the earlier than anticipated increase in gold exports and resumption of fish exports to the European Union. For the long-term projections, however, export prices are projected to be lower than those assumed for the decision point DSA, as is the growth in the export of agricultural products, reflecting actual developments in recent years. As a result, exports of goods and services are now projected to grow at an annual average rate of 7.2 percent in the period 2001-20, compared with 9.1 percent assumed in the decision point document (Table 14). 37. Debt indicators show that debt relief provided under the enhanced HIPC Initiative would reduce Tanzania's public and publicly guaranteed external debt to sustainable levels at the completion point. The net present value of Tanzania's official debt after traditional debt relief stood at US$3.6 billion at end-June 2001 (Tables 11 and 12). It is projected to fall in 2001/02 to US$1.6 billion (US$1.8 billion if new loans are included) after full relief under traditional debt-relief mechanisms and the enhanced HIPC Initiative. As can be seen in Table 13, the ratio of NPV of debt to exports remains well below the enhanced HIPC Initiative sustainability target of 150 percent throughout the '°Commercial debt at the completion point is higher than at the decision point. This increase does not reflect new commercial loan data but rather a reclassification between bilateral and commercial loan data, compared to the decision point document. " These assumptions were included in Box 5 on page 33 of the decision point document.  - 17 - Box 2: Tanzania Macroeconomic Assumptions Underlying the Debt Sustainability Analysis Economic growth. The economy is assumed to grow at an average annual rate of close to 6 percent during the period 2001-2020 (Table 9). This projection is based on the assumption that further improvement in infrastructure and transportation will allow for agricultural growth of 5.5 percent per year. Investment in privatized parastatal enterprises and in new gold mines is expected to lead to average annual growth rates of 6.5 percent in manufacturing and 8.7 percent in the mining sector. Inflation. Sound fiscal and monetary policies are expected to keep annual average inflation below 5 percent. Exports and imports. In the wake of the recent slowdown in world economic activity and its adverse effects for commodity prices and tourism, Tanzania's total receipts from exports of goods and services are expected to follow a lower path than anticipated at the decision point. Traditional exports are assumed to grow by 6.1 percent on average in nominal U.S. dollar terms (4.6 percent in real terms) over the 2001-20 period. Export prices are assumed to increase in line with the forecasts of the IMF's World Economic Outlook and the World Bank's Global Economic Prospects until 2006, and to remain constant in real termns thereafter. A steady increase in nontraditional exports, mainly due to increased gold exports and tourism receipts, will help to stabilize the ratio of exports of goods and non- factor services to GDP at 15 percent. Gold exports are assumed to increase from US$112 million in 2000 to about US$250 million in 2005, reflecting the new gold mines' reaching full capacity. However, the price of gold over the 20-year period is assumed to remain unchanged at US$265 per ounce, compared with the US$290 assumed at the time of the decision point. Imports of goods and services are projected to grow by 6.8 percent on average in nominal U.S. dollar terms as import volumes are projected to increase in line with real GDP growth. Current account. The deficit on the current account excluding grants is projected to continue on the downward trajectory observed since 1999 throughout the projection period except for the period 2001-02. Reflecting the impact on tourism and exports of the September 11 terrorist attacks on the United States, we project a temporary increase in the current account deficit for 2001/02. Foreign direct investment (FDI) is projected to remain stable at about 2 percent of GDP, resulting in an average annual increase of 7.4 percent in nominal U.S. dollar tenns. Grants and loans. Tanzania is expected to become gradually less dependent on official transfers, and, accordingly, grants are assumed to decline steadily from 8.5 percent of GDP (about US$760 million) in 2000 to just over 2 percent (or US$891million) in 2020. It is assumed that the share of program grants will gradually increase from 23 percent (or US$175 million) in 2000 to above 40 percent (or US$365 million) in 2020, as the donor community becomes more confident of improved fiscal management in Tanzania, and the authorities are consistently implementing the PRSP. New project loans, which are assumed to be on concessional terns, in line with Tanzania's debt strategy, are projected to grow by 6.0 percent per year in nominal U.S. dollar terms. Program loans are assumed to grow at about 7.5 percent per year, partly because of the recent shift toward program lending by the World Bank. Gross official reserves, expressed in months of imports of goods and services, are expected to decline from the high level of 5.6 months in 2000 to 4.3 months in 2010, and to remain at that level thereafter. projection horizon, rising from 130.8 percent in 2001/02 to a peak of 137.1 percent in 2 003/04, before falling to 117.4 percent by 2020/21. The NPV of official debt as a proportion of GDP is projected to decline slightly, from 17.6 percent in 2001/02 to 14.4 percent by 2020/21. 38. Bilateral relief beyond that required under the HIPC Initiative is projected to reduce the NPV of Tanzania's debt by a further US$363 million in 2001/02. The ratio of NPV of debt to exports will remain even further below 150 percent as compared to after enhanced HIPC Initiative assistance, rising from 104.4 percent in 2001/02 to a peak of 116.3 percent in 2006/07, following which it will decline slightly to 114 percent by  - 18- 2020/21.12 The NPV of official debt as a proportion of GDP is projected to remain broadly the same over the next 20 years, increasing from 14 percent in 2001/02 to 15.1 percent in 2008/09, before declining back to 14 percent in 2020/21. D. Comparison of Revised DSA with DSA as of the Decision Point 39. The NPV of debt-to-exports ratio after enhanced HlIPC Initiative debt relief for end-June 2001 is estimated. in this revised DSA at 137 percent compared to 172 percent projected for this time at the decision point. The revision reflects new information on the debt stock at end-June 2001, revisions to the macroeconomic and debt projections, and changes in discount rates and exchange rates. The ratio would be further reduced to 105 percent after taking into account pledges of additional assistance from Paris Club bilateral creditors beyond the enhanced HIPC Initiative. These elements are discussed below. 40. Based on the same exchange and discount rates as used for the decision point, the debt stock (in NPV terms) at end-June 2001 before debt relief under the enhanced HIPC Initiative was US$4 billion, US$137 million lower than projected at the time of the decision point, mainly because of lower than projected new borrowing (Table 15); this latter change accounts for 10 percentage points of the decline in the NPV of debt-to- exports ratio after assistance under the enhanced HIPC Initiative. When the higher exports (compared to projections of the decision point), are also taken into account, the NPV of debt-to-exports ratio declines to 150 percent at end-June 2001, compared with 172 percent projected at the time of the decision point. Including updated exchange and discount rates, the ratio falls further to 137 percent. Additional Paris Club bilateral debt relief beyond the HIPC Initiative is expected to reduce the debt stock in NPV terms at end-June 2001 by an additional US$407 million. The impact of this additional relief would be a further decline in the NPV of debt-to-exports ratio to 105 percent. 41. For 2000/01, exports of goods and services were higher by about US$100 million than projected at the time of the decision point. However, growth projections for exports of goods and services have been revised downward for the period 2001/02-2020/21 to reflect continued depressed commodity prices and lower growth projections, particularly in the agricultural and tourism sector (Table 14). 42. As a result of these revisions, official debt service would be lower than projected at the decision point and remain within the sustainable limits as defined under the enhanced HIPC Initiative (Table 16). After debt relief under the enhanced HIPC Initiative, debt service as a percentage of exports is estimated to be 6.7 percent in 2001/02, compared with the 9.5 percent projected at the time of the decision point, and it is projected to remain lower for most of the projection period because debt service is lower given the lower-than-expected new borrowing (Table 13). As the front-loading of interim debt relief from the IMF comes to an end, the debt-service ratio rises gradually to a peak of 8.6 percent of exports in 2004/05 before falling to 6.4 percent in 2020/21. After Paris Club bilateral debt relief beyond the HEPC Initiative, the debt service ratio is reduced further, particularly over the period 2001/02-2010/11. By 2020/21, debt service 12 The ratio is calculated using the average exports of goods and services in the preceding three years.  - 19- is projected to be 6.2 percent of exports. With regard to the fiscal debt sustainability indicator, government revenue in U.S. dollar terms is expected to be slightly lower in the next two decades than projected at the decision point, partly because of a faster-than- anticipated depreciation in the Tanzanian shilling during the last two years. Nevertheless, the debt service-to-revenue ratio after enhanced HIPC Initiative assistance, is also forecast to decline, falling from 8.3 percent in 2001/02 to 4.9 percent in 2020/21. E. Sensitivity Analysis 43. This section examines the implications for debt sustainability under more pessimistic assumptions than those included in the baseline scenario described above. Two specific scenarios are analyzed below and compared with the baseline case (Table 17). The first scenario examines the likely impact of lower growth, and the second scenario examines the impact of lower external project grants. Scenario 1: lower growth 44. There is a risk that Tanzania's real GDP will grow by less than the 6 percent per year assumed under the baseline scenario. The growth rate has gradually increased during the second half of the 1990s, reflecting the impact of macroeconomic stabilization and structural reform policies. However, the target of annual real GDP growth of 6 percent, which assumes continuation of the present strong macroeconomic and reform policies, is yet to be attained. In addition, Tanzania's agriculture-based economy remains vulnerable to climatic conditions, and the impact of the HIV/AIDS pandemic on growth prospects remains uncertain. To examine the sensitivity of lower growth on the debt indicators, for the purpose of this scenario, real GDP growth is assumed to remain at the average level of the 1990s of 3.1 percent throughout the period 2001/02-2020/21, implying little long-term effect of the present stabilization, reform and poverty reduction policies. The lower growth rate is reflected in lower export growth-especially with regard to agricultural products-of on average 4.2 percent annually, compared to 7.2 under the baseline scenario and lower foreign direct investment growth of on average 3.5 percent per year instead of 7.4 percent under the baseline case. In addition, lower growth will adversely affect Tanzania's ability to borrow and, hence, total new official borrowing will be lower by about 1.7 percent per annum (US$675 million compared to almost US$940 million in the baseline case). These shortfalls are expected to be offset mainly by lower import volumes. 45. Under the lower-growth scenario (Table 17), the NPV of debt-to-exports ratio in 2001/02, when the assumed lower growth period begins, is 129.7 percent; it increases to 146.7 percent by 2010/11, compared with 122.3 percent under the baseline scenario, and to 176.9 percent by 2020/21 (compared with 117.4 percent in the baseline scenario). Whereas debt service decreases in nominal terms (by US$38 million by 2020/21), as a result of lower export and government revenue, the debt service to exports and debt service to revenue ratios are significantly higher than those under the baseline scenario. While the debt service ratio in this lower growth scenario is lower by 0.1 percentage points in 2002/03, the difference increases to about 4 percentage points by 2020/21 (10.4 percent compared with 6.4 percent in the baseline case). The debt service to revenue ratio is also significantly higher in the lower-growth scenario. However, both debt  -20 - service to export and debt service to revenue ratios remain below 10 percent for most of the next two decades. This sensitivity analysis clearly shows the importance of achieving high and sustained growth though maintenance of macroeconomic stability and continued pursuit of structural reforms. Scenario 2: lower grants 46. Tanzania has been receiving substantial foreign assistance, including grants, since 1995/96, partly because of very low per capita income and partly because of an impressive record of economic reform. The baseline projections assume an increase in external grants from about US$740 million in 2001/02 to US$891 million in 2020/21, a growth rate of 1 percent per year. Under alternative scenario 2, however, external project grants will remain constant in nominal US dollar terms at US$740 million. As a result, external grants would decline from 8.1 percent of GDP in 2001/02 to 1.9 percent in 2020/21, compared with the baseline scenario of 2.2 percent. In the absence of any other changes, it is assumed that these additional financing requirements are met through new concessional official borrowing. However, the average grant element of new loans is reduced to 55.4 percent compared with 58.3 percent in the baseline case as the additional official borrowing is expected to have only a grant element of 35 percent. Additional borrowing is also required to cover the higher debt service costs with total debt service being US$125.4 million higher than in the baseline scenario in 2020/21. 47. The NPV of debt-to-exports ratio in this lower-grant-scenario increases beyond that in the baseline scenario, rising from 135.2 percent in 2002/03 to 148.2 percent by 2020/21. Debt service is also higher in this scenario than in the baseline case over the projected horizon, but lower than in the lower-growth scenario. Starting at 6.5 percent in 2002/03, the debt service ratio increases to 8.5 percent by 2020/21, compared to 6.4 percent in the baseline scenario. This sensitivity analysis underlines the importance of following prudent debt management policies and avoiding a new build-up in debt. Tanzania will have to continue to rely on grants and highly concessional loans in order to keep its debt within sustainable limits. IV. CONCLUSIONS 48. The staffs of the IMF and IDA consider that Tanzania has satisfactorily met the conditions established for reaching the completion point. Staffs' assessment of Tanzania's PRSP was endorsed by the Boards of IDA and the IMF and, in the view of the staffs, Tanzania has satisfactorily implemented its poverty reduction strategy for more than a year, building on a process that started in 1997. The government has also continued to implement prudent financial policies, that have contributed to the positive macroeconomic developments during the last two years and the excellent performance under its program supported by the PRGF. Tanzania made good progress with structural reforms, including with regard to the key areas of reform identified in the decision point document. Progress surpassed the conditions for the floating completion point in many areas; in the two areas where progress was less than envisaged, this was the result of technical difficulties outside the control of the government, and does not reflect a weakening of Tanzania's commitment under the HIPC Initiative to a strong and sustained policy performance.  - 21 - 49. The interim debt relief provided under the HIPC Initiative has allowed Tanzania to protect and further increase government spending in the priority sectors in 2000/01 and 2001/02. The budget allocations are being set in line with the poverty reduction strategy, based on improved costings and a broad-based consultation process in the context of the MTEF. However, although the authorities strengthened the central government's expenditure management system, the tracking of priority-sector expenditure by the local governments-which are expected to play an increasing role in social sector expenditures in the context of the local government reform program-remains weak, reflecting serious capacity constraints. With technical assistance from the IMF, the World Bank, and other donors, efforts are under way to improve monitoring in this area. 50. The staffs consider that, with the assistance expected to be provided under the enhanced HIPC Initiative, Tanzania will achieve a sustainable debt and debt-service profile as defined under the Initiative. After full delivery of enhanced HIPC Initiative assistance, the NPV of debt would remain well under 150 percent of exports; possible additional debt relief from some Paris Club creditors would reduce the debt ratio to about 105 percent at end-June 2001. This NPV of debt-to-exports ratio, which is considerably lower than projected at the time of the decision point, reflects not only higher exports and lower-than-expected new borrowings, but also higher discount rates and additional debt relief from Paris Club creditors beyond the HIPC Initiative. While Tanzania's economy remains vulnerable to external shocks, the lower NPV of debt-to-exports ratio affords some margin for Tanzania to accommodate possible unfavorable developments. However, the sensitivity analysis shows that Tanzania's external debt sustainability could be jeopardized by a failure to continue to implement strong macroeconomic and reform polices as well as a prudent management of external debt. 51. In light of the above, the staffs of the IMF and IDA recommend that the Executive Directors determine that Tanzania has met the conditions for reaching the completion point under the enhanced HIPC Initiative V. ISSUES FOR DISCUSSION 52. Executive Directors may wish to focus on the following issues and questions: * Do Directors agree that Tanzania has met the conditions for reaching the floating completion point? * Do Directors agree that assistance agreed at the decision point will provide Tanzania with a solid basis for debt sustainability over the medium term, within the framework of the enhanced HIPC Initiative, as discussed in Section III?  - 22 - Table 1: Tanzania: Selected Economic and Financial Indicators, 1999-2004 1999 2000 2001 2002 2003 2004 Act. Act. Proj. Proj. Proj. Proj. (Annual percentage change, unless otherwise indicated) National income and prices Nominal GDP (billions ofTanzania shillings) 6,433 7,226 7,975 8,786 9,661 10,640 Real GDP growth 4.7 4.9 4.8 5.5 5.8 6.0 Real GDP per capita growth 1.9 2.6 2.6 3.4 3.7 3.9 Consumer prices (period average) 7.9 5.9 5.2 4.4 3.9 3.8 Consumer prices (end of period) 7.0 5.5 4.8 4.0 3.9 3.8 External sector Exports, f.o.b (in U.S. dollars) 562.7 663.1 727.2 777.1 840.9 921.6 Imports, c.i.f (in U.S. dollars) 1,572.7 1,534.4 1,698.2 1,806.0 1,932.2 2,084,5 Export volume -4.1 21.3 10.9 4.9 5.5 6.6 Import volime 0.7 -2.1 11.5 6.4 6.7 6.8 Terms of trade 9.9 -2.5 -1.0 2.3 2.3 1.9 Nominal effective exchange rate (end of period) -10.5 9.3 ... ... ... ... Real effective exchange rate (depreciation-) -5.6 12.4 ... ... Public finance 1! Revenue(excludinggrants) 12.0 20.3 10.3 12.1 13.5 10.4 Total expenditure 30.9 1.1 23.1 9.4 9.4 13.1 Current expenditure 21.7 22.2 25.3 5.2 8.8 13.5 Development expenditure and net lending 49.0 .20.5 19.5 24.5 11.1 11.9 Money and credit Broad money 18.6 14.8 13.0 10.7 10.0 10.1 Netforeignassets 35.6 49.6 28.1 6.5 -7.8 11.5 Netdomesticassets 6.6 -16.2 -11.0 20.3 46.0 8.3 Credittogovernment2/ 14.0 -13.6 -39.3 14.7 0.0 0.0 Credit tonon-government sector 25.5 9.4 24.1 24.6 17.7 14.3 Velocity of money (GDP/M3; average) 5.7 5.5 5.4 5.3 5.3 5.3 Treasury bill interest rate (in percent; end of period) 3/ 15.5 6.9 ... ... ... ... (In percent of GDP, unless otherwise indicated) Public finance Revenue (excluding grants) 11.3 12.2 12.2 12.5 12.9 12.9 Total grants 4.5 3.8 5.4 5.3 5.5 5.4 Expenditure 18.6 16.9 18.8 18.7 18.6 19.1 Overall balance (including grants) -3.3 -1.2 -1.2 -1.0 -0.6 -0.9 Domestic financing 4/ 1.8 0.4 0.5 0.0 0.0 0.0 Savings and investment Resource gap -12.1 -8.5 -10.9 -11.1 -11.1 -10.8 Investment 15.5 17.7 18.6 19.2 19.2 19.3 Govemment 3.1 3.4 4.3 4.8 4.9 5.0 Non-government 12.4 14.3 14.3 14.3 14.3 14.3 Gross domestic savings 3.4 9.2 7.7 8.1 8.1 8.5 Government -0.5 -0.8 -2.7 -1.7 -1.2 -1.6 Non-government 4.0 10.0 10.4 9.8 9.3 10.0 External sector Current account deficit (excluding grants) -12.3 -9.2 -11.7 -11.8 -11.7 -11.3 Current account deficit (including grants) -3.8 -0.7 -3.6 -4.3 -4.7 -4.7 (In millions of U.S. dollars, unless otherwise indicated) External sector indicators Current account balance (excluding grants) -1,060.7 -826.9 -1,068.8 -1,161.1 -1,242.9 -1,296.7 Current account balance (including grants) -324.1 -64.2 -328.3 -421.4 -503.1 -535.5 Overall balance ofpayments (deficit-) 43.4 111.7 -25.0 -73.7 -91.6 -68.3 Gross official reserves 775.6 974.4 1,078.0 1,160.5 1,198.3 1,230.7 In months of imports of goods and nonfactor services 4.2 5.6 5.5 5.5 5.3 5.1 Sources: Tanzanian authorities; and World Bank/lIMF staff estimates and projections. 1/ Fiscal years (July-June), beginning in the year indicated in the column header. 2/ Including new debt issued for the recapitalization of banks. 3/ Weighted-average yield of9l-, 182-, and 364-day treasury bills. 4/ Excluding new debt issued to recapitalize government-owned banks.  - 23 - Table 2: Tanzania: Central Government Expenditure on Priority Sectors, 1999/2000-2001/02 1/ (In billions of Tanzania shillings, unless otherwise indicated) 1998/99 1999/00 2000/01 2001/02 Act. Act. Proj. Act. Proj. Total expenditure in priority sectors 290.9 354.3 491.7 499.7 766.5 (in percent of GDP) 4.8 5.2 6.5 6.6 9.1 (in percent of total expenditure) 32.4 30.3 38.1 39.3 48.6 Education 135.2 180.9 247.8 254.9 347.6 Health 69.4 77.3 96.3 100.7 139.3 Water 9.6 8.6 17.1 18.3 31.6 Agriculture (research and extension) 10.5 16.1 18.9 19.1 30.5 Lands 3.2 3.9 5.3 5.1 8.1 Roads 57.8 59.6 91.4 92.5 181.2 Judiciary 5.2 7.9 10.1 9.2 21.0 HIV/AIDS 2/ ... ... 4.8 ... 7.3 Recurrent expenditure in priority sectors 235.8 285.4 343.8 351.7 454.3 (in percent of GDP) 3.9 4.2 4.5 4.6 5.4 (in percent of total recurrent expenditure) 35.9 35.3 35.1 35.6 36.1 Education 117.6 158.9 182.1 189.2 238.0 Health 50.7 53.9 66.0 70.3 88.6 Water 7.1 5.4 7.0 8.1 14.7 Agriculture (research and extension) 8.6 13.7 10.2 10.3 15.9 Lands 2.8 3.4 4.4 4.2 7.4 Roads 43.9 42.2 59.6 60.7 68.3 Judiciary 5.2 7.9 9.7 8.8 14.1 HIV/AIDS 2/ ... ... 4.8 ... 7.3 Development expenditure in priority sectors 55.1 68.9 147.9 148.0 312.3 (in percent of GDP) 0.9 1.0 1.9 2.0 3.7 (in percent of total development expenditure) 22.2 19.1 47.2 51.7 91.1 Education 17.6 22.0 65.7 65.7 109.5 Health 18.7 23.4 30.4 30.4 50.7 Water 2.6 3.2 10.1 10.1 16.9 Agriculture (research and extension) 1.9 2.4 8.7 8.7 14.6 Lands 0.4 0.5 0.9 0.9 0.7 Roads 13.9 17.4 31.7 31.7 112.9 Judiciary ... ... 0.4 0.4 7.0 HIV/AIDS 2/ ... ... ... ... ... Memorandum items: Total expenditure 3/ 898.8 1,167.5 1,292.1 1,272.9 1,578.7 Recurrent expenditure 657.3 807.6 978.6 986.6 1,236.5 Development expenditure 247.9 359.9 313.5 286.3 342.1 HIPC Initiative debt relief ... 51.6 ... 141.2 148.5 (in percent of GDP) ... 0.8 ... 1.9 1.8 GDP 6,002.0 6,829.3 7,600.4 7,600.4 8,380.8 Sources: Ministry of Finance; and World Bank/IMF staff estimates and projections. I / Fiscal years run from July to June. 2/ Expenditure on HIVWAIDS related activities are distributed across various ministries, departments, and agencies (MDA) and currently not reported separately from other expenditures of these MDAs in Tanzania's expenditure reporting system. Amounts shown refer to the operation of TACAIDS. 3/ Total expenditure excludes bank and parastatal recapitalization, and thus, differs from the figures in Table 1.  - 24 - Table 3: Tanzania: Assistance Under the HIPC Initiative as Approved at the Decision Point 1/ (In millions of U.S. dollars, unless otherwise indicated) Memorandum Item: Common Required NPV Debt Reduction Reduction on Paris Factor Club Debt Assuming Total Assistance Under the at the Decision Comparable Action NPV of Debt-to-Exports Criterion 2/ Point 4/ by Nomnultilateral Total Bilateral 3/ Multilateral (In percent) Creditors 2,026 1,006 1,020 54 Memorandum items: NPV of debt 5/ 3,769 1,871 1,898 Three-year average of exports 1,162 ... ... Current-year exports 1,081 ... ... NPV of debt-to-exports ratio 6/ 324 ... ... Paris Club creditors 1,481 85 Of which: pre-cutoff-date non-ODA 1,125 90 Non-Paris Club creditors 3/ 390 85 Of which: pre-cutoff-date non-ODA 240 96 Sources: Tanzanian authorities; and World Bank/IMF staff estimates and projections. I/ The proportional burden-sharing approach is described in "HIPC Initiative-Estimated Costs and Burden-Sharing Approaches" (EBS/97/127, 7/7/97, and IDA/SEC M 97-306, 7/7/97). 2/ Applies a hypothetical stock-of-debt operation on Naples terms and appropriate comparable treatment by other official bilateral creditors at end-June 1999. The net present value (NPV) of debt-to-exports target is 150 percent. 3/ Includes official bilateral and commercial creditors. 4/ Each creditor's NPV reduction at the decision point (after traditional debt relief mechanisms), in percent of its exposure at the decision point. 5/ Based on end-June 1999 data and after a hypothetical full application of traditional debt-relief mechanisms. 6/ Based on the three-year export average (backward-looking average).  Table 4: Tanzania: Status of Creditor Participation Under the Enhanced HIPC Initiative Debt Relief Satisfactory reply in NPV Terms Percentage of to participate Modalities to (US$ mil.) Total Assistance in Initiative Deliver Debt Relief Implemented IDA/IBRD 694.5 34.3 Yes Debt-service relief of 69.1 percent annually for 20 years on debts outstanding at end-June Yes 1999 (average reduction of 63.6 percent on debts outstanding at end-June 2001). Interinm relief starting in April 2000. AfDB Group 124.9 6.2 Yes Using the HIPC Initiative Trust Fund resources and internal resources to release eligible Yes countries from 80 percent of asmual debt-service obligations until debt relief is delivered, subject to a maximum of 40 percent of HIPC Initiative assistance being provided in the interim period. Interim debt relief backdated to April 2001. IMPF / 119.8 5.9 Yes The IMF's enhanced assistance is being provided through special PRGF grants -- to be Yes paid into an escrow account and used to cover debt-service payments to the IMP. Share of debt service due on current IMF obligations (as of end-June 2001) covered by total IMF assistance averages 48 percent over the period 1999/00-2008/09. EU/EIB 37.9 1.9 Yes Debt relief on identified EU loans during the interim, supplemented with grants to pay off No EU loans at completion point. IFAD 15.3 0.8 Yes Up to 100 percent debt-service relief until NPV target is achieved. No BADEA 14.7 0.7 Yes Concessional clearance of arrears, concessional rescheduling of debt and reduction of No interest rates. OPEC Fund 9.8 0.5 Yes Concessional loan and restructuring of existing debt. No NDF 1.8 0.1 Yes Contribution to HIPC Initiative Trust Fund, which will pay 100 percent debt service at No completion point. EADB 1.6 0.1 Yes Reduction of interest rate on outstanding loan and extension of repayment period. No Total multilateral 1,020,3 50.4 Paris Club creditors 796.3 39.3 Yes Flow rescheduling on Cologne termns during the interim period, to be followed by a Yes Cologne stock deal. Non-Paris Club creditors 9.0 Some China and Kuwait indicated participation. Others being contacted by Tanzania. No Commercial creditors 27.7 1.4 No Being contacted by Tanzania. No Total bilateral and commercial 49.6 Total 2,026.3 100.0 Sources: "HIPC Debt Initiative, Multilateral Development Banks' Meeting, October 10-1 1, 2001, Chairman's Summary," IDA/SecM2001-0614, October 18, 2001; and World Bank/lMF staff estimates.  