Tanzania - Third Annual Poverty Reduction Strategy Paper (PRSP) Progress Report and Joint IDA-IMF Staff Assessment

Documentof The World Bank FOR OFFICIAL USE ONLY ReportNo.:28966-TZ THE UNITD REPUBLICOF TANZANIA POVERTYREDUCTIONSTRATEGY PAPERPROGRESSREPORT AND JOINT IDA-IMF STAFFASSESSMENT May 5,2004 Macroeconomics2 Africa Region This document has a restricted distribution and may beusedby recipientsonly inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  FOROF'FICXALUSEONLY INTERNATIONAL MONETARY FUNDAND THE INTERNATIONAL DEVELOPMENT ASSOCIATION TANZANIA PovertyReductionStrategyPaper-Progress Report Joint StaffAssessment Preparedby the Staffs of the IMF and IDA Approved by Anupam BasuandMichaelHadjimichael (IMF) and Callisto Madavo and Gobind Nankani(IDA) June 8,2004 I. Overview 1. The government of Tanzaniahas preparedits thirdPoverty Reduction Strategy ProgressReport, which outlines the progressmade inimplementing the poverty reduction strategy during fiscal year 2002/03 (July-June), andupdates the Poverty Reduction Strategy Paper (PRSP) of October 2000, that was endorsedby the Boards of the IDA and the IMF onNovember 30 and December 1,2000, respectively. 2. Tanzania is currentlyembarkedon a major update o f its Poverty Reduction Strategy. Analytical work and consultations have started to prepare a second-generation PRSP, covering the period 2004/05-2008109. As a consequence, and with the agreement of the staffs of the Bank andthe Fund, this year's Progress Report (PR) provides a fairly light update on progress. A more in-depthreview o f experiencewill emerge from the update process, as well as more specificity with respect to forward-looking policy plans, whichare being re-assessedas part ofthe on-going update. 3. Inthe view ofthe staffs the PR accuratelyreflects developments inthe pastyear. Despite adrought, real economic growth is estimatedto have beenabout 5 percent, sound macroeconomic managementwas maintained, andnotable progress was made inthe areas of education and financial sector reform, among others. The report also, however, illustrates a number of emerging weaknesses inthe PRS process, and these point to areas for attention inthe mainupdate. Foremost among them are the needto link the technical- level reviews with a more policy-based debate on sector strategies; strengthening the link betweenthe PRS and budget processes; stronger quantitative monitoring, and a deeper understandingof the relationship betweeneconomic growth and poverty outcomes. 4. The governmenthas made substantialprogress in many of the areas flagged , in lastyear's JSA. These includedfurther articulation of environment and financial sector strategies, development of a national secondary education strategy, structural reforms related to private sector development and the public service, improving PRSP costing, and updating poverty monitoringindicators. Work onthe linkages between This documenthas a restricted distributionandmay be used by recipients only in the performance of their official duties. I t s contents may not be otherwise disclosed without World Bank authorization.  - 2 - macroeconomic developments andpoverty is beingpursuedinmore depthunderthe mainPRSP update, as is amore intensive assessment of agricultural strategy. 5. The PRSP processinTanzania continuesto be openandtransparent. This Progress Report benefitedfrom the deliberations of aPoverty Policy week heldin October 2003 involving awide range of stakeholders, andwas reviewedat a stakeholders meeting inJanuary, 2004 at whichthere was inputfrom civil society andNGOs. The final version of the ProgressReport has beenpostedon the national website, andi s also inprintfor wider disseminationto the generalpublic. Ajoint statementof supportfor the Progress Report is being issuedby Tanzania's development partners. 11. PovertyAnalysis 6. There exists little newsurvey datato track changes inincome poverty over the past year; and at any rate measurable changes would not necessarilybe expectedover a one-year period. The drought in2003 has slowed economic growth and hada negative impact on food consumption inmany districts, so localized declines inwelfare would be expectedto have taken place inrural areas. The government has completed a second Poverty and HumanDevelopment Report (PHDR), which pulls together data from existing sources and looked inmore depthat issues o ffemale-headed householdsand the benefit-incidence ofpublic services; as well as aParticipatory Poverty Assessment (PPA) and a Policy and Services Satisfaction Survey which gaugedqualitative reactions to economic reforms andpolicy developments. 7. The ProgressReport andthe PHDR reiterate the earlier findings that the growth ofthe past decade has hadless impact interms o freducing poverty than would have been hoped for. The PR notes however that mucho fthis growthhas taken place relatively recently, and the effects have not yet beencaptured inhousehold surveys. Also the growth and poverty reduction which has taken place has beenmostly concentratedinDar Es Salaamandother urban areas. Progressinraising incomes more widely will depend on the composition of growth andrequire attention to rural and agricultural development. Better understanding the dynamics at work i s a major part o fthe agenda as Tanzania moves forward to update the PRSP. Staffs recommend that this should include: (i) analytical work on growth-poverty linkages; (ii) analysis ofthe geographic deeper dispersion ofpoverty changes; (iii) better understanding o f the transmission mechanisms (including rural-urban and farmhon-farm linkages), and how sector productivity changes affect incomes insome key sectors, especially agriculture; and (iv) assessment ofthe welfare impacts o f liberalization and reform measures. Not all can be achievedinthe coming year, but work i s already committed to on the relationbetweengrowth, poverty and inequality; preparation of apoverty map; the impact o f shocks on household welfare; and on the relation betweenrural income growth and nutrition. 111. ProgressinSectoraland PolicyReforms 8. Ineducation,the ProgressReport notesthe continued impressive expansionof the primary system: enrollments for 2003 again exceedPRS targets. The PRrightly places increasedemphasis on quality; some improvements have been cited, but more  needs to be done to improve completion rates. The Primary Education Development Program has been successfully implemented,andthe Public Expenditure Tracking Study shows that about 95 percent of funds allocated to schools were usedfor the intended purposes. However, there are still challenges inthe area of capacity building, particularly intransforming the MinistryofEducationinto anagencythat focuses onpolicy, technical support and monitoringand evaluation, linkedsystematically to the local government institutions responsible for delivery ofprimary education. The PR correctly reflects the increased attention being placed on secondary education. Government has met its target o f developing a national strategy for the sub-sector during FY2003/04, and implementation of the strategy has started. Itis expectedthat the priority for education in the second-generationPRS will be broadenedfrom primary education to include post- primaryeducation andtraining more widely. 9. Inhealth,as thePRnotesprogresshasbeenmadeinanumberofindicators: the increasednumberof outpatient visits, and achievement of 90 percent DPT3 (vaccination) coverage. During the pastyear the government conducteda review o fhealth sector performance and usedthe findings to formulate a newHealthSector Strategic Plan (HSSP). Notable achievements in2002/03 include:(i) the expansion o fpooled financing and extent to whichexternal support i s capturedinthe MediumTerm Expenditure Framework (MTEF); (ii) coverage ofthe national health insurance fund, which can wider potentially reduce the inequityof public spending; (iii) the Community HealthFinancing scheme which allows communities to determine how funds raised locally are utilized; (iv) district planning systems which should result inmore rational allocation of resources; and (v) expansion ofthe Integrated Management of Childhood Illnesses program, more progressivetreatment regimes for malaria, andthe highTB cure rate. Inthe view of the staffs these are all positive developments. The HSSP has many o fthe essential ingredients of a stronger healthprogram, and it is important that it be a major input into formulation ofthe next PRSP. Critical issues inthis nextphase will be measuresto address the humanresource crisis inthe health sector, and improvingmonitoring to get betterempirical data onresults. An HIV/AIDS strategy for 2003-06 was also developed, and reflectedinactivities under the MTEF. There are newresourcesbecoming available, andpartnersare working with government to ensure resource needs are met. Paramount to this effort will be the effective utilization of existing resources, and monitoring and evaluation to bothmonitor the impact of financing andprovide the evidence o fresults that will leverage additional financing. 10. The government's objective inagriculture,as laidout inthe Agricultural Sector DevelopmentStrategy (ASDS), is to create anenabling environment for improving agricultural productivity, profitability and farm incomes. Duringthe past year local government `nuisance' taxes which inhibitedagricultural trade have beenrepealedand formulation of core programs to implementthe strategy initiated. The agricultural strategy has some laudable features, includinggreater reliance on private markets, andthe withdrawal of government from unsustainableinterventions. However, the PR tends to focus on detailed reporting on publicly-supplied inputs, whichwhile important, does not address questions ofthe effectiveness ofpolicies andinterventions instimulating private sector investmentand growth. Inthe mainPRSP update it will be important to focus more on: (i) the productivity, trade andincome effects ofagricultural policies; (ii) the  - 4 - impact and cost-effectiveness of programs, with a clear delineation ofpublic andprivate roles; and (iii)the right degree andmix of government intervention across the range of activities impactingon agriculture, including roads, land, andruralfinance, while continuing to limit the direct role of government inagricultural markets. A number of on-going pieces of work should helpinformthis, including the analysis of agricultural supply chains, the rural investment climate andthereviewof crop boards. 11. As the ProgressReport notes, accessibility has improved as the result of road investments during the PRS period, improving the flow of people and commodities. However, the PPA highlighted concerns with the imbalance infavour ofurbanover rural areas; and despite significant allocations in2003/04, road funding remains inadequate. Insufficientfunds for maintenanceresult inadditional rehabilitation needs. Improved network managementstill requires enhancedcapacity and autonomy of TANROADS, and a conducive framework for the management of rural roads. For the above reasons the overall condition ofthe network has not improved notably in2003/04, with about 50 percent inpoor condition, and still poses a major obstacle to development. 12. The PRnotesthe progressmade inwater supply coverage, but also points out it has beenconcentratedinurbanareas. Itdescribes impressiveprogress ina number of policy areas, including launch o fthe National Water Policy, and completion ofthe divestiture o f DAWASA. At the same time the PR flags several constraints: the importance o f functional user committeesto maintain supplies, the proliferation of uncoordinated donor projects, andthe need for greater local government capacity; which form an agenda for work inthe next round ofthe PRS. 13. With respect to private sector development,the government is proposing some ambitious steps to develop a competitive investment climate. Itis addressingmajor issues concerning labour laws to encouragemore private sector employment. Itplans to address constraints inthe businessenvironment and has taken major steps towards improvingthe efficiency of utilities and infrastructure services. Further, effort will be undertakento strengthenthe growingentrepreneurshipculture inTanzania by supporting small andmedium-scale enterprises andbuilding linkages betweenTanzania entrepreneurs and international investors. Inthe past year notable progresshas been made towards privatizationof the National Microfinance Bank, reformingthe National Social Security Fund, andrevisionof landpolicy. Immediate next steps should include expeditious implementation of business licensing reform, and improvingaccess to bank creditby ensuring the recent amendments ofthe LandAct, which facilitate the use of landas collateral, are made fully effective. Inmoving forward, it will be important that the governmentfocus onperforming aneffective facilitatingrole for private sector development, ensuring the independenceof regulatory agencies inthe newenvironment, andresisting the temptation to pursue subsidized credit policies that have proven unsustainable inthe past. 14. With respectto governance, aPublic Service Reform Program has been implementedwhich infact goes beyondwhat is described inthe PR, includingmeasures to improve transparency and createa more meritocratic environment, the introduction of performance management, and a greater focus on service delivery (including clients'  - 5 - charters and service delivery surveys); all ofwhich contribute to reducing resource leakage and increasing the focus on delivery of services to the poor. The PR notes that the original planfor local governmentreformhas beenphasedto allow for more flexible adoption depending on the degree of readiness of local governments. Implementationof the Legal Sector Reform Programhas also been initiated, andgovernment has introduced quantitative indicators to measure progress inimplementing the NationalAnti-Corruption Action Plan. The PR confirms government's awareness of the importance o f gender dimensionsof development,andoutlines specific measures, suchas the proposed business incubators for female entrepreneurs, andplano f action for combating violence against women. Itwill be important to more explicitly examine the gender aspects of growth andpoverty inthe full PRSPupdate. 15. Tanzania has made significant progress ininstitutionalizing environmental managementcapacity duringthe past year. Accomplishments includeformulation of environmental framework legislation; initiationof strategic environmental assessments; launch o f an EnvironmentalPublic Expenditure Review, and steps to mainstream environmental indicators into the poverty monitoring system. Inorder for environmental managementto contribute meaningfully to the agenda for growth andpoverty reduction, the staffs recommend afocus onthe following strategicareas over the nextfour years: (i) strengthening capacity at the district andlocallevel, with the priority placed on areas o f highest poverty and environmental vulnerability; (ii) greater emphasis on healthand environment linkages; (iii) understanding and use of economic instrumentsand deeper incentives for the private sector to adopt voluntary mechanisms for environmentally sustainable development; and (iv) strengthening ongoing efforts to improve information and monitoring systems to identify andmanage environmental risks such as global change, droughts, flooding and fluctuations inrenewable resourceavailability. IV. MacroeconomicandPublicExpenditureDevelopments 16. Overallmacroeconomicperformance. Since its last PRSP ProgressReport, Tanzania has maintained macroeconomic stability and made further progress instructural reforms. Real GDP growth continued to be strong while inflationremained below 5 percent. Nevertheless, the drought in2003 i s expectedto have adversely affected agricultural output. Hence, the growthrate o f 5.7 percent for 2003 projected inthe ProgressReport appears to be optimistic. The Tanzanian authorities' commitment to prudentfiscal policies, whichhas beenthe foundation ofmacroeconomic stabilization, is evidenced by containing domestic borrowing inline with the agreedprogram target for net domestic financing under the PRGF arrangement. Tanzania's continued success in economic reform has attractedrising inflows of donor assistance, which contributed to a sizeable reserve build-up, despiterisingdemandfor imports. Onthe structural side, considerableprogress has been made inthe areas of tax reform, financial sector reform, andthe creation ofanenvironment conducive to private sector development. However, more efforts are called for inthe improvement ofthe business environment, as noted in paragraph 13. Itwould also be important for the authorities to follow up on their efforts with Tanzania's EastAfrican Community (EAC) partners to harmonize investment incentives inthe EAC.  - 6 - 17. Financial and related developments. As noted earlier, substantial progress has been made inthe past year infinancial sector reform; the Progress Report, however, does not deal inany depthwith either the financial sector or trade issues. Giventhe importance of these sectors to growth and poverty reduction, it would be desirable to better integrate bothtrade and financial sector issues into future PRs. 18. Revenue issues. Domestic revenue mobilization i s key to containing aid dependency and enhancing the robustness o f economic growth. The Progress Report candidly acknowledges that there are insufficient domestic resources to meet even the needs o f the priority sectors. The authorities deserve credit for their recent reform efforts inthe areaso ftax policy andtax administration. Inparticular, comprehensive measures to curtail petroleum smuggling, which more than doubled the recordedpetroleum imports, proved to be highly effective. The new Income Tax Act (ITA) and the implementationo f the Tanzania Revenue Authority's corporate plan are expected to further boost revenue performance. Nevertheless, the authorities will needto remain vigilant to avoid the granting o ftax exemptions andthe resulting erosion o fthe tax base. 19. Finally, while the macroeconomic targets for 2004/05 that are quoted inthe Progress Report are the same as the PRGF programtargets, projections for 2005/06 and 2006/07 for the budget framework, includingrevenue-to-GDP ratios, differ from those in the current PRGF. The staff recommends that any divergences o fmacroeconomic targets from those included under the PRGFprogram be explained inthe upcoming PRSP. 20. PublicExpenditure Management andAllocation. As the PR reports, there has been a continued increase in spending on education, roads, and agriculture in2002/03; while overall fiscal discipline was maintained. The Tanzania Progress Report does a laudable job o f linking the PRSP andpublic spending -particularly inpresentingbudgets and actual expenditure outcomes ineach o fthe main sectors. Inaddition the gap between PRSP costingpresented inthe PR and the projected future budget framework is less than inpreviousyears, althoughthere is still adisconnect. Movingforward, there is a needfor further work to harmonize PRSP program costs withrealistic projections o flikely resource availability. Equally importantwill be the better integration o f the various expenditure programmingexercises inTanzania: the annual PRSP review, Public ExpenditureReview, andMTEF, so there is a single set of expenditure numbers, firmly located inthe context o fthe annual budget process. Inthe next cycle, the authorities intendto address this issue by strengtheningthe role o fthe Budget GuidelinedMTEF as a clearer statement o f government's budget strategy, linking the PRS,projected budget framework and salient aspects o f proposedmonitoring withina single framework. V. PRSP Process and Monitoring System 21. As part o fthe PRSP process, Tanzania has developeda well-designed Poverty Monitoring System (PMS). Duringthe past year the PMS group has updated the set o f indicators for tracking PRS implementation to makethem more consistent with policy targets, and to better reflect the availability o f data. Major new data is beinggenerated by the Agricultural Census andNational Population Census of 2002, andwill be analyzed over the coming year. However, implementation of the monitoring system i s proving more difficult than was originally foreseen. Itis not yet generatingtimely routine data to  - 7 - track changes inoutcomes, nor even intermediate outputs-as is evidencedby the limited reporting on outcomes inthis year's ProgressReport. Inaddition the dissemination and use o f the data generated inpolicy-level debate i s limited, as i s the involvement o f local- level institutions inthe monitoring process. Government recognizes these weaknesses. Inthe mainPRSPupdateitwill becriticalto lay outthe steps neededto strengthenthe system, and commit to aprogram to implementthem. 22. Inthe context of updatingthe PRSPadebate istakingplace- within government and with the donor community - on the appropriatefuture role ofthe PRS. Tanzaniais one ofthe first countries to enter the secondphase o fthe PRSP cycle, andthis debate is a natural function of the evolution ofthe PRS instrument. The discussionrevolves around: (i)wideningthe scope of the PRS, whichto date has mostly focused on social sectorsand agriculture, to cover the whole range ofpublic policy; (ii) expanding the role o fthe PRSP as an instrumentfor formulation of overall public policy ingovernment, inaddition to serving as a tool for external accountability; and (iii)the need to rationalize the multiple processes that exist inTanzania, including the annual Public ExpenditureReview, Tanzania Assistance Strategy, Budget Support Reviews, MTEF,annual preparation of an Poverty and HumanDevelopment Report, and of aPRSP ProgressReport, 23. The consultative process underlyingthis year's ProgressReport was relatively light. While these consultations have informedthis year's PRYthe government has embarked on a more comprehensive andwide-ranging set of consultations with civil society across the country inthe coming year for the major PRSP update. The consultations are plannedinphases, starting with collection o fthe views of stakeholders at grassroot level duringMay/June 2004. This will be followed by consultations at national levelprior to finalization andapproval by Cabinet, the PresidentandNational Assembly. O fequal importance is integrating public consultation on amore continuous basis into on-going processes:for example on public expenditureinthe budget cycle, on policy formulation, and through local government. VI. Conclusion 24. Tanzania continues to make significant progressinthe implementation ofthe PRSP, andthe policy measures ofthe past year represent a credible set of reforms. Furthermore, the PRSP process now firmly forms the basis for government-donor dialogue inTanzania. The expectations laiddown at the time o fthe last JSA have largely beenmet, interms o fprogress inprivate sector andfinancial sector policy, development o fthe secondary education strategy, and environmental institutions, as well as more realistic costing o fprograms. 