Table 5: Tanzania: Delivery of IDA Assistance Under the Enhanced HIPC Initiative, 1999/2000-2019/20 1/ (In millions of U.S. dollars, umless otherwise indicated) 19992O000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2009/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 201S/19 2019/20 Projected debt service to IDA before HLPC ntiafiveassistance2/ 44.9 54.2 59.7 63.0 70.2 73.6 74.2 79.4 88 1 89.8 96.0 108.1 111.2 113.2 116.8 119.1 116.9 113.1 107.9 103.1 102.1 IDA debt service reduction 9.5 3' 37.5 41.2 43.7 48.1 48.7 48.9 51.5 54.2 55.3 58.7 63.1 65.2 66.8 69.6 69.3 68.9 69.0 69.9 69.2 49.0 Projected remaining debt service to IDA 2/ 35.4 16.7 18.5 19.4 22.0 25.0 25.4 27.9 33.9 34.5 37.3 45.0 46.0 46.4 47.3 49.8 48.0 44.1 38.0 33.9 53.1 Memorandum items: Percentagereduction of IDA debt service 2/ 69.1 69.1 691 693 68.6 66.1 65.8 64.8 61.5 61.6 61.1 58.4 58.6 59.0 59.6 58.2 58.9 61.0 64.8 67.1 65.2 Percentagereductiononstotal debtservice5/ 4.4 17.2 18.4 19.7 20.9 20.8 20.5 21.3 22.8 23.8 24.9 26.1 29.3 29.3 29.5 28.7 28.0 27.8 28.1 27.6 19.2 HIPC Isitiative assistance in NPV terms 694.5 HIPC Initiative assistance in nominal 1,157.1 terms Source: World Bank staff estimates and projections. 1/ All years onJuly-Juoe fiscal-year basis 2/ Before newo bonowing, i.e.,on disbursed and outstanding debt as of edn-Jane 2001. O 3/ The pecentage reduction is not 69.1 percent in all years because this line shows the percentage reduction of IDA debt service at md-June 2001 after receiving relief as agred asdecision point (i.e.69.1 percent reduction of debt Servicedue to IDA at ead-June 1999) 4/ For 2019/20, the 65.2 percent debt-service reduction applies only In thedebt servicedue to IDA beween July 1, 2019 and March 31, 2020. 5/ After traditional debt-relief mechanisms and before newborroving.  Table 6: Tanzania: Delivery of IMF Assistance under the Enhanced HIPC Initiative 1/ (In millions of SDRs, unless otherwise indicated) Actual 1999/2000 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 Jul.-Feb. Mar.-Jun. Delivery schedule ofIMF assistance (in percent oftotal assistance) 2/ 5.6 9.4 6.4 17.6 12.5 8.5 8.0 8.0 8.0 8.0 8.0 Debt service due on current IMF obligations 7.3 12.4 7.4 19.6 19.3 23.2 35.4 44.1 47.3 35.8 28.5 Principal 6.4 10.7 6.4 17.6 17.1 21.0 33.4 42.3 45.7 34.5 27.3 Interest 0.9 1.7 LO. 2.1 2.2 2.2 2.0 1.8 1.6 1.4 1.2 IMF assistance-deposits Into Teazania's account Interim assistance 13.3 13.3 Completion point assistance 3/ 62.3 IMF assistance-drawdown schedule 4/ 5.0 8.6 5.7 18.2 15.9 11.9 8.9 8.6 8.2. 7.8 7.5 IMF assistance without interest 5.0 8.3 5.7 15.6 11.1 7.6 7.1 7.1 7.1 7.1 7.1 Estimated interest eamings - 0.3 - 2.6 4.8 4.3 1.8 1.4 1.1 0.7 0.3 DebtservicedueoncurrentlMPobligationsafter MBassistance4/ 2.3 3.8 1.7 1.4 3.4 11.3 26.4 35,6 39,1 28.0 21.1 Share of debt service due on current IMP obligations covered by IMPFassistance (in percent) 4/ 68.4 69.4 77.5 92.8 82.6 51.4 25.3 19.4 17.3 21.8 26.1 Proportion (in percent) of each repayment fltiung due during the period to be paid by IMF WPC Initiative assistance from the principal deposied in member's account 78.0 78.0 89.0 89.0 65.2 36.0 21.3 16,8 15.6 20.6 26,0 Memorandum items: 5/ 2000/01 Total debt service due (millions ofU.S. dollars) 6/ 216.7 217.7 224.0 221.4 230,3 234,4 238.9 241,4 237.2 232,8 Ofwhlch: debt service due on MP obligations (millions ofU.S. dollars) 9.1 24.6 24.4 24.1 28,8 44.1 55.0 59,0 44,6 35.6 Debt service due on current IMP obligations after IMF anssistance 4/ In millions ofU.S. doars 2.9 6.8 1.8 4.2 14,0 32.9 44,3 48.8 34.9 26.3 In percent ofexports 0.2 0.5 0.1 0.3 0,9 1.9 2.3 2.3 1.5 1,1 Share of total debt service covered bylMF assistance (in percent) 4/ 2.9 8.2 10.1 9.0 6.4 4.7 4.5 4.2 4.1 4.0 Sources: Tanzanian anthorities; and IME staffestimates and projections. 1/All years on July-June basis. 2/ Total IMP assistance under the HIPC Initiaive is SDR 88.95 million, calculated on the basis of data available at the decision point, excluding interest earned on member's account and on committed but undisbursed amounts as described in footnotes 3 and 4. 3/Remaining amount ofassistance assumed is to be disbursed into Tanzania' s account at the assumed completion point in November 2001. 4/ Includes estimated interest earnings on (I) amounts held in member's account; and (2) amounts committed but not yet disbursed up to completion point. It is assumed that these amounts eamn a rate of return of5 percent in SDR terms; actual interest earnings may be higher or lower. Interest accnted on (1)during a calendar year will be used toward the first repayment obligation(s) failing due in the following calendar year except in the final year, when it will be used toward payment of the final obligation(s) falling due in that year. Interest accued on(2) during the interim period will be used toward the repayment of obligations falring due during the three years after the completion point. 5/For memorandum items, numbers for 'Mar.-Jun." 2000/01 refer to total for 2000/01. 6/ After traditional debt relief mechanisms.  -28 - Table 7: Paris Club Creditors' Delivery of Debt Relief Under Bilateral Initiatives Beyond the Enhanced HPC Initiative Creditors ODA Non-ODA (countries in bold Countries Covered (In prcent) (in percent) Provision of Relief are creditors to Decision point Tanzania) Pre-cutoffdate Post-cutoff date Pre-cutoff date Post-cutoff date (In percent) Completion point (1) (2) (3) (4) (5) (6) (7) Australia HIPCs 100 100 100 100 1/ 1/ 1/ Austria HlPCs (Case-by-case) Case-by-case (100) Case-by-case (100) Case-by-case (100) ... Case-by-case Case-by-case Belgium HIPCs 100 100 Case-by-case(uptolO0) Case-byCase flow Stock Canada HIPCs 2/ ... 3/ ... 31 100 100 100 flow Stock Denmark HIPCs - 100 Case-by-case ... ... ... Stock France HlPCs 100 100 100 ... 100 flow 4/ Stock Finland HlPCs 95 98 ...... ... Germany HIPCs 100 100 100 ... 100 flow Stock Ireland ... ... ... ... ... ... ... Italy HIPCs 100 100 5/ 100 100 5/ 100 flow Stock Japan HIPCs 100 100 100 ... ... Stock Netherlands HlPCs 100 100 100 ... 90-100 flow 6/ Stock 6/ Norway HlPCs ... 3/ ... 3/ 100 100 7/ 100 flow Stock Russia Case-by-case ... ... ... ... ... Stock Spain HIPCs 100 Case-by-case Case-by-case Case-by-case ... Stock Sweden Case-by-case ... 3/ ... 3/ Case-by-case (100) ... ... Stock Switzerland HlPCs ... 3/ ... 3/ Case-by-case Case-by-case Case-by-case, flow Stock United Kingdom HlPCs 100 100 100 100 8/ 100 flow 8/ Stock United States HIPCs 100 100 100 100 9/ 100 flow Stock Source: Paris Club Secretariat. Notes: Columns (I) to (7) descnbe the additional debt relefprovided following a specific methodology under bilateral initiatives and need to be read as a whole for each creditor. In column (1), '"HPCs" stands for eligible countries effectively qualifying for the HIPC Initiative process. A "100 percent" mention in the table means that the debt relief provided under the enhanced HIPC Initiative framework will be topped up to 100 percent through a bilateral initiative. 1/ Australia: post-cutoffdate non-ODA reliefto applyto debts incurred before adateto be finalized; timingdetails forboth flow and stock reliefare to be finalized. 2/ Canada: including Bangladesh. Canada has granted a moratorium of debt service as of January 2001 on all debt disbursed before end-March 1999 for 11 out of 17 HlPCs with debt service due to Canada. The debt will be written off at the completion point. The countries to be covered are Benin, Bolivia, Cameroon, Ethiopia, Guyana, Honduras, Madagascar, Mali, Senegal, Tanzania, and Zambia. 3/ 100 percent of ODAclaims have already been canceUled on HEPCs, withthe exceptionofMyanmar's debtto Canada. 4/ France: cancellation of 100 percent of debt service on pre-cutoff-date commercial claims as they faU due starting at the decision point. Once countries have reached their completion point debt relief on ODA claims will go to a special account and will be used for specific development projects. 5/ Italy: 100 percent debt cancellation of post-COD ODA and non-ODA debt assumed prior to the Cologne summit on 6/20/1999. 6/ The Netherlands: for ODA, 100 percent ODA pre- and post-cutoffdate debt will be cancelled at decision point; for non-ODA, in some particular cases (Bolivia, Burkina Faso, Mali Ethiopia, Nicaragua, and Tanzania), the Netherlands will write off 100 percent ofthe consolidated amounts on the flow at decision point; all other HIPCs will receive interim relief up to 90 percent reduction ofthe consolidated amounts. At completion point, all HIPC countries will receive 100 percent cancellation of the remaining stock of the pre-cutoffdate debt. 7/ On debt assumed before December 31, 1997. 8/ United Kingdom: "beyond 100 percent" full write-offof all debts of HIPCs as oftheir decision points, and reimbursement at the decision point of any debt service paid before the decision point. 9/ United States: 100 percent post-cutoffdate non-ODA treated on debt assumed prior to /20/99 (the Cologne summit).  - 29 - Table 8: Comparison of Discount Rate and Exchange Rate Assumptions at end-June 1999 and end- June 2001 1/ Discount Rates I/ 2/ Exchange Rates (In percent per annum) (Currency per U.S. dollar) At completion At decision point At completion At decision point point point Clurrency Austrian schilling 5.76 4.61 16.23 13.32 Belgian franc 5.76 4,61 47.57 39.06 Bulgarian lev 5.40 4.87 2.31 1.89 Canadian dollar 6.23 6.02 1.52 1 47 Chinese yuan 5.40 4.87 8.28 8.28 Danish krone 6.05 4.81 8.79 7.20 Deutsche mark 5.76 4.61 2.31 1.89 European currency unit 5.76 4.61 1.18 0.97 Finnish markka 5.76 4.61 7.01 5.76 French franc 5.76 4.61 7.74 6.35 Indian rupee 5.40 4.87 47.04 43.36 Iraqi dinar 5.40 4.87 0.31 30.00 Irish pound 5.76 4.61 0.93 0.76 Italian lira 5.76 4.61 2,283.34 1.874.78 Japanese yen 1.76 2.32 124.05 121.10 Kuwaiti dinar 5.40 4.87 0.31 0.31 Luxembourg franc 5.76 4.61 47.57 39.06 Netherlands guilder 5.76 4.61 2.60 2.13 Norwegian krone 7.79 6.02 9.30 7.85 Portuguese escudo 5.40 4.61 236.42 194.12 Russian ruble 6.20 6.00 0.60 0.60 Saudi Arabian riyal 5.40 4.87 3.75 3.75 Spanish peseta 5.76 4.61 196.21 161.10 Special drawing rights 5.40 4.87 0.80 0.75 Swedish kroner 5.57 4.77 10.85 8.46 Swiss franc 4.44 3.74 1.80 1.55 Tarzania shilling 5.40 4.87 888.03 737.00 U A.E. dirham 5.40 4.87 3.67 3.67 U.K. pound sterling 6.16 5.82 0.71 0.63 U.S. dollar 6.20 6.00 1.00 1.00 Zamibian kwacha 5.40 4.87 3,457.44 2,439.45 Zirrbabwe dollar 5.40 4.87 55.07 37.97 Memorandum item: Paris Club cutoff date is June 30, 1986 Sources: OECD; and IMF, InternationalFinancialStatistics. 1/ The discount rates used are the average commercial interest reference rates (CIRRs) for the respective currencies over the six-month period ended in June 2001 for the completion point and June 1999 for the decision point. 2/ For all currencies for which the CIRRs are not available, the SDR discount rate is used as the proxy.  Table 9: Tanzania - Main Macroeconomic Assumptions, 2001-2020 (In percent of GDP, unless otherwise indicated) 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001-10 2011-20 Act. Act. Projected Average Economic growth Real GDP (percentage change) 4.7 4.9 4.8 5.5 58 6.0 6.0 6.0 6.0 60 6.0 60 58 6.0 Real GDP per capita (percentage change) 1.9 26 2.6 3.4 3.7 39 40 40 39 3.9 3.9 3.9 37 3.9 Investment (all sectors) 15.5 17.7 186 19.2 19.2 19.3 19.5 196 19.7 19.8 19.9 20.1 19.5 19.5 Balance of payments Exports of goods and services I/ 140 14.7 15.0 14.8 146 14.7 14.9 150 15.2 15.2 15.2 152 15.0 14.6 Imports ofgoods and services I/ 25.8 23.2 25.9 25.9 257 25.5 25.4 25.1 24.8 24.5 24.2 24.0 25.1 22.1 Current account including grants -3.8 -0.7 -3.6 -4 3 -4.7 -4.7 -4 6 -4.3 -4.2 -4.2 -4.3 -4.3 -4.3 -4.2 Current account. excluding grants -12.3 -9.2 -11.7 -11.8 -11.7 -11.3 -11.0 -10.4 -9.9 -9 5 -9.2 -8.9 -10.5 -7.4 Gross official reserves (in months of imports) 2/ 4.2 5.6 5.5 5.5 5.3 5.1 4.8 4.7 4.6 4.5 4.4 43 4.8 4.3 Exportvolumegrowth(percentagechange)3/ -4.1 21.3 10.9 4.9 5.5 66 7.1 6.2 7.2 6.1 5.8 5.8 6.6 5.1 Import volume growth (percentage change) 3/ 0.7 -2.1 11.5 6.4 6.7 6.8 60 6.0 6.0 60 6.0 6.0 6.8 6.0 Terms of trade (percentage change) 9.9 -2.5 -1.0 2.3 2.3 1.9 1.7 1.6 0.5 0.5 0.5 0.5 1.1 0.4 Sources: Tanzanian authorities; and World Bank/IMF staff estimates and projections. 1/ Exports (imports) of goods and nonfactor services as defined in IMF, Balance of Payments Manual, 5th edition, 1993. 2/ Imports of goods and nonfactor services. 3/ Merchandise exports (imports).  - 31 - Table 10: Tanzania - Medium- and Long-Term Balance of Payments, 1999-2020 (In millions of U.S. dollars, unless otherwise indicated) 1999 2000 2001 2002 2003 2004 2005 2001-10 2011-20 Act. Act. Trade account -1,010.0 -871.3 -971.0 -1,028.8 -1,091.3 -1,162.8 -1,235.2 -1,282.3 -2,311.8 Exports, f.o.b. 562.7 663.1 727.2 777.1 840.9 921.6 1,013.5 1,076.2 2,145.6 Traditional 301.2 292.8 292.2 317.0 342.9 374.1 409.5 425.9 782.8 Nontraditional 261.5 370.3 435.0 460.2 498.1 547.6 - 604.0 650.4 1,362.8 Imports, c.i.f -1,572.7 -1,534.4 -1,698.2 -1,806.0 -1,932.2 -2,084.5 -2,248.8 -2,358.5 4,457.5 Services and factor income (net) -84.6 9.8 -131.5 -166.2 -184.6 -168.7 -164.3 -120.9 168.4 Receipts 702.5 726.7 703.0 741.2 777.9 826.8 894.7 983.2 2,163.5 Ofwhich: nonfactorreceipts 646.4 663.7 646.0 682.9 715.8 760.6 823.5 905.6 1,997.1 Payments -787.1 -716.9 -834.5 -907.3 -962.6 -995.5 -1,059.0 -1,104.1 -1,995.0 Interest 1/ -116.0 -105.8 -109.9 -102.8 -99.1 -95.1 -94.1 -96.6 -105.9 Other services -671.1 -611.1 -724.6 -804.5 -863.5 -900.4 -964.9 -1,007.6 -1,889.2 Nonfactorpayments -652.0 -560.0 -671.4 -743.8 -798.4 -832.4 -893.6 -934.5 -1,770.4 Factorpayments(excl.interest) -19.1 -51.1 -53.2 -60.7 b65.0 -68.1 -71.3 -73.1 -118.8 Private transfers (net) 33.9 34.6 33.7 33.9 33.0 34.8 41.3 42.8 77.8 Current account (excl. official transfers) -1,060.7 -826.9 -1,068.8 -1,161.1 -1,242.9 -1,296.7 -1,358.3 -1,360.4 -2,065.6 Official transfers (net) 736.6 762.7 740.5 739.7 739.8 761.2 788.0 791.7 867.0 Project financing 606.2 587.1 568.6 519.9 501.6 509.4 517.3 524.3 525.3 Program financing 130.4 175.6 171.9 219.8 238.2 251.9 270.8 267.4 341.7 Current account (incl. official transfers) -324.1 -64.2 -328.3 421.4 -503.1 -535.5 -570.2 -568.7 -1,198.6 Capital account 377.3 239.1 303.3 347.8 411.5 467.2 515.7 528.9 1,219.6 Loan inflow 469.3 319.3 440.4 418.1 417.3 418.4 442.3 473.0 825.4 Official project financing 348.7 189.6 285.0 283.6 283.6 278.6 289.5 329.3 544.9 Official program financing 81.5 68.4 105.0 105.6 115.0 120.0 130.9 117.8 200.2 Other loans 39.1 61.3 50.4 28.9 18.7 19.9 21.8 25.9 80.3 Amortization 1/ -275.0 -273.0 -329.8 -270.7 -214.2 -168.0 -152.0 -189.5 -181.0 Direct investment 183.0 192.8 192.7 200.4 208.4 216.8 225.4 245.4 575.3 Errors and omissions -9.8 -63.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Overall balance 43.4 111.7 -25.0 -73.7 -91.6 -68.3 -54.6 -39.7 21.0 Financing -43.4 -111.7 25.0 73.7 91.6 68.4 54.6 39.8 -21.0 Change in net foreign assets (increase-) -142.6 -348.4 -143.2 -72.5 45.1 -61.2 -71.4 -91A -137.0 Bank of Tanzania (BoT) (increase -) -127.6 -217.3 -100.4 -72.5 45.1 -61.2 -71.4 -87.1 -137.0 Gross reserves -176.5 -198.8 -103.6 -82.5 -37.8 -32.3 -28.0 -57.3 -132.4 Use ofFund credit 36.3 30.7 27.1 27.4 -7.3 -28.9 43.5 -25.7 4.7 Purchases 58.8 53.2 51.2 52.0 19.8 0.0 0.0 12.3 0.0 Repurchases -22.5 -22.5 -24.1 -24.6 -27.1 -28.9 -43.5 -38.0 4.7 Other (net) 12.7 49.2 -23.9 -17.4 0.0 0.0 0.0 -4.1 0.0 Commercial banks (increase-) -15.0 -131.1 -42.8 0.0 0.0 0.0 0.0 4.3 0.0 Arrears (increase +) -1,163.3 106.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Debt relief 2/ 1,262.5 130.5 168.3 146.2 136.7 129.6 126.0 131.2 116.0 Ofwhich: multilateral HIPC Initiative debt relief 3/ 0.0 43.8 74.2 72.4 67.3 64.9 62.5 62.9 52.5 Financing gap 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Memorandum items: Gross official reserves (BoT) 775.6 974.4 1,078.0 1,160.5 1,198.3 1,230.7 1,258.6 1,308.2 2,208.3 In months of goods an nonfactor services imports 4.2 5.6 5.5 5.5 5.3 5.1 4.8 4.8 4.3 Current account deficit 4/ Excluding official transfers -12.3 -9.2 -11.7 -11.8 -11.7 -11.3 -11.0 -10.5 -7.4 Including official transfers -3.8 -0.7 -3.6 4.3 4.7 4.7 4.6 4.3 4.2 Sources: Tanzanian authorities; and World Bank/lMvF staff estimates and projections. 1/ Includes amounts due to all creditors, before debt rescheduling and debt relief 2/ Debt relief prior to 2000 is from the January 21, 1997 Paris Club rescheduling agreement, including assumed implementation of a bilateral agreement with Russia in November 1999, involving an up-front discount of 80 percent on all Russian claims and a flow rescheduling on Naples terms. Debt relief for 2000 and beyond includes the April 2000 Paris Club rescheduling agreement on Cologne terms and HIPC debt rclief from thc IMF, IDA, and AfDB. 3/ For 2000-01, interim assistance from the Fund, IDA, and AfD)B pending the HIPC Initiative completion point. 4/ In percent of gross domestic product.  Table 11: Tanzania - Net Present Value of External Debt, 2000-2020 (In millions of U.S. dollars, unless otherwise indicated) 2000/01 200l/02 2002/03 2003/04 2004/05 20D5106 2000/07 2007/08 2008/09 2009/10 2010/11 2020/21 2000/01- 201 1/12- 2010/Il 2020/21 Actual Estimate Projections I. After traditional debt relief mechanisms 2/ 1. NPV of total debt (2+6) 2/ 3,653.6 3,739.9 3,852.2 3,966.1 4,085.8 4,217.1 4,363.5 4,509.7 4,661.4 4,809.4 4,959.2 7,011.6 4,256.2 6,086.0 2. NPV ofoutstandinsg debt (3+4) 3,653.6 3,587.1 3,538.7 3,487.7 3,445.3 3,399.8 3,353.4 3,294.7 3,228.4 3,150.8 3,062.9 1,874.8 3,382.1 2,492.3 3. Offieial bilateral and commercial 1,752.3 1,714.9 1,680.9 1,649.6 1,629.8 1,613.1 1,600.5 1,586,4 1,569.2 1,549.1 1,526.1 972.0 1,624.7 1,290.3 Paris Club 1,309.0 1,287.8 1,274.3 1,259.1 1,255.1 1,249.4 1,241.9 1,234.9 1,226.0 1,214.9 1,201.4 826.8 1,250.3 1,044.7 Other official bilatenal 335.2 338.1 325.3 322.7 320.6 317.1 313.1 307.2 300.3 293.0 285.5 139.0 313.7 222.1 Commercijal 108.0 96.0 81.3 67.8 54.1 46.6 45.5 44.3 42.8 41.2 39.3 6.2 60.6 23.5 4. Multilateral 1,901.3 1,872.3 1,057.8 1,038.2 1,815.5 1,786.7 1,752.9 1,708.3 1,659.3 1,601.8 1,536.7 902.8 1,757.3 1,202.0 Wodd BankGroup 1,323.0 1,333.1 1,340.5 8,341.1 1,339.8 1,339.4 1,333.8 1,389. 