25. This year's ProgressReport was intentionally limitedinscope, withthe government focusing its efforts insteadonthe forthcoming full PRS updatethat has already started. Itis important that the authorities take advantage of the opportunity offered by the updateto frankly assessthe impact o fpolicies over the past five years or so: to critically examine what i s working, what i s not, and what the government would like to do differently inthe next PRSP periodas a result. Taking into account the issues noted inthis JSA, the staffs suggest that work inthe coming year should include: (i)  - 8 - better feeding the sound technical analysis producedby the PRS review process into formulation o f policies andprograms at the national strategic level; (ii) strengthening the monitoring and evaluation system to better track results quantitatively; (iii)greater a focus on growth, and examination o fthe productivity and welfare impacts o f sector developments, policies, andprograms, especially inagriculture; (iv) aligning public interventions with the stated policy o fprivate-sector-led growth; and (v) strengthening the link betweenthe PRS and budget processes. 26. Inconclusion, the staffs ofthe World Bank andthe IMFconsider that, basedon this PRSP Progress Report, Tanzania's poverty reductionstrategy remains a sound basis for Bank and Fundconcessional assistance. The staffs recommend that the Executive Directors of the World Bank and the IMF reach the same conclusion.  THE UNITED REPUBLICOF TANZANIA Telegrams: "MAKAMU", VICE PRESIDENTSOFFICE Telephone: 2113857/2118995 Fax :2113856 P.O.BOX 5380, E-mail: makamu@ud.co.tz TANZANIA DAR ESSALAAM In replyplease quote Our Ref.No.: EA.191/276/0 April 23,2004 The Resident Representative, World BankCountryOffice, P.O. Box2054, DARESSALAAM Dear Madam, RE:SUBMISSIONOFTHE 3RDPRSPROGRESSREPORT2002/03 We wishto formally submitthe 3*dPovertyReductionStrategyProgressReport for the year 2002/03. The report closesthe three year cycle of the implementation of the frrst PRSP, which was formulated inthe year 2000. The preparation ofthe report benefited from the consultative processthat involved a wide range of stakeholders including government, civil society, development partners, through the Poverty Policy Week held in October 2003, a stakeholders meeting held in January 2004 and stakeholders participation within the context of the operations of the Poverty Monitoring System. Views from the general public were also collected through the Policy and Service Satisfaction Survey (PSSS). The 31d PRS Progress Report provides an update on the implementation of the Poverty Reduction Strategy during fiscal year 2002/03 (July - June), incrementally updatingthe PRSP (2000). It records successes inmacroeconomic performance and in various reforms while pointing out challengesstill ahead inthe areas of growth-poverty linkage, issues o f quality and equity in social service delivery and on commitments to goodgovemance. The report has been preparedwhile mindful of the on going PRS review exercise that is aimed at preparing the second generationPRSP. The report provides therefore a bridge to this review andtakes the year ahead as aplanningyear.  L The Government of Tanzania wishes to express its appreciation and gratitude to our DevelopmentPartners for the fruitfulcollaboration duringthe year andfor the various commentsmade onthe various drafts of the report. The commentshavebbeenextremely helpful infinalizingthe report. We are therefore formally submitting this 3' PRS Progress Report for the year 2002/03 for your necessary action. The report has also been posted on the National Website for wider access. We look forward to our continued collaboration and effective engagement as we planfor the secondgenerationPRSP. Sincerely, SENIORPERMANENTSECRETARY c.c ResidentRepresentative, m, DARESSALAAM PermanentSecretary TREASURY DAR ESSALAAM 2  THE UNITEDREPUBLIC OF TANZANIA POVERTYREDUCTI STRATEGY THE THIRD PROGRESSREPORT2002103 DAR ES SALAAM  LIST OFABBREVIATIONS AND ACRONYMS ADB African Development Bank ADF African Development Fund ADR Alternative DisputeResolution AGOA African Growth Opportunity Act ASDP Agriculture Sector Development Program ASDS Agriculture Sector Development Strategy ASLM Agriculture Sector LeadMinistries ATC Air Tanzania Corporation ATIP Accountability, Transparency and Integrated Project BOT Bank o f Tanzania BSE Basic Statistics on Education CAP Country Action Program CBOs Community Based Organizations CEF Community EducationFundProgram CFAA Country Financial Accountability Assessment CFS Child Friendly School Program CHF Community HealthFund COBET Complimentary Basic Education inTanzania csos CPI Consumer Price Index Civil Society Organizations DAC Donor Aid Coordination DAWASA Dar es Salaam Water and SewerageAuthority DBSPE District Based Support to Primary Education DFID Department for InternationalDevelopment DHS Demographic and Health Survey DPT DiptheriaPectusis Tetanus DRF DrugRevolving Fund DSA Dissemination, Sensitization and Advocacy EAC East African Community EPZ Export Processing Zones ESDP Education Sector Development Program ETP Educationand Training Policy EU European Union FDI Foreign Direct Investment FDTF Fiscal DecentralizationTask Force GATT General Agreement onTrade and Tariffs GDP Gross Domestic Product GER Gross Enrolment Rate GFS Government Financial Statistics GGCU Good Governance CoordinationUnit GOT Government o fTanzania HBS Household Budget Survey HIPC HighlyIndebtedPoor Countries HIV/AIDS HumanImmuno-deficiency VindAcquiredImmune Deficiency Syndrome HMIS Health Management Information System HSR Health Sector Reforms ICBAE Integrated Community Based Adult Education ICT Information and Community Technology IFAD InternationalFundfor Agricultural Development i  IFEM Inter-Bank Foreign Exchange Market IFMS IntegratedFinancialManagement System ILFS Integrated Labor Force Survey INSET In-Service Training Program IRP IntegratedRoads Program ITN InsecticideTreated Nets LGA Local Government Authorities LGRP LocalGovernment Reform Program MAFS MinistryofAgriculture andFood Security M C M MinistryofCooperatives andMarketing MDA Ministries, Departments andAgencies MDG MillenniumDevelopment Goals MDT MillenniumDevelopment Targets MIS Management Information System MOEC MinistryofEducation and Culture MWLD MinistryofWater andLivestock Development NACP National Aids Control Program NACSAP NationalAnti-Conuption Strategy and Action Plan NAO National Audit Office NDS National Debt Strategy NER Net EnrolmentRate NFE Non-Formal Education NGOs Non-Governmental Organizations OCAG Office of the Controller and Auditor General PASS Private Agribusiness Sector Support PCB Preventionof Corruption Bureau PEDP Primary EducationDevelopmentProgram PER Public Expenditure Review PHDR Poverty and HumanDevelopment Report PMMP Poverty Monitoring Master Plan PMS Poverty Monitoring System PORALG President's Office, RegionalAdministration and Local Government PPA Participatory Poverty Assessment PRBS Poverty ReductionBudget Support PRS Poverty Reduction Strategy PRSC Poverty Reduction Support Credit PRSP Poverty Reduction Strategy Paper PSLE Primary School Leaving Examination PSRP Parastatal Sector Reform Program QSP - Quick Start Project R D S Rural Development Strategy REPOA Research on Poverty Alleviation SADC Southern Africa Development Community SEDP Secondary EducationDevelopment Program SMEs Small and Medium Enterprises STI Sexually Transmitted Infections TACAIDS - Tanzania Commission onAids TAS Tanzania Assistance Strategy TB Tuberculosis TCCIA Tanzania Chamber o f Commerce, Industries and Agriculture TEDP Teacher Education Development Program ii  TIC Tanzania InvestmentCenter TNBC Tanzania NationalBusiness Council TRC Tanzania Railways Corporation TSED Tanzania Socio-Economic Database URRP UrgentRoadsRehabilitationPrograms VAT Value Added Tax VPO Vice President's Office VTTP Village Travel andTransport Program WABEM Ward BasedEducationManagement Program WSDP Whole School Development Program WSDS Water Sector Development Strategy WSIS World Summit on Information Society iii  Table of Contents LIST OF ABBREVIATIONS AND ACRONYMS ...................................................................................... i Table of Contents ........................................................................................................................................ iv List of Tables............................................................................................................................................... vi I.BACKGROUND....................................................................................................................................... 1 1.1 1 I1 THE STATUS OF POVERTY................................................................................................................ 4 .1.2 PRS Review ................................................................................................................................ Introduction................................................................................................................................. 2 2.1 4 Non-Income Poverty: HumanCapabilities, Survival, ExtremeVulnerability ........................... Income poverty: Growth, Employmentand Roads..................................................................... 2.2 7 2.3 11 Prospectsof Monitoring Poverty Reduction............................................................................. Governance............................................................................................................................... I11.2.4 12 SOCIO-ECONOMIC REFORMS IN2002/03..................................................................................... 14 3.1 MacroeconomicPerformance................................................................................................... 14 3.2 15 Poverty Orientation ofthe 2003/04 Budget.............................................................................. Structural Reforms and Private Sector Development............................................................... 3.3 17 3.4 Globalization andPoverty......................................................................................................... 18 I V. IMPLEMENTATION STATUS OF THE PRIORITY SECTORS ..................................................... 3.5. Public Debt Developmentsand Management........................................................................... 19 20 4.1 Primary Education..................................................................................................................... 20 4.2 Roads......................................................................................................................................... 24 4.3 Water......................................................................................................................................... 27 4.4 Legal andJudicial System......................................................................................................... 30 4.5 Health Sector............................................................................................................................. 32 V.4.6 36 CROSSCUTTING ISSUES................................................................................................................... Agriculture ................................................................................................................................ 42 5.1 HIV/AIDS................................................................................................................................. 42 5.2. Gender....................................................................................................................................... 44 5.3. 47 Local GovernmentReform Program......................................................................................... Governance............................................................................................................................... 5.4. 48 5.5 Environment.............................................................................................................................. Human Capital Development.................................................................................................... 51 VI. BUDGET FRAMEWORK FOR POVERTY REDUCTION PROGRAMS........................................ 5.6 51 55 6.1, 55 56 Public ExpenditureManagementinthe Medium Term............................................................ Budget frame considerationfor financing ofpriority sectors ................................................... Resource envelope: A macroeconomicperspective.................................................................. 6.2 VI1. POVERTY MONITORTNG AND EVALUATION........................................................................... 6.3 59 60 7.1 Performance.............................................................................................................................. 60 7.2 Operationalizationofpooled fundmechanismfor the PMS..................................................... 61 7.3 Annexes: Policy Matrix for Poverty Reduction Strategy ........................................................................... Challengesencountered............................................................................................................ 61 A.1: Macroeconomic, GoodGovernanceandPrivate Sector Development........................................... 62 62 A.11: PovertyMonitoring System........................................................................................................... A.111: Water............................................................................................................................................ 63 A. IV: Health.......................................................................................................................................... 64 65 A.V: Gender........................................................................................................................................... 66 66 A.VII: Roads.......................................................................................................................................... A.VI: Education..................................................................................................................................... 67 68 A. IX: Agriculture .................................................................................................................................. A.VII1: Judiciary andJustice.................................................................................................................. 68 iv  A.X:HIV/AIDS ..................................................................................................................................... 69 A.XI:Employment................................................................................................................................. A.XI1:Environment............................................................................................................................... 70 71 V  List of Tables Table.1: Income poverty indicators. baseline and targets............................................................................. 4 Table 2: EducationIndicators. Base line and Targets .................................................................................. 7 Table 3: Health Outcome and NutritionIndicators, Base line and Targets.................................................. 8 Table 4: Health Service Indicators, Base line and Targets......................................................................... Table 5: Tanzania: Selectedmacroeconomic indicators ............................................................................ 10 14 Table 7:Highlightsfor the 2003/04 Budget Measures............................................................................... Table 6: Priority Expenditureswithin Priority Sectors, 2000/01 - 2006/07 (Jul-Jun) (in billions TShs)... 15 17 21 Table 8b: Gross and Net Enrolment Ratio (GER and NER)by Sex and Region, 2003 ............................. Table Sa: Gross and Net Enrolment Ratio (GER andNER)By Sex and Region, 2002............................. 21 Table 9: EducationUnitsInspected2002.................................................................................................. Table 11: Summary o f program costing (Tsh.Million) ............................................................................. Table 10: EstimatedFinancingRequirementsfor the ESDP 2002/03 -2005/06 (inmillion Tshs.).........22 23 Table 12: Financing o f the water sector Program, 2003/2004 - 2005/2006 (billion Tshs)........................ 26 30 Table 13: Legal and Judicial Systems Costingof Interventions 2003/04................................................... Table 14: Financing of Priority Health Interventions, 2003/04 - 2005/06 (July-June) TShs billion..........35 32 Table 15: Summary of costing of sector programs 2003/04 -2005/06 (Tshs. `Millions) ......................... 40 Table 16: Costing of Mid-TermPlan ofthe LGRP.................................................................................... 50 Table 17: Central Government Expenditure, 1998/99-2003/04 (billion TShs).......................................... 56 Table 18: Budget Framework 2003/04-2006/07 (in millionTShs) ............................................................ 58 vi   I. BACKGROUND 1.1 Introduction This is the third PRS Progress Report (July 2002-June 2003) that closes the three-year cycle of the implementation o f the first PRSP, which was formulated inthe year 2000. While it marks the end of the first cycle it also provides a bridge to the review process leadingto the formulation o f the second cycle - PRSP 11. The PRS review process was launched during the Poverty Policy Week in October 2003, the consultative process of which is stipulated inthe "Guide for the Poverty Reduction Strategy Review." There are successes recorded due to the implementationof the first PRSP inmacroeconomic performance and in reforms in various areas including financial sector, public service and local government. Distinct effort has been made to improve delivery of social services such as education, health and water. However, more effort i s still needed in virtually all areas. Challenges due to unmet development needs emanate from various angles. There i s insufficient translation of macro level achievements to the micro level - hence the need for closer analytical work on growth-poverty linkages and how growth could better benefit the poor. Greater attention also has to be paid to quality and equity issues in the delivery of social services, like education and health; combating the spread of HIV/AIDS and commitment to governance issues. The report highlights what Government did during the past year in terms o f policy developments, an assessment o f the achievements and challenges, including the monitoring system. Unlike the earlier two reports that pointed out intervention areas for the following year in terms of next steps, this report only updates the Policy Matrix and takes the year ahead as the planning year to inform the next PRSP. The first cycle PRS had process activities, some of which have been finalized, while others will continue and be better informed by the PRS review. Cases in point are the Rural Development Strategy (RDS), mainstreaming of gender, environment and governance issues. Experience during the preparation of the last two progress reports and this one reveals that the reporting quality of progress on both outcome and impact indicators requires improvement. This includes all PRS sectors and thematic areas. Further, reporting on progress towards poverty reduction interms o f incidence and correlates can only be made if new data sets are generated. Government will strengthenthe reporting capacity of sectors and thematic areas during the PRS review and in the next PRS cycle. Among other things, Government will strengthen the capacity of the PRS Technical Committee and Secretariat and harmonize and synchronize various reporting instruments e.g. PHDR, PER and sector reviews. Inrelation to the Poverty Monitoring System(PMS) the challenge is how to hold the entire "machinery" together and avoid duplication o f activities without further stretching available capacity and existing 1  institutional set up. This occupies center stage as we plan for the PRS review. Capacity constraints may hinder consolidation of the PRS gains and poverty monitoring. Duplication o f activities and failure to define a point of convergence will add to the transaction costs and put additional strain on the already stretched capacity. Thus addressing PMS capacity concerns and harmonization of activities will certainly be critical to the implementation o fthe next PRS cycle and to the management o fthe PRS review process. 