1 1,301.9 1,277,6 1,239.9 687.9 1,317.2 947.9 IMP 228.2 195.0 177,5 163.3 148.3 125.2 101.8 75~8 49.3 21,5 0.0 0.0 116.8 0.0 AftiiaslDevelopment Bank Grousp 241.7 243.7 245,1 245.3 245.6 245.9 246.5 246.2 244.9 243.3 241.6 187.1 244.5 215.3 Others 108.4 100.4 94.6 88.4 81.8 76.1 71.6 67.2 63.2 59.31 55.2 27.8 78.7 38.8 5, Nominal stock of total debt 5,717.0 5,996.2 6,200.4 6,568.6 6,846.3 7,143.4 7,457.0 7,779.0 I5.9 8,11 8,458.4 8,812.4 13,346.9 7,198.6 11,339.4 IL After enhanced HIEPC assistance 1. NPV of total debt (2+6) 3/ 4,102.2 8,800.3 8,946.4 2,077.5 2,202.8 2,347.6 2,517.9 2,694.9 2,884.6 3,069.3 3,269.3 6,300.8 2,628.4 4,887.0 NPV of total debt after fusIl delivery 4/ 1,748.8 1,800.3 1,946,4 2,077.5 2,202.8 2,347.6 2,587,9 2,694.9 2,884.6 3,069.3 3,269.3 6,300.8 2,414.5 4,887.0 2. NPVof outstanding debt (34+4) 4,102.2 1,647.6 1,632.9 1,599:1 1,562.4 1,530.3 1,507.9 8,479.9 1,451.6 1,410,8 8,373.0 1,164.0 1,754,3 1,293~3 3. Ofricial bilateral and commercial 2,200.9 685.7 651.1 604.1 555.9 5188,2 492.2 467.0 442.6 489.8 400.6 263.2 676.2 330.0 Paris Club 1,128.1 404.8 395.1 372.3 348.2 325.2 303.4 283.9 265.8 249.4 236.7 182,5 392.1 205.5 Othseroffieial bilateral 878,0 198.3 888.0 177.3 167.0 159.6 156.2 158.4 146.1 840.8 835.6 69.1 227.1 104.7 Commercial 194.8 82.7 68.0 54.5 40.8 33.4 32.6 31.7 30,7 29.6 28.4 11.6 57.0 89.8 4. Multilateral 1,901.3 961.9 988.8 995.0 1,006,4 1,012.0 8,015.7 1,082.9 1,009.0 991.0 972.4 900.8 1,078,1 963.3 World Bank Group 8,323.0 688.0 703.5 717.2 730.2 745.0 758,1 766.0 773.7 779.0 776.9 687.9 796.4 751.1 IMP 228,2 109.9 118.7 108.5 104.6 92.4 79.1 64.8 49.3 21.5 0.0 0.0 88.2 0,0 U..) Afr~icanDevelopment Bank Group 241.7 128.2 124.6 128,2 131.9 135.9 140.1 144.1 148.1 152.5 157.4 187.1 147,8 180,5 Others 808.4 42,7 41.9 41.1 39.8 38.7 38.3 38:0 38.0 38.0 38.0 . 25,8 45,7 31.7 S. Nominalsrockoftotal debt 6,1597 4,573,9 4,870.5 5,139.8 5,398.9 5,685.6 5,996,9 6,319.4 6,661.2 7,013.4 7,384.1 12,490,5 5,927l6 10,158,1 MI.After bilateral debt relief beyond HOIPC assistance 5/ 1. NPV of total debt (2+6) 3/ 4,802.2 1,437.3 1,5890 1,740.2 1,885.8 2,050.9 2,241.6 2,436.6 2,643.0 2,843.0 3,054.6 6,188.3 2,365.9 4,696.4 NPV of total debt after fulIldelivery/ 8,342.2 8,437.3 8,589.8 1,740.2 1,885.8 2,050.9 2,248.6 2,436.6 2,643.0 2,843.0 3,054.6 6,118.3 2,815.0 4,696.4 2. NP1Vofoutstandingdebt(3+4) 4,802.2 1,284.6 1,2763 8,261.9 1,245.4 8,233.6 8,238.5 8,221.6 1,280.0 1,184.4 8,158.3 981.5 1,491.8 1,102.6 3. Official bilateral and commercial 2,200.9 322.7 294.6 266.9 239.0 221.6 215.9 208.7 208.0 193.4 186,0 80.7 413.7 139.3 Paris Club 1,828.8 41.8 38,6 35.1 31.2 28.6 27.1 25.6 24.2 23.0 22.0 0:0 129.6 14,8 Other offic'ial bilateral 878,0 198.3 888.0 877.3 167.0 159.6 156,2 851.4 146.1 140,8 135.6 69.1 227.1 104.7 Commercial 194.8 82.7 68.0 54.5 40.8 33.4 32.6 31.7 30.7 29,6 28.4 11.6 57.0 19,8 4. Multlleteral 1,001.3 961,9 981,8 995.0 1,006.4 1,082.0 1,015.7 1,082,9 1,009. 991.0 972.4 900.8 1,078.1 963,3 IMA 1,323.0 688,0 703.5 717.2 730.2 745.0 758.8 766.0 773.7 779.0 776.9 687.9 796A 751.1 IMf 228.2 1099 188.7 108.5 104.6 92.4 79.1 64.8 49,3 28.5 0.0 0.0 88.2 0.0 Afican DeveIopment Bank 241.7 121.2 124.6 128.2 131.9 135.9 140.1 844.1 140.1 152.5 157.4 187.1 * 147.8 180.5 Othsers 108,4 42.7 41.9 41.1 39.8 38.7 38,3 38.0 38.0 38.0 38.0 25.8 45.7 31.7 5. Nomfinal stock of aotal debt 6,159.7 4,214.5 4,523.7 4,885.0 5,094,9 5,402.3 5,734.0 6,074.6 6,433.8 6,800.5 7,182.9 12,311,7 5,675.9 9,977.6 Memorandusm items: 6. NPVofnewhorrowing .. 152.7 313.5 478.4 640.5 817.3 1,080.8 1,285.0 1,433.0 1,658.5 1,896.3 5,136.9 961.5 3,593.7 Official bilateal .. 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0,0 0.0 Multilateral 1.52.7 313.5 478.4 640.5 817.3 1,010.1 8,285.0 8,433.0 1,658.5 8,896.3 5,836.9 961.5 3,593.7 Sources: Tmtzanian authorities; and Woeld Book/IMIF staff estimsates and projections. 1/ All yewraon July-June basis. 2/ Refers to pubrlc and publicly gucamnteed exateradebt only and assumes a hypothetical stock-of-debt operation on Naples terms (67 percent NPV redaction) at end-June 1999. 3/ Discoaunted on the basis of the average commercial interet reference rate fbr the respective ctsrrency, derived over the tix-month period prior to the latest date for which actual data are avallable (Jose 30, 2001). The oDoversion of currency-spectfic NPVs inot U.S. dollars occurs for all year at the base dote (Jane 30, 20D1) exchsange rate. 4/ NPV of total debt aesuming the entire HOIPC Iniftative assittance it ftlly delivered as of end-Jane 2001. 5/After debt relief beyond HIPC Initiat'ive offered by some of the Paris Club creditors.  - 33 - Table 12: Tanzania - Nominal and Net Present Value of External Debt Outstanding at End-June 2001 1/ (In million of U.S. dollars) Legal Situation I/ After Traditional Debt at end-June 2001 Relief Mechanisms 2/ Nominal debt NPV of debt Nominal debt NPV of debt 3/ Total 6,185.8 4,155.4 5,717.0 3,653.6 Multilateral creditors 3,514.8 1,901.3 3,514.8 1,901.3 World Bank 2,524.0 1,323.0 2,524.0 1,323.0 IDA 2,514.9 1,313.8 2,514.9 1,313.8 IBRD 9.1 9.3 9.1 9.3 African Development Bank group 499.0 241.7 499.0 241 7 African Development Bank 9.3 11.2 9.3 11.2 African Development Fund 489.7 230.5 489.7 230.5 IMF 323.6 228.2 323.6 228.2 European Union 64.7 45.8 64.7 45.8 EADB 1.1 1.1 1.1 1.1 IFAD 62.5 31.8 62.5 31.8 BADEA 14.6 12.4 14.6 12 4 OPEC Fund 14.3 12.3 14.3 12.3 Nordic Development Fund 11.0 5.0 11.0 5.0 Paris Club 1,547.3 1,181.5 1,624.0 1,309 0 Austria 29.5 18.3 37.4 19.9 Belgium 123.2 73.2 122.4 75 6 Brazil 232.8 76.9 229.8 76.0 Canada 37.3 30.3 32.4 30 0 France 65.3 63.8 65.3 69.5 Germany 45.4 46.0 41.4 45.6 Italy 185.1 127.1 182.4 103.5 Japan 467.6 472.3 584.2 628.9 Norway 7.1 6.4 6.5 5.9 Netherlands 54.5 56.8 46.9 49.1 Russia 140.4 75.6 136.0 74.2 Spain 12.4 10.0 13.3 10 9 United Kingdom 119.1 101.5 112.4 107.1 United States 27.8 23.2 13.5 12.9 Other official bilateral 926.0 877.8 467.5 335.2 Algeria 106.1 106.1 33.4 33 0 Angola 5.4 5.4 1.8 1.8 Bulgaria 26.2 26.2 20.0 13.3 China 164.8 125.7 152.8 59.9 Czech Republic 1.6 1.6 1.6 1.1 Egypt 2.0 2.0 2.0 0.3 Hungary 14.4 14.4 4.8 4.7 India 32.1 32.1 14.3 13.8 Iran, I.R. of 154.3 154.3 48.0 47.5 Iraq 110.1 110.1 318 31.5 Korea 2.0 1.8 2.0 0.4 Kuwait 51.3 44.7 56.5 34.4 Libya 113.3 113.3 37.4 37.0 Poland 8.4 8.4 3.0 2.9 Romania 0.1 01 0.0 0.0 Saudi Arabia 15.9 13.6 12.3 99 United Arab Emirates 11.8 11.8 11.3 9.7 Yugoslavia 104.9 104.9 33.8 33.5 Zambia 0.8 0.8 0.8 0.2 Zimbabwe 04 0.4 0.1 0.1 Commercial 197.7 194.8 110.8 108.0 Sources: Tanzanian authorities; and World Bank/IMF staff estimates. it Reflects the external debt situation at end-June 2001, including the April 13, 2000 Paris Club flow rescheduling under Cologse terms except for Italy and Japan who have yet to sign the bilateral agreement. 2/ Assuming a hypothetical stock-of-debt operation under Naples terms. 3/ Does not include the impact of grants disbursed to cover debt service payments to some multilateral creditors.  Table 13: Tanzania - External Debt Indicators, 2001/02-2019/20 1/ (in percent, unless otherwise indicated) Outer Year Averages 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 20071/0 200S/09 2009/10 2010/11 2020/21 2001/02- 2DI)/J2- Actual Estimate 2010/11 2020/21 (In percent) After traditional debt-relief mnechanisnns 2/ NPV of debt-toGDP ratio 385 36.5 34.9 33.3 31.8 30.3 290 27.8 26.6 25A 242 16.0 300 196 NPV of deb-t-exports ratio 3/4/ 2854 271 7 267.7 261 8 250.8 238.6 226.3 214.6 2042 1945 185.6 130.6 231.6 154.6 NPVofdebt-to-revenueratioa/ 324.9 325.0 297.5 280.4 264.5 245.6 2288 214.4 1994 186.5 1729 949 241.5 125.7 Debt-service rtio 156 16.0 15 1 14.8 14.0 13.2 124 11.6 09 10.8 106 83 12.9 89 Debt service-to-revenue ratio 5/ 19.4 19.7 176 169 16.0 14S 13.7 12.6 11.5 112 10,7 6.5 14.5 7,7 After enhanced EIPC Initiative assistance NPVofdebt-to-GDPratio 43.2 176 17.6 17.5 17.1 16.9 16.8 16.6 164 16.2 15.9 14.4 169 15.4 NPVofdebt-to-exportsratio(existingdebtonly) 320.4 119.7 113.5 105.6 95.9 866 78.2 70.4 636 57.1 51.4 21.7 84.2 338 NOV of debt-to-exports ratio after flll deliveryin 2000/01 3/4/6/7/ 136.6 1308 1352 137.1 1352 1328 130.6 1282 1263 124.1 1223 1174 130.3 122.0 NPV of debt-to-revenue ratio 5/ 364.8 1565 1503 146.9 142.6 136.7 132.0 1281 123.4 119.0 114 0 85.3 135.0 98.5 Debt-serviceratio 6.6 6.7 67 8.1 8.6 78 7.0 64 3.9 6.2 60 6.4 6.9 5.1 Debt service-to-revenue ratio 5/ 8.2 8.3 78 9.2 9.7 88 77 7.0 62 6.4 6.0 4.9 7.7 4.4 After bdateral debt relief beyond BIPC Initiative asistance 6/ NOV ofdebt-to-GDP ratio 43.2 140 14.4 14.6 14 7 14.8 14.9 15.0 15.1 15G 14.9 14.0 14.7 14.8 NPV of debt-to-exports ratio after full deliveryin2000/013/4/6v7/ 104.9 1044 110.5 114.9 1158 1160 1163 115.9 815.8 1150 114.3 114.0 113.9 117.0 NOV ofdebt-to-revenue ratio 5/ 364.8 1249 122.8 1230 122.1 119.4 117.5 1159 113.1 110.2 106.5 82.8 117.5 94.4 Debt-service ratio 6.6 6.5 57 62 69 6.4 5.7 5.3 5.0 5.4 54 6.2 5.8 4.8 Debt service-to-revenue ratio 5/ 82 8.0 6.6 71 7.9 7,1 6.3 58 5.3 5.6 54 48 6.5 42 Memorandum items: (In millions ofU.S dollars) NPVofdebt aftertraditional debt-reliefmechanisms 3,653 1 3,740 3,852 3,966 4,086 4,217 4,363 4,510 4,661 4,809 4,959 7,012 4,316 6,086 Debt service after traditional debt-relief mecshanisms 217.7 227 228 240 247 254 260 265 269 288 306 477 25S 376 NPV of debt afterenhanced IPC Initiative assistance 8/ 4,102 1,800 1,946 2,077 2,203 2,348 2,518 2,695 2,885 3,069 3,269 6,301 2,481 4,887 DebtserviceallerenhancedHI4PClInitiativeassistance 92 96 102 130 151 ISI 147 147 146 166 173 365 141 219 GDP 9,494 10,232 11,032 11,897 12,859 13,902 15,024 16,234 17,544 18,965 20,501 43,748 14,819 31,863 Exports ofgaods and services 3/ 1,393 1,417 1,508 1,620 1,760 1,923 2, 100 2,282 2,468 2,668 2,882 5,744 2,063 4,290 Exprts ofgoods and services (threeyear mv g .avg.) 3/ 1,280 1,376 1,439 1,515 1,629 1,768 1,928 2,102 2,283 2,473 2,673 5,368 1,919 4,010 Government revenue 5/ 1,124 1,151 1,295 1,414 1,545 1,717 1,907 2,103 2,337 2,579 2,869 7,390 1,892 5,059 Sources Tanzanian authorities, and World Bank/IMF stalf estimates. 