1.2 PRS Review Overall, the purpose of the review is to update the current PRS by making it more comprehensive and pro-poor. Also, the review will broaden and deepen interventions to reduce poverty and raise awareness on the PRS and MDGs. While it is intended to undertake a comprehensive review it is necessary to be strategic and prioritize issues the review will focus on, and avoid trying to do everything. Specifically the review will: a Be set in the context o f the country's long-term strategies (e.g. NPES and Vision 2025). The PRS is seen as a meansto achieve these long-term goals set out inthese strategies, visions and MDGs. Use existing and recent data and analyses including the last (three) PRS progress reports, PPA, PER studies and reports, PHDR, Poverty Week Reports, Labor Force and Child Labor Survey, H B S 2000/01 and Census findings, Agriculture Survey, Policy and Service Satisfaction Survey (PSSS) and other reports. However, since the findings of these reports will be used in the review process, it is not necessaryfor this report to highlightthem. Identify knowledge gaps and commission few critical new studies e.g. growth and trade, growth and employment (jobs) creation, raising returns to smallholder agriculture, examining macro-meso-micro linkages and integrationof cross-cutting issues HIV/AIDS,gender and environment. - Scale up ownership and awareness of PRS within and across government; strengthen government leadership and foster participation of key stakeholder with a clear focus on community participation in PRS formulation, implementation and monitoring. Improve harmonizationof key processes around the PRS, PMS, PER and the budgetingcycle to ensure most effective utilization o f government resourcesinline with its poverty reduction efforts. The PRS review provides an opportunity to explore and discuss what is working and what is not. The review has to address the current limitations of the PRS and PMS and amplify the complementing contributions of sectors by examining the inter-sector linkages. Capacity constraints in key institutional bodies of the PRS and PMS, including Local Government will be examined. A PRS Communication Strategy to supportthe PRSNDGs and the PMS will be prepared. 2  As part of the review, a consultative meeting of stakeholders was heldin January 2004 inDar es Salaam to clarify PRS Review issues and launch the preparation of a country-wide Consultation Process on a range of poverty and policy concerns for the next cycle PRS. Stakeholders came from first-PRS priority sector and cross-cutting issues ministries, government departments and civil society. Government and development partners have contributed financial resources to support the country-wide consultations which are now underway. Reports from the consultations are beginningto flow in. They will be analysed so that key messagescan be incorporated in the new PRS document. It is expected that work on the first draft of the PRS will start in April and that there will be further rounds o f consultation - in June for the first draft and September for the second draft. Poverty Policy Week i s scheduled for October and finalization and publication activities on the document will take place between October and December 2004. Details on the PRS review are available in the guide document which can be accessed through http://www. tzonline and poverty website -http://www.povertymonitoring.go.tz 3  II. THE STATUS OF POVERTY This chapter presents the status of poverty based on the original PRSP indicators and the revised set of indicators that were extended and modified in 2002. The chapter builds on 2001/02 Progress Report Status chapter, adding on new data where available and explaining trends inthe selected indicators. It also assesses whether the targets are likely to be achieved, highlightsstrategic policy direction and prospects o f monitoring poverty reduction. In-depth analysis of poverty status i s contained in the PHDR 2003. Section 1addresses income poverty including GDP growth, agriculture and employment. Section 2 looks at non-income poverty dimensions. Section 3 reviewsgovernance and related gender indicators. Section 4 highlights medium-term prospects for improving monitoring of poverty. 2.1 Income poverty: Growth, Employment and Roads The PRS underpins sustained economic growth as a precondition for poverty reduction, grounded in sound macroeconomic management, increased investment and improvements inproductivity. Agriculture, improvements to the road network and other pro-poor sectors are prioritized. The performance indicators identified in the PRS were revised in 2002. The agriculture indicators were extended, food price inflation was added, unemployment indicators were included to reflect the extent of economic opportunities, and the road indicators were modified to reflect available data. Targets for new indicators will be set during the PRS review; a baseline is available in many cases. The resulting indicators are presented in Table 1. The poverty targets have been adjusted to reflect the revised poverty estimates that were produced after the publication of the PRSP. areas Note: For actual 2003, most of the socio-economic indicators in this section have not been worked out, The informationis obtainedfrom HBS andthe latest is the 2000/01 HBS. Sources: -National Bureau of Statistics Other indicators that future reports will consider due to their relation to growth and employment include number of kilometers o f roads under periodic / routine maintenance, percentage of roads that are only seasonally accessible), percentage of working age population not currently employed percentage of 15-24 4  years old not currently employed in urban areas. Indicators for investment and business climate will also be considered. There is no information on trends in household income poverty since 2000. The current Household Budget Survey 2000/01 provides the most current information on trends in income poverty between 1991/92 and 2000/01, showing very limited declines in income poverty levels over the 1990s. Estimates of household consumptionlevels are not produced annually. The rest of this section focuses on macroeconomic and sector indicators that have an impact on income poverty. Note, however, except for a few macroeconomic variables, data on performance of most social indicators are not readily available for the current progress report. Subsequent report will carry those for which analyses from the various surveys will have been completed. In addition, possibilities of having similar indicators for contributions of the private sector in social sectors where the sector has grown in importance following liberalizationwill be considered inlater reporting. Economic Growth While in the early 1990s GDP annual growth rates were often lower than population growth rate, economic growth has, since the mid-l990s, risen more steadily and overtaken the population growth rate (2.9% for 1988-2002). In 2002, GDP growth rate registered 6.2%, surpassing the PRSP target of 6.0%; sliding back to 5.5% for 2003 (provisional estimates). Overall the performance reflects the positive impact of the economic and fiscal reforms undertaken since mid-1990s. The sticky issue, however, is how far this growth can translate into poverty reduction over the comingyears. Relatedto this, i s the question of how the gains from growth can be distributed among households for the benefits to reach the poor. Government is grappling with these issues through broadening sources of growth, expediting implementation of agricultural sector and rural development programs, facilitating increased private investment, promoting micro financing and Small and Medium Enterprises (SMEs), and developing the infrastructure, especially supporting agriculture. Agriculture and Food Security: Being the mainstay of the economy, agriculture must grow well above the population growth. PRS agriculture growth target of 5% was achieved in 2001 and 2002, largely due to good weather conditions. The growth rate for 2003 is provisionally set at 3.3%. This is due to poor rains. The forthcoming agricultural survey will provide a baseline for 2003, thus reducing data limitations on production, accessto credit, access to market andextension services. Employment and Unemployment: The ILFS 2000/01 shows that overall unemployment increased substantially and that it is higher amongst women than men in urban areas. Also, unemployment is particularly high amongst young people, making them more vulnerable. The Integrated Labor Force and 5  Child Labor surveys, 2000/01 (launched in April 2003) indicated that 39.6% of children aged from 5 to 17 years old are economically active and 21.3% of them are child laborers working more than 4 hours a day often in worst forms of child labor. Government is addressing employment creation through policy actions on private sector development, SMEs, agricultural and rural development, micro financing and EPZs. Such efforts include measures to enhance productivity through job and ,business management skills, access to flexible loans and market support for poor women and their families. There are also measures to curb child labour under the "Time Bound Programme on Worst Forms o f Child Labour" coordinated by the Ministryo f Labour, Youth Development and Sports. Roads: PRS envisaged a rehabilitation of 4,500 km of rural roads in twelve of the poorest regions by 2003. It also aimed at undertaking routine and periodic maintenance on all rural roads, with a focus on community involvement. Only 5 1% of the planned rural roads had routine spot improvementand periodic maintenance. The condition o f most roads i s classed"poor". D Challenges and Strategic Policy direction and monitoring The overriding concern is to ensure attainment of sustained high economic growth and ensuring such growth benefits the poor particularly in the rural areas. Constraints facing agriculture require expeditious actions with regard to financing mechanisms, investment and provision of support services. Regional diversity and inequality would be addressedthrough appropriate budgetary allocation mechanisms as well as provision of enabling environment for domestic and foreign investment.The forthcoming agriculture survey offers an opportunity to revisit and establish concrete indicators for monitoring agriculture and rural development. More concrete approach of measuring will be designed to capture both rural and urban dimensions. As part of the PRS updates, attention will be paid to the income and employment impacts of agriculture, with increasing returns to agriculture at the center. For the roads, more effective coordination machinery between the central and local governments in the maintenance o f the road stock will be developed. The coordination machinery will clearly assign responsibilities. The capacity o f Government and relevant NGOs at national and sub-national levels, both human and resources will be strengthened to meet the challenges of efficiently implementing the "Time Bound Program on the Worst Formso f Child Labor." 6  2.2 Non-Income Poverty: Human Capabilities, Survival, Extreme Vulnerability Education The past three years have registered substantial achievement, particularly in primary school enrolment. Enrolment grew by 50 % from 4.4 million in2000 to 6.6 million in 2003. Both net and gross enrolments have increased by about 30%. This increase is attributed to the abolition of UPE levy and other mandatory contributions. Apparently, 2003 PRS and PEDP targets for GER and NER have been surpassed. Regarding gender parity, despite encouraging signs of near equality in the entry o f 7 year olds, there are concerns that PRS and MDG target for parity in the overall enrolment o f girls and boys by 2005 may be adversely affected by over-age girls facing more difficulties to start school than their male counterparts. There are also vast disparities inenrolment rates across regions. Note: Targets for 2003 are the revised values given in the Second PRS Progress Report (2000-0l), where differentfrom the PRSP Sources: I-MoEC Basic StatisticsEducation (BSE) 2- Household Budget Survey 2000-01 Many of the out-of-school children were registered for complementary basic education programs in 2002 but actual enrolment in non-formal education is still low. To rectify this situation, Government is implementingits new strategy for adult and non-formal education beginning 2003/04. Inthe past two years, there has been some improvement inthe pass rates inthe primary school leaving examination, with a peak pass rate o f 29% in 2001. However, a call for further quality improvement is still in order. Achievement o f the PRS target o f a 50% PSLE pass rate by 2005 seems to be unlikely. Transition rate from primary to secondary school has increased from 16% duringthe late 1990sto about 20% largely due to the 50% expansion o f secondary school places between 1997 and 2003. Nonetheless, the absolute level of transition remains low. Overall gender gap in secondary enrolment is still large. This is attributed to the poorer performance of girls in PSLE. Selection for' secondary school places takes into account both gender and academic performance. 7  Another challenge i s eliminating illiteracy by 2010, particularly for rural women, the population with the highest incidence o f illiteracy. The recently launched Adult and NFE Strategy is a necessary and important initiative inaddressing the challengestowards achieving PRSMDGstargets. n Challenges and Strategic Policy direction and monitoring Thetempo for attaining significant achievement ineducation will be enhanced. The focus will be on: improving infrastructure and quality inteaching, provision o f pedagogical inputs, and incentives; e supporting vulnerable children, reviewing curriculum to provide knowledge and skills useful to graduates inthe labor market, provision o f non-formal education for older out-of-school children and illiterate adults; and continued expansion of secondary schooling, with enhanced government-private sector partnership. Survival, Nutrition and Health Because of lack of data the maternalmortality ratio was removedfrom the PRS indicator list and replaced by births attended by skilled health worker. As the national estimates after 2000 are not available, the general assessment in this section i s based on the demographic and health surveys o f the 1990s and sentinel surveillance sites. Table 3 shows healthand nutrition indicators and targets. PRS indicator %change inmortality attributableto malariainunder-fives-to be addedinlaterreports/ analyses Source: 1 -TanzaniaReproductiveand Child HealthSurvey 1999;2 -National AIDS Control Program, 2002; and 3 -National PopulationCensus, 1988 Infant and Child mortality: There have been no significant changes in infant mortality and prevalence of fever in children under five during the 1990s. Sentinel site surveillance shows little net change in the  importance of malaria as a cause of child deaths, though there i s some year-on-year fluctuations and differences between sites. HZV and AIDS: Data from blood donors show steady increases in HIV prevalence since 1996. Despite widespread knowledge of HIV and some successful local initiatives in its prevention and control, there is no significant improvement. In general prevalence is higher in women than in men and the gap between male and female infection rates has increased. Prevalence in blood donors replaced prevalence in antenatal clinic attendees as an indicator because of weakness in the ANC sentinel surveillance system. The national HIV/AIDS survey being conducted in2003 will provide a baseline against futuretrends. Life Expectancy: Based on the 1988 census, life expectancy at birth was 52 years. Life expectancy is expected to be lower now due to the effect of HIV.The forthcoming analysis of 2002 Census will provide a definitive picture ontrends and differentials inlife expectancy. Nutrition: There has not been much improvement in the nutrition status of the under-fives. Child malnutrition is muchworse inruralthan urban areas and much higher inthe poorest quintiles.About 16% of children have a birth weight below 2,500 grams as a result o f early pregnancies, illness and poor nutrition status of pregnant women. Apparently, food insecurity and HIV/AIDS in under-fives will also worsen the nutritional status o f children. Health Service Delivery The number of outpatient visits has increasedenormously since 1999, showing a 47% increaseinabsolute numbersbetween 2000 and 2002. Indicators of the proportion of births attended by skilled health worker and proportion of institutional deliveries showed a decline over the 1990s. Rural-urban disparities in skilled attendance at birth are large, mainly due to shortage of adequately trained staff inrural areas. Both urban-rural disparities and between poorest and richest increased during the 1990s. There has been continuous improvement in DPT3 and measles coverage. DTP3 reached almost 90% coverage in 2002, well above the targets for 2003 (Table 4). 9  PRS indicator IDTP(Hb)3 immunizationcoverage(%) IDHS81 11999[2] 1=90(2002) 185 1 IMoH76 I1999[11 TB treatment completion(%) 178 12000[1]I1- Sources: 1-Ministry of Health 2002; 2 - TanzaniaReproductiveand ChildHealth Survey 1999 3 -HouseholdBudget Survey 2000-01 D Challenges and Strategic Policy direction and monitoring Analysis of 2002 Census and the forthcoming DHS in2004 will provide more robust recent estimates for many of the indicators of survival, nutrition status and health. Improvement in routine data system will also provide a regular source for assessing trends in health service outputs. Government will focus on ensuringthat health services are accessible to the rural population and the poor through the provision of adequate facilities and quality services. As part o f the PRS review, further reflection will be made on the applicationo f user fees at primary level facilities to ensureuniversal access. Government will scale up efforts inprioritizing measuresto reduce transmission o f HIV and its impact on the welfare ofthose affected. Water and Sanitation Increasing access to clean and safe drinking water for the rural population is among the PRS priorities. The target is to improve coverage to 55% of rural inhabitants by 2003. During 1990s there was noticeable improvement in the coverage in rural areas, although the rate of improvement is unlikely to reach the 2003 target. The time it takes to collect water has increased inurban areas, probably as a result of increasedpressure on water points due to increased urban growth rates, implyingsubstantial time costs on those who collect water, mostly women and children. No specific targets for sanitationwere set. o ChulIengesand Strutegic Policy direction and monitoring The greatest concern is on the weakness of routine data system from collection, production and analysis to dissemination at district, regional and national levels. Government is in the process of developing a single, highly accessible monitoring system that contains all of the necessary data to be used by the district, councils, regional secretariats and central government. 10  Extreme Vulnerability The PRS recognizes vulnerable groups that require special attention, including AIDS sufferers, orphaned children who most likely would get into the child labor market and its worst forms, the disabled, the very old and refugees. There is no new information on trends of the five indicators for monitoring extreme vulnerability. However, trends over the 1990s are known only for orphanhood that increased during the decade, largely as a consequence of HIV/AIDS pandemic. The Participatory Poverty Assessment (PPA) carried out in 2002 has brought up more qualitative information on various dimensions of vulnerability - conceptualization, the most vulnerable social groups, impoverishing forces, and protection and risk managementprograms. a Challenges and Strategic Policy direction and monitoring The current indicators on extreme vulnerability cover a disparate set o f areas and do not appear to have been selected within a common conceptual and policy framework. The PPA will assist in refining indicators for vulnerability in sectors that are already monitored. It provides also a basis for the development of additional indicators. During the PRS review process the PPA will be usedto concretize Government policy towards vulnerability andto develop appropriate social protection programs. 2.3 Governance The major challenges have been to identify and prioritize the key aspects of governance most linked to poverty reduction. So far, governance has been addressed through the legal, judicial, and public expenditure management systems and inchecking corruption. The percentage o f councils with clean audit report reflects the proper use and accountability of government funds by local authorities. The number of corruption cases reported is an indicator of the readiness of the population to report corruption and willingness to combat it, while the number of convictions shows the promptness and effectiveness of prosecution of cases. Inrecent years, the coverage ofthe audit services has been increased, i.e. coveringmore local authorities, Most local authorities have been audited annually since 1998. However, only 10% of councils were awarded a clean certificate, which shows weak accountability at the local level. The number of corruption cases lodged increased from 33 in 2000 to 129 in 2002. However, the number of convictions is low, recoding 6 in 2000 and 12 in 2002, attributed to the long delay in processing cases before a conviction or acquittal i s obtained. The proportion of women among civil servants has remained steady at 39% over the past 3 years, with a small rise to 40% in 2003, and when women teachers are excluded, the proportion of women falls to about one third. Programs to enhance productivity and promotion o f good industrial relations at the 11  workplace have been implemented in collaboration with workers and employers organizations. These include workers education, women workers rights, occupational safety and health, social dialogue and HIV/AIDSinterventions. Social welfare serviceswere promotedintea plantations through renovationand creation of day care centers. Women's role in Parliament is still wanting, occupying only 27% o f all seats, despite constituting about half of population. However, the current situation represents an improvement from the previous Parliament, inwhich women heldonly 18% of seats. D Challenges and Strategic Policy direction and monitoring More urgent actions will be undertaken to increasethe proportiono f district councils given clean auditing certificates. Faster processing of corruption cases is requiredto retain public confidence and engagement. More robust actions will be undertaken to increase women's representation and involvement in Government and Parliament. 2.4 Prospects of Monitoring Poverty Reduction One of the most substantial changes in the PMS since 2002 has been the revision o f the list of poverty monitoring indicators in response to the monitoring requirements of Poverty Reduction Budget Support (PRBS), Poverty Reduction Support Credit (PRSC) and Millennium Development Goals (MDGs). The indicators in the Poverty Monitoring Master Plan (PMMP) were revised and supplemented in preference to establishing an additional, parallel monitoring mechanism. The focus of PRSMDG indicators and the PHDR i s to assess whether welfare has improved rather than to report on progress in implementingthe policies. Most outcomes and impact indicators are expected to take some time to respondto policy changes, and they change only slowly once they respond. The PMMP prioritized the selection o f indicators including a number o f slow moving impact indicators for balance. It is appropriate that the PMMP define indicators that can be used to monitor poverty beyond the short-term perspective o f the PRS e.g. MDGs indicators; but it is then necessary to identify the indicators that can reasonably be used for monitoring over the short term. A number of important data collection and analysis activities are currently being undertaken and will provide additional poverty monitoring data in the near future. Foremost amongst these is the analysis of the Population and Housing Census 2002. Preliminary tabulations of population by district have already been produced and more detailed analysis is ongoing. The census will provide updated information on a series of poverty indicators including literacy, school enrolment and the level o f schooling attained, child and adult mortality, fertility, source of drinkingwater and unemployment. Itwill also provide information on population by age group, improving the denominator used for many of the indicators based on routine data, which can then be recalculated. This will be particularly important ineducation, where it will help to 12  resolve current uncertainties about enrolment rates. A particular benefit of the census is that data can be highlydisaggregated-down to district and below. The Agriculture Survey conducted in 2003 will provide information on agricultural production that can be used to update GDP figures and that will allow the calculation of three of the agriculture indicators for the first time. This survey will be the first to use the `core poverty module' that standardizes the measurementsof basic socioeconomic characteristics across surveys, particularly those that are useful for the prediction of consumptionand poverty status. The review and re-basing of the GDP and CPI series undertaken in2003 i s also noteworthy. I t is essential that both be based on recent data and on a sound and transparentmethodology. The national HIV/AIDS survey being conducted during 2003/04 will provide national seroprevalence estimates, linked with information on knowledge and behavior. In addition, the report of the 2002/03 Tanzania Participatory Poverty Assessment finalized in 2003 provides an insight into vulnerability and the processes by which households and individuals may become impoverished. The Policy and Service Satisfaction Survey (PSSS) that was undertaken as part of the introduction of performance management system into the civil service is currently being analyzed. It will give quantitative information on people's knowledge of, and satisfaction with, government policies and basic services, including health, education, water, roads and agriculture. This will provide a baseline for assessing whether services are perceived to have improvedor not. 13  111.SOCIO-ECONOMICREFORMS IN 2002/03 3.1 Macroeconomic Performance Tanzania has continued to experience steady economic growth over the last 4-5 years. During2002 GDP growth rate rose to 6.2% from 5.7% in 2001. The main sources o f this growth were agriculture (5.0%), mining(15% from 13.5% in ZOOl), wholesale and retail trade including tourism (7% from 6.7% in 2001) and manufacturing (8% from 5% in 2001). Per capita GDP grew by 3.4% compared to 2.8% in2001. By the end of December 2002, the rate of inflation was at 4.4%, sliding further to 4.2% by March 2003. The decline in inflation is attributedto improvement inthe food supply situation inthe country, following good food crop harvests, coupled with steady implementation of prudent fiscal policies, supported with a cautious monetary policy. However, inthe 2002/03 season adverse weather conditions led to higher food prices taking the headline inflation up to 4.6% by end-November 2003. Table 5 shows trends in selected macroeconomic indicators. Table 5: Tanzania: Selected macroeconomic indicators 14  Government revenue effort has continued to improve, with collection now reaching Tshs. 100 billion per month. During fiscal year 2002/03 total revenue amounted to Tshs. 1,217.5 billion. Tax revenue for 2002/03 stood at Tshs 1,105.7 billion compared to Tshs 938.5 billion in 2001/02. Non-tax revenue was Tshs 111.8 billion in 2002/03. Improved performance is attributed to high collections on income tax, customs duty and VAT on domestic goods and services. Government spending continues to be guided by the priorities set out in the PRS. Trends in actual recurrent expenditures in the priority sectors and projections are shown in table 6 (Table 18 includes data on development expenditures to priority sectors). Table 6: Priority Expenditures within Priority Sectors, FY 2001/02 - 2004/05 (Jul-Jun) (inbillions TShs) 1 2001/02 I 2002103 I 2003/04 [ 2004/05 Education 344.9 I 436.2 I 502.3 I 564.7 Basic Education 116.6 171.3 371.3 417.4 Health 142.1 186.7 214.3 284.9 PrimaryHealth 101.0 113.3 124.4 165.4 Water 32.5 51.9 64.4 87.7 Roads 179.6I 190.2 I 236.0 I 289.5 RuralRoads 21.5 I 22.8 I 57.0 I 69.9 Agriculture and Food Security 31.9 I 60.2 1 93.1 1 112.3 TACAIDS 4.0 I 5.3 1 21.2 I 58.7 Total Priority Sectors 753.8 953.7 1,164.0 1,443.9 Total Priority Items 261.9 335.9 606.6 757.5 3.2 Structural Reforms and Private Sector Development Government has continued to demonstrate commitment to develop a liberalized private sector-led economy. Considerable progress has been made inthe implementation o f privatization policy as a whole. As a result 259 public enterprise companies (comprising of two third o f all public enterprises) and 210 non-core assets were placed in the hands of the private sector by June 2002. Out of the 259 privatized enterprises 135 have been acquired 100% by Tanzanian investors. Out o f 210 non-core assets divested, Tanzanians acquired 180through an open competitive tender system. The ParastatalSector Reform Program (PSRP) continues to make progress. Focus now is on privatization of large utilities organizations and banks, including the Tanzania Electric Supply Company (TANESCO), Tanzania Railways Corporation (TRC), the Tanzania Harbors Authority (THA), and the National Microfinance Bank (NMB). Divesture o f Air Tanzania Corporation (ATC) and Dar es Salaam Water and 15  Sewerage Authority (DAWASA) were concluded in December 2002 and February 2003 respectively. The process of unbundling TANESCO into autonomous commercial' entities is ongoing. A private management company, which took over inApril 2002 has begunto improve the finances of TANESCO. Employment creation The structural reforms undertaken by Government have had short-term implications in terms of job losses. This has compounded the problem of unemployment mainly in urban centers. However, private sector development i s seen in the medium to longer term as a sustainable employment creation mechanism. Government is supporting private sector investment so that it can create employment opportunities and raise incomes. These initiatives have already started to bear fruits. For instance, in 2002 TIC approved 311 private sector investment projects in the manufacturing sector worth TShs 1, 024,536 million. These investment projects have the potential to employ 33,132 people. Government, through its Time Bound program, is also creating skilltraining for 2000 families and 7,500 youth who are already in worst forms o f child labor or at risk of getting into it, with the budget of US$ 1,230,000 (2004- 05). Government is creating an enabling environment for employment (jobs) creation through revisions of employment laws, labor relations, dispute prevention and settlement and the regulatory framework. Ithas established a Labor Exchange Center (LEC) to match skills of job seekers and job qualifications and implemented a demand-driven skills training to promote self-employment informal and informal sectors. Government-private sector consultation mechanism A formal consultative mechanism with the private sector has been established through the formation of the Tanzania National Business Council (TNBC). The objective is to enhance private sector participation in development. Issues emerging from dialogue between Government and private sector that have been acted upon duringthe period underthe review include: i) Establishment o fthe Export Credit Guarantee Scheme. ii) A comprehensive review o fthe micro credit schemes. iii) Involvingthe private sector inthe negotiations for the East African Community andthe SADC trade agreements. iv) Nuisance taxes have been abolished. v) Views from various stakeholders on inadequacies in the Land Act of 1999, including collateralizationare being processedfor possible revision o f the Act. The Business Environment Strengthening in Tanzania (BEST) that has been approved aims at improving the effectiveness of government/private sector partnership. The program is geared to provide better 16  policy, administrative, legal, regulatory and judicial environment for private sector development. Other actions relate to the financial sector development in respect of improvements in the payments systems, stronger insurance supervisory regime, and of the financial institutions such as the National Insurance Corporation, Tanzania Postal Bank, Tanzania Investment Bank etc 3.3 Poverty Orientation of the 2003/04 ,Budget Table 7 provides in brief the focus and orientation of the 2003/04 Budget; clearly showing increased attention to poverty reducing measures. SECTOR MEASURE Health. 1 Increased resource allocation to the sector 1 Inclusion of ambulances in item 5 to The Third Schedule o fthe VAT Act since they are also part o f medical equipment. Water 1 Introduction o f Customs duty exemption on water drilling machines and equipment. 1 Increased resource allocation to the sector Education. 1 The 2003104budget has set aside additional resources for the educationfundto support children with academic ability but whose parents fail to pay schools fees due to poverty. 1 Increased resource allocation to the sector Roads 1 Increased resource allocation to the sector Lands HIV/AIDS Increased resource allocation to the sector ~ 1 Legal and 1 Increased resource allocation to the sector Judicial System Agriculture 1Introductiono fsimplifiedandtransparent procedures for business activities inthe districts; sector .Reduction o fwithholding tax on sale o f fish from the current 2% to 1%. 1Increased resource allocation to the sector 1Shifting o fmilk packaging from Second Schedule o fthe VAT Act o f 1997 to the Thud Schedule o f the same Act, because it was misplaced inthe Second Schedule. 1Improve access to credit through established export credit guarantee schemethat guaranteed cooperative unions. 1Improve access to credit through guaranteeing micro-credit to small-scale farmers, small scale fishermen, small scale livestock keepers, small scale manufactures; .Provision o f modem superior seeds to farmers at affordable prices. 1Provision o f subsidized fertilizers for Rukwa, Mbeya, Iringa and Ruvumaregions so as to boost maize production andeliminate the risk o f famine inthe country; .Government is working on plansto start a bank that will cater for the requirements o f large and mediumscale fishermen, livestock keepers and farmers; 1 Government has introduced a fund to cater for livestock development starting with this budget. 1 Government has allocatedmore resources to the Export Credit Guarantee Scheme Structural .The privatization Trust has beenestablished to enable many people especially those with low Reform incomes, to participate inthe privatization o f state parastatals; .Government has set aside Shs 4,000 million for payment o fterminal benefits to employees who will be retrenched incertain key parastatal organizations under privatization, and employees who will be retrenched from District Councils. Private Sector .Government has allocated funds inthe 2003104 budget to guarantee loans for SMEs Development .The current Income Tax Act No.33 of 1973 will bereviewed with a view to putting inplace a new law to cater for the modem economic andbusiness environment. Employment 1 The Government has allocated funds for special projects focusing on economic growth, employment creation, and exports. 17  Govemance .Abolish a number of levies and fees chargedby Local Governmentsandremainwith very few ofthem which are beneficialto the people inrural andurbanareas. .The 2003/04 budgethas madea specialallocationfor salary reviews, that will also include salary adjustments for Government institutions .The Government,with effectfiom January, 2004will startpayingsalaries to Village Government and Ward officials .The budget for 2003104 has set aside Shs 5,000 millionto start constructionwork ofthe new NationalAssembly Hall. .The 2003104budgethas increasedallocationto security agenciesto enablethem to confrontall sorts of crimes. .Government has raisedthe minimumpensionentitlement to Shs 20,000 per month IInorderto enablethe District Commissionersto executetheir dutiesmore efficiently, allocated funds, with effectfrom next financialyear are channeleddirectlyto their respectivedistricts andnot through the RegionalAdministrativeSecretaries. 3.4 Globalization and Poverty It is important that the country positions itselfto cope with the globalization process so as to benefit from it in the context of the Development Vision 2025 and the PRS. Increased trade liberalization at global level and growing regional integration pose great challenges for economic growth and sustainable development that are critical for poverty reduction. Among measures undertaken in responding to the challenges of globalization include: Diversification of exports and processing of agricultural produce so as to add value, improving efficiency inproduction, processing and marketingo fcurrent and potential export commodities; Initiatives to establish the ExportProcessing Zones (EPZ) have been undertaken to promote exports. Developing strong financial systems, financial markets and sound economic policies, e.g. enhancing participation of SMEs inthe global arena. The SME Development Policy approved in 2003. Putting in place sound, consistent and stable investment policies to encourage development and promote investment, technology and the export sector. Reviewing aid relationships between Tanzania and development partners to create local ownership through the implementationo f Tanzania Assistance Strategy (TAS). Beingproactive infurtheringintra-regionaltrade and other forms ofregional cooperation. Increased investment in education, research and health sectors and IT as prerequisites for gaining from integration into the world economy. Enhancement of private sector development through implementation of BEST program. 18  Participation in the "Development Round of'Trade Talks" with an objective to urge rich nations to . make the WTO Doha DevelopmentAgenda a reality and agree to remove trade barriers. Push for a common position among and within developing countries to allow for removal or lower . trade barriers between themselves and hencefoster better access to each other's markets. Tanzania is also in the process o f creating more awareness to the community and address globalization issues ina more holistic approach. 3.5. Public Debt Developments and Management With the objective of strengthening debt management(both external and domestic) Government launched theNational Debt Strategy inAugust 2002. Sincethenthe following measureshave been implemented (i) The legal and regulatory framework has been strengthened by the amendment of the Loan, Securities and Grants Act of 1974. (ii) The amendment has vested all powers of debt contraction and management with the Minister for Finance based upon advice of the National Debt Management Committee. Debt relief under the enhanced M P C initiative received a boost from the cancellation of debt by all the Paris Club members except for Brazil and Japan under the Paris Club VI1agreements. Government will continue to strive for further debt cancellation from these two members as well as the Non-Paris Club and commercial creditors on the same terms. Government introduced a 10-year Treasury bond in October 2002 in addition to the 2-year, 5-year Treasury bonds. Govemment has gained flexibility in restructuring and extending the term o f domestic debt that was previously heavily front-loaded. Implementation of the recommendations o f the NDS i s expected to reinforcethese initiatives. 19  IV. IMPLEMENTATIONSTATUS OF THE PRIORITY SECTORS This chapter presents the performance of priority sectors in relation to the identified priority activities in each of the sectors including (i)primary education (ii) roads (iii) and sanitation (iv) legal and rural water judicial systems (v) primary health care and (vi) agriculture. The next steps or planned actions for all PRS sectors and crosscutting issues are includedinthe policy matrix. 4.1 Primary Education Overview During 2002/03 the Govemment with support from development partners continued to implement the second year o f the five-year Primary Education Development Program (PEDP), which is one of the first components of the Education Sector Development Program (ESDP). The aim has beento sustainthe PRS targets for 2003 focusing on expansion of enrolment, improvement o f quality, capacity building and improvement inmanagement and strengthening the institutional arrangements. Progress and Achievements Progresstowards the PRS targets identified in PEDP is given below: In 2003 1,475,889 pupils were enrolled as against a target of 1,600,000. The enrolment target was not met because most of eligible children were enrolled in the first year of PEDP implementation. Standard One enrolment for 2003 is above the PRS target o f 85% of school age children. School mapping exercise coverage expanded from 82 districts in June 2002 to 98 by June 2003 o f which 53 districts were micro-planned. An additional 16 districts were to be micro-planned by December 2003. The Gross Enrolment Ratio (GER) inyear 2003 is 105.3% compared to 100.4% inyear 2002. The Net Enrolment Ratio (NER) (Age 7-13) has risen from 80.7% in year 2002 to 88.5% in 2003. This increase is attributed to the abolition of school fees and other enrolment related contributions from parents. PRS target of raisingNERto 77% by 2003 has thus been surpassed(Tables Sa and 8b). The transition rate from primary to secondary education has risen by 0.7% from 21% in 2001 to 21.7% in 2002. The small rise in the transition rate i s attributed to the increase in the number of secondary schools from 937 (2001) to 1,024 (2002). Dropout rate in primary schools stands at 4.7% in 2003 as opposed to 6.6% (2000). However, the achievement is still low compared to the target o freducing the dropout rate to 3.O% by year 2003. 20  TalI Shinyanga 93.5 86.7 90.1 74.8 70.9 72.8 Singida 103.0 100.3 101.7 76.6 76.5 76.5 Tabora 88.4 79.2 83.8 73.1 66.9 70.0 Tanga 101.7 96.0 98.8 84.6 80.2 82.4 Grand Total 101.2 96.1 98.6 82.1 79.3 80.7 Region Male GER Female Total GER Male NER Female Total NER 2003 GER2003 2003 2003 NER 2003 2003 Arusha . 106.3 100.4 103.4 89.5 85.6 87.5 Dar es Salaam 110.7 109.5 110.1 93.7 96.4 95.0 Dodoma 89.2 85.8 87.5 72.7 70.7 71.7 Iringa " 111.5 108.5 110,o 94.0 93.1 93.5 Kagera 110.7 106.8 108.7 91.1 90.4 90.7 Kigoma 117.3 107.0 112.1 96.4 89.1 92.7 Kilimanjaro 107.0 101.5 104.2 91.9 88.2 90.1 Lindi 89.5 80.9 85.2 75.7 69.2 72.4 Manyara 109.2 103.6 106.5 85.5 81.7 83.6 Mara 125.3 115.5 120.4 103.1 97.7 100.4 Source: MOEC 21  To enhance quality of teaching and learning and to reducethe shortage of teachers across schools and regions, the government recruited 10,7 19 new Grade "A" teachers out o f the targeted 11,65 1by May 2003. This i s 92% of the target. The failure to employ in some districts is a result of unattractive working environment including, among other things, poor housingconditions for teachers. Inorder to meet the increased demand for teachers, the government increased the number of trainees in teacher training colleges. The pre-service teachers training enrolment expanded from 9,728 in 2002 to 15,285 in 2003. In-service training of teachers i s also being conducted through Teacher Resource Centers (TRCs) and distance learning. In 2002, a total of 149 (86 male and 63 female) in-service grade A teachers were admitted in Teacher Training Colleges and in 2003, 484 (234 male and 250 female) teachers were enrolled. Training of 763 facilitators to upgrade 50,000 grades "CB" teachers to grade A was conducted. In-service and pre-service teacher professional development programs have been developed to integrate In-Service Training Program (INSET) into PEDP. These programs aim at enhancing the quality o f the learning environment. The pass rate in standard 7 examinations has increased from 24.9% (2001) to 27.1% (2002). The recruitment of qualified teachers, improvementof school inspection service and provision of quality teaching and learning materials are undertaken to attain the pass rate of 50% by year 2005. The gender enrolment parity ratio inPrimary Schools was 1:