1/ All debt indicators refer to public and publicly guaranteed debt and are defined after rescheduling unless otherwise indicated. All years on July-June basis. 2/ Reflects a hypothetical stock-of-debt operation on Naples terms at end-June 1999 for official bilateral and commercial creditors. 3/ As defined in IMF, Balmce ofPaymentsMntual, 5th edition, 1993. 4/Based on a three-year average ofexports (e g., export average over 1998/99-2000/01 for NPV of debt-to-exports ratio in 2000/01). 5/ Revenue is defined as central government revenue, excluding grants. delivery of sPC Initiative assistance at end-June 2001. 6/ Assuming fulIl 7/ Some Paris Club creditors have agreed to extend additional debt-relief beyond HItC Initiative assistance (see Table 7). 8/For 2000/01 the NPV of debt does not reflect the full delivery of t{PC assistance as of end-June 2001.  Table 14: Tanzania - Main Assumptions used for DSA at Decision Point and Completion Point, 1999/00-2017/18 1/ (In millions of US dollars, unless otherwise indicated) 1999/002/ 2000/01 3/ 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 1999/00-2008/09 2009/10-2017/18 Projected Average At Decision Point: Economic growth Real GDP (percentage change) 5.2 5.6 6.0 6.0 6.0 6.0 6.0 6.0 5,9 6.0 Export growth (percentage change) 4/ 10.2 8.6 15.2 14.5 11.0 9.6 9.5 9.3 10.6 8.4 Exportsofgoodsandservices4/ 1191.1 1293.1 1489.4 1705.6 1892.9 2075.0 2272.2 2483.7 2006.1 4519.6 Terms of trade (percentage change) -3.9 1.6 1.0 1.0 0.7 0.9 0.7 0.7 0.4 0.7 After enhanced HIPC Intiative assistance NPV of total debt 5/ 1876.9 2042.1 2355.9 2616.6 2820.1 3041.3 3279.0 3526.6 2943.5 5885.4 NPV of old debt 5/ 1674.5 1601.4 1662.9 1657.7 1609.5 1559.4 1510.3 1458.8 1553.2 1041.6 NPV ofnew debt5/ 202.4 440.8 693.0 959.0 1210.6 1481.9 1768.7 2066.8 1390.3 4S43.8 NPV ofdebtto exports ratio (in percent) 4/5/6/ 165.4 171.9 177.9 174.9 166.3 160.8 157.6 154.8 163.3 141.8 Debt service ratio (in percent) 7/ 19.8 11.9 9.5 84 7.8 7.3 7.0 7.0 9.2 5.8 At Completion Point: Economic growth Real GDP (percentage change) 4.9 4.8 5.5 5.8 6.0 6.0 6.0 6.0 5,7 6.0 Export growth (percentage change) 4/ 17.0 5.6 1.7 6.5 7.4 8.7 9.3 9.2 8.2 7.3 Exports ofgoods and services 4/ 1319.4 1392.8 1416.6 1508.4 1619.5 1759.6 1923.4 2100 3 1779,0 3594.6 Terms of trade (percentage change) -2.5 -1.0 2.3 2.3 1.9 1.7 1.6 0.5 0.8 0.4 After enhanced HIPC Intiative assistance NPVoftotaldebt8/ ... 1748.8 1800.3 1946.4 2077.4 2202.8 2347.6 2517.9 2246.7 4113.1 NPV of old debt/ / .. 1748.8 1647.6 1632.9 1599.1 1562.4 1530.3 1507.9 1573.4 1335.4 NPVofnewdebt8/ .. ... 152.7 313.5 478.4 640.5 817.3 1010.1 7576 2777.7 NPV of debt to exports ratio (in percent) 4/6/8/ 136.6 130.8 135.2 137.1 135.2 132.8 130.6 132.5 122.5 Debt service ratio (in percent) 7/ .. 6.6 67 6.7 8.1 8.6 7.8 7.0 71 5.2 1/ On a fiscal year basis (July-June). 2/1999/00 figures are estimated for decision point, actual for completion point. 3/2000/01 figures are estimated for completion point. 4/ As defined in IMF Balance of Payments Manual, 5th edition, 1993, and calculated on a fiscal-year basis. 5/ Assumed committed unconditionally at end-lune 1999 6/ Based on a three-year backward looking average of exports. 7/ In the decision point document the debt service ratio was calculated incorrectly as a percentage of the three-year backward looking average of exports of goods and non-factor services, instead of the current fiscal year annual export data. In the completion point document, the debt service ratio is calculated as a percentage of the current fiscal year annual export data. 8/ Assumed committed unconditionally at end-Jutne 2001.  Table 15: Tanzania: Comparison of NPV of External Public Debt Between Decision and Completion Points (In millions of U.S. dollars, unless otherwise indicated; stock at end-June 2001) Decision Point DSA (Projection) 1/ Completion Point DSA 2/ After traditional After enhanced After traditional After enhanced After additional debt relief HIPC relief debt relief HIPC relief bilateral relief 3/ NPV of debt using end-June 1999 parameters 4,111 2,042 3,974 1,926 1,514 Multilateral 2,297 1,247 2,129 1,109 1,109 Official bilateral and commercial 1,814 795 1,845 818 405 NPV of debt using end-June 2001 parameters ... ... 3,654 1,749 1,342 Multilateral ... ... 1,901 958 958 Official bilateral and commercial ... ... 1,752 791 384 NPV of debt-to-exports ratio (in percent) 4/ Using end-June 1999 parameters 346 172 310 150 118 Using end-June 2001 parameters ... ... 285 137 105 Memorandum items: NPV of enhanced HIPC Initiative assistance 5/ Using end-June 1999 parameters 6/ ... 2,069 ... 2,048 Using end-June 2001 parameters ... ... 1,905 ... Exports of goods and services 7/ Decision point 1,188 1,188 Completion point .. ... 1,280 1,280 1,280 Sources: Tanzanian authorities; and IMF/Woeld Bank staff estimates. 1/ Debt sustainability analysis (DSA) based on stock of debt reconciled as of end-June 1999, assuming fulL (hypothetical) delivery of enhanced H-IPC Initiative assistance. 2/ Based on stock of debt reconciled as of end-June 2001, assuming full (hypothetical) delivery of enhanced EfPC Initiative assistance. 3/ After debt relief beyond enhanced RTPC Initiative offered by some of the Paris Club creditors, 4/ Based on the average of three consecutive years of exports of goods and services ending in the current year. 5/ The value of assistance under the enhanced EIIPC Initiative framework was determined at its March 2000 decision point, namely US$2,026 million in NPV terms, using end-June 1999 parameters (exchinge rates and discount factors). The corresponding values for enhaticed HIPC Initiative relief expressed as of end-June 2001 are provided for information only. 6/ The estimate of US$2,048 million expresses the value of the agreed assistance (US$2,026 million in NPV terms of March 2000) in NPV terms of end-June 2001. 7/ Average of tiree consecutive years of exports of goods and services ending in June 2001. Projectiotis at the time of the decision point and actual data at the coimpletion point wider the enhanced EIIPC Initiative framework  Table 16: Tanzania: External Debt-Service After Full Implementation of Debt-Relief Mechanisms, 2001/02- 2020/21 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2020/21 2001/02- 2011/12- 2010/11 2020/21 Projections Outer year Averages Total debt service after taditional debt-relief mechanisms I/ 2240 221.4 2303 234.4 2389 241.4 2372 232.8 235.7 242.0 262.9 233.8 244.0 Multilateral 111.1 112 6 1259 143 1 151.6 1591 153 9 1470 147.8 152.2 1219 140.4 1321 World Bank Group 628 661 732 752 74.2 794 88.1 898 960 1081 101.1 813 110.4 UIMF 244 24.1 288 44.1 550 590 446 356 30.4 227 00 36.9 00 African DevelopmentBankGroup 102 110 123 122 121 119 128 13.8 14.0 14.1 171 124 166 Others 13.7 115 11.6 116 10.3 88 84 7.S 74 7.4 38 9.9 5.0 Official bilateral 956 88.3 860 73.5 766 78.4 793 81.7 83.6 85.4 1352 829 1070 Paris Club 72 4 63.6 64 8 53 I 54 7 56.3 55 5 57.2 59.1 61 1 100.3 59.8 79 0 Other official bilateral 232 24.7 212 205 21.9 221 238 24.5 24.5 243 349 23.1 280 Commercial 2/ 17.2 20,5 18.5 178 10.7 39 4.0 41 42 4.3 58 10.5 49 Total debt service afterenhancedHIPCassistance3/ 925 95.4 1212 1382 1354 1284 1190 1094 113.4 1086 1506 1162 868 Multilateral 320 32.5 451 658 757 819 743 663 729 725 1212 61.9 598 World Bank Group 215 224 25 1 265 25.4 279 339 34.5 373 450 10t 1 29.9 508 IMF 18 42 140 329 443 480 349 263 304 22.7 00 26.0 O0 AfricanDevelopmentBankGroup 2.3 27 28 28 27 27 31 34 31 2.8 171 28 60 Others 6.4 32 3.2 36 3.3 26 2.4 21 21 21 30 31 30 Official bilateral 44 3 43 2 58 5 55 4 500 43 6 419 40 2 37 6 33 1 26 2 44 8 24.0 PansClub 251 21.4 370 34.8 326 309 280 260 237 196 10.5 279 108 Other official biiateral 19.2 21.8 215 20 6 17 1 12 7 139 14 2 139 13 5 15.7 16 8 132 Commercial2/ 162 197 177 170 98 2.9 29 2.9 2.9 30 32 95 30 Total debt service after bilateral debt reliefbeyond HIPC 4/ 886 792 905 1094 107 1 1007 94.1 863 923 914 1401 940 776 Mluilateral 32 0 32 5 45 1 65.8 75 7 819 74 3 66 3 72 9 72 5 1212 619 59.8 Officialbilateral 404 27.0 278 265 216 159 170 171 165 159 157 226 148 ParisClub 212 52 63 59 4.5 32 31 29 26 24 00 57 15 Otherot3icialbilateral 192 218 215 206 171 127 139 142 139 135 157 168 132 Commercial2/ 162 197 177 170 98 29 29 29 29 30 32 95 30 Mrmorandum items Debtserviceofn cdebt 30 61 92 123 155 19.0 277 366 523 642 2145 246 1324 Multilateral 30 61 92 123 155 190 27.7 366 523 642 2145 246 1324 Official bilateral 00 00 000 00 00 00 00 00 00 00 00 00 00 Nominal HTPClnitiiaverelief 1315 1260 109.1 962 1034 1130 1182 123,5 1222 1333 1123 1177 1572 Offihich multilateral 792 801 S08 773 759 772 796 808 749 79.7 07 785 723 Sources Tanzanian authorities, and IMF/World Bank staffestimates and projectinos. 1999 for official bdiairal and commercial cred,iors and full delivery of omigigal at end-June Assumes a stock-of-debt operation under Naples ternms I/ HIPC Initiative assistance 2/ Reflects theclearance of anrears from 2001/02 ti 2004/05 3/ Icliidrs debt relief from the Aprd 2000 Paris Club flow rescheduling under Cologne terms and assumes a stock-of-debt operation under Cologne icons at Completion Point HIPC Initiati,e offered by some ofthe Paris Club creditors 4, ARterdebt relief heyond  Table 17: Tanzania: Sensitivity Analysis of Debt Sustainability, 2001/02-2020/21 1/ 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2020/21 2001/02- 2011/12- 2010/11 2020/21 Estimates Outer Year Averages Baseline scenario NPV of debt-to-exports ratio 2/ 130.8 135.2 137.1 135.2 132.8 130.6 128.2 126.3 124.1 122.3 117.4 130.3 122.0 Debt service-to-exports ratio 2/ 6.7 6.7 8.1 8.6 7.8 7.0 6.4 5.9 6.2 6.0 6.4 6.9 5.1 Debt service-to-revenue ratio 3/ 8.3 7.8 9.2 9.7 8.8 7.7 7.0 6.2 6.4 6.0 4.9 7.7 4.4 Grant element in total debt 60.6 60.0 59.6 59.2 58.7 58.0 57.4 56.7 56.2 55.7 49.6 58.2 52.2 Grant element in new debt 63.2 62.5 61.8 61.5 61.0 60.4 59.9 59.3 58.9 58.5 53.4 60.7 55.9 Altemative scenario -Lower growth 4/ NPV of debt-to-exports ratio 2/ 129.7 133.2 135.6 135.6 136.3 138.1 140.0 142.4 144.3 146.7 176.9 138.2 165.6 Debt service-to-exports ratio 2/ 6.5 6.6 8.2 9.1 8.7 8.2 7.5 7.2 7.8 7.8 10.4 7.8 7.3 Debtservice-to-revenueratio3/ 8.1 8.1 9.8 10.8 10.1 9.2 8.3 7.6 8.1 7.8 8.5 8.8 6.4 Grant element in total debt 60.8 60.3 59.9 59.6 59.2 58.5 57.9 57.4 57.0 56.5 50.9 58.7 53.4 Grant element in new debt 62.9 62.0 61.4 61.1 60.6 60.0 59.5 59.0 58.6 58.2 52.9 60.3 55.3 Altemative scenario-lower project grants 5/ NPV of debt-to-exports ratio 2/ 130.8 135.2 138.0 138.0 138.4 138.8 138.8 139.2 139.2 139.5 148.2 137.6 147.8 Debt service-to-exports ratio 2/ 6.5 6.5 7.9 8.6 8.0 7.3 6.6 6.1 6.5 6.4 8.5 7.0 6.5 Debt service-to-revenue ratio 3/ 8.0 7.6 9.1 9.7 9.0 8.0 7.1 6.5 6.7 6.4 6.6 7.8 5.6 00 Grant element in total debt 60.9 60.4 59.9 59.5 58.9 58.1 57.3 56.6 56.0 55.5 49.2 58.3 52.0 Grantelement in new debt 63.2 62.5 61.4 60.5 59.3 58.2 57.3 56.4 55.7 55.1 48.9 59.0 51.8 Sources: Tanzanian authorities; and IMF/World Bank staff estimates and projections. 1/ tncluding new debt. All years on July-June basis. 2/ As defined in IMF, Balance of Payments Manual. 5th edition, 1993. NPV of debt ratio is based on a three-year average of exports on the previous year (e.g., export average over 1998/99-2000/01 for NPV of debt-to-exports ratio in2000/01). The debt service ratio is based on contemporary exports. 3/ Revenue is defined as central government revenue, excluding grants. 4/ Growth of real GDP is assumed to be 3.1 percent per annum (average growth rate for the 1990s) compared to 6 percent in the baseline scenario, starting from 2001/02 onward. Export and import volumes have been lowered, consistent with the lower GDP growth. 5/ Grants in extemnal financing are assumed constant in nominal terms at US$740 million annually from 2001/02 to 2020/21.  - 39 - Table 18: HIEPC Initiative: Status of Country Cases Considered Under the Initiative, November 8, 2001 Target astimnated Tota NPV of Debt-to- Assistatice Levels I/ Percentage Nominal Debt Decision Completion Glov.. (In millions of U.S. dollars, present value) Reduction Service Relief -Country Point Point Exor revenue Total Bilateral Multilateral IMP World Bank In NPV of (In millons of (in percnt) Debt 2/ U.S. dollars) Completion point reached under enhanced framiework Bolivia 1.302 425 876 84 193 2,060 original franmework Sep. 97 Sep. 98 225 448 157 291 29 53 14 760 enhancedfjramework Feb. 00 Jun. 01 150 854 268 585 55 140 30 1,300 Mozamnbique 2.022 1,270 753 143 443 4,300 originalfranzewrk Apr. 98 Jun. 99 2010 1.716 1,076 641 125 381 63 3,700 enhancedframseork Apr. 00 Sep. 01 150 306 194 112 18 62 73 600 Uganda 1,003 183 820 160 517 1,950 originalfiransewvork Apr. 97 Apr. 98 202 347 73 274 69 160 20 650 enhanced framneork. Feb. 00 - May 00 150 656 110 546 91 357 37 1.300 Decision point reached under enhanced fratnework Benin Jul. 00 Floating 150 265 77 189 24 84 31 460 Burkina Faso 398 56 342 42 162 700 original franmework Sep. 97 Jul. 00 205 229 32 196 22 91 27 400 enhanced.framework JUL 00 Floating 150 169 24 146 20 71 27 300 Canmeroon Oct. 00 Floating 150 1,260 874 324 37 179 27 2,000 Chad May. 01 Floating 150 170 35 134 18 68 30 260 EdtiopiaL Nov. 01 Floating 150 1,275 482 763 34 463 47 1.930 Gambia, The Dec. 00 Floating 150 67 17 49 2 22 27 90 Guinea Dec. 00 Floating 150 545 215 328 31 152 32 800 Guinea-Bissau Dec. 00 Floating 150 416 212 204 12 93 85 790 Guyana 585 220 365 75 68 1.030 origi nalfiramework Dec. 97 May 99 107 280 256 91 165 35 27 24 440 enhancedframsework Nov. 00 Floating 150 250 329 129 200 40 41 40 590 Honduras Jul. 00 Floating 110 250 556 215 340 30 98 18 900 Madagascar Dec. 00 Floating 150 814 457 357 22) 252 40 1,500 Malawi Dec. 00 Floating 150 643 163 480 30 331 44 1,000 Mari 522 162 361 58 182 870 original fraewrk Sep. 98 Sep. 00 200 121 37 84 14 44 9 220 enhancedfransetwrk Sep. 00 Floating 150 401 124 277 44 138 28 650 Mauritania Feb. 00 Floating 137 250 622 261 361 47 100 50 1.100 Nicaraga Dec. 00 Floating 150 3,267 2,145 1,123 82 189 72 4.500 Niger Dec. 00 Floating 150 521 211 309 28 170 54 900 Rwanda Dec. 00 Floating 150 452 56 397 44 228 71 810 Sao Tome &Principe Dec. 00 Floating 150 97 29 68 - 24 83 200 Senegal Jun. 00 Floating 133 250 488 193 259 45 124 19 850 Tanzania Apr. 00 Floating 150 2,026 1,006 1,020 120 695 54 3.000 Zambia Dec. 00 Floating 150 2,499 1,168 1,331 602 493 63 3,820 Decision pHint reaced under original framework C6ted(lvoire Mar. 98 .. 141 280 345 163 182 23 91 6 3/ 800 Total assistance providedlcomnnitted 22,159 10,296 11,735 1,791 4! 5,422 36,620 Prelimiinary MIC document issued 5/ Ghana .... 250 2,096 1.002 1,095 122 767 55 3,200 Sienfa Leone .... 150 553 189 326 121 119 79 900 Sources: EIMP and World Bank Board decisions. completisn point docsunrnts, decision point documents, preliminary HIPC documents, and staff calculatioss. 1/ Assistance levels are at countries' respective decision or completion pohits, as applicable. 2/ In pcerent of the net present value of debt at the decision or completion point (as applicable), after the fall use of traditional debt-rehinf mechanisms. 31Nonrescbrdulable debt to non-Paris Club official bilateral creditors and the London Club, which was already subject to a highly concessionnal Restructuring. is excluded from the NPVof debt at the completion point in the calculation of this ratio. 41Equivalent to SDR 1.398 mIllin at an SDRIUSD exchange rare of 0.7806, of November 1,200 1. 5/ Figures are based on preliminary assessments at the time of the issuance of the preliminary HIPC document; and are subject to change.  -40 - Figure 1: Sensitivity Analysis of Debt Sustainability, 2001/02-2020/21 x70 o NPV of Dtbt to EpoartsRatio 170 __ __ ____ _ - i Baseline scenario 160 ~~ Lower growth scenaTio/ Lower gmantsscenario/ 150 - - - - Basefine beyond HIPC/ 140 130 120 - 110 -, 100 e e e B- B B , iE _lt r ¢ c ° ~~~~~~~~~~~~~~~~~~ DebtSenee t Eaport Rtlio 10 -_-- Baseline scenatio Lowergmwth scenario / Louergrants w scenario - - - - Baseline beyond HIPC 5 6 \AXi 5 B B B B - - - - -- - -- - , .... .- . . . . . . . .… ----- ….. .... ~~~~~~Debt S.urfr tr Re1w.D. RatiUO n . . * ~~~~~~~~~~~~~~~~~~Ba4selinescenanio - s / \ -- ~~~~~~~~~~~~~~~~~Lower growth scenarioi // \ \ * ~~~~~~~~~~~~~~Lowergrntns scenarioi s~~ ~ ~~~~~~ ~ ~ ~ -~~~~~~~ Baseline beyond HI[PC/ - -,X> O - S\ ~- / 4 3 4 * * * B B B B_ 0^ O iit O 0 2 0 ° ° ° a e °, a °, e e ffi o a ~ a ,, a ri . | , 7 0 . ° , eA . 0 U > 0 8 ; a  -41 - APPENDIX I Tanzania: Debt Management INSTITUTIONAL FRAMEWORK Debt management is the joint responsibility of the Ministry of Finance and the Bank of Tanzania (Central Bank). Public or publicly guaranteed debt can only be contracted with the approval of the Ministry, however the technical work related to the granting of state guarantees is handled by both the Ministry and the Bank of Tanzania. The government prepares and publishes a comprehensive annual debt strategy report in addition to monthly and quarterly reports. DEBT RECORDING AND REPORTING Monitoring of public and publicly-guaranteed debt has been good. The loan data is maintained using the Commonwealth Secretariat database system, CS-DRMS. The database is generally up-to-date and is regularly maintained by both the Ministry and the Bank of Tanzania. Information on contracts, disbursements, debt service and reports are exchanged weekly between the Ministry and the Bank of Tanzania. However, the current system is not able to produce data directly in an analytical form. DEBT MANAGEMENT AND BORROWING STRATEGY A committee is in place, composed of the Ministry of Finance, the Bank of Tanzania, the Planning Commission, the Attorney General Chamber and Sectoral Ministries, to oversee debt management and coordination. Procedures are also in place to track the public sector's debt servicing needs and the impact on the budget and Balance of Payments. Borrowing policy is developed by a committee comprised of the Ministry of Finance, the Bank of Tanzania, the Planning Commission and Attorney General Chambers. ANALYTICAL CAPACITY The technical staff at both the Ministry of Finance and the Bank of Tanzania are experienced and knowledgeable about debt issues and have carried out numerous debt restructuring renegotiations. There is more limited capacity within the debt teams to integrate debt and macroeconomic simulations and have tended to be produced in conjunction with the Bank and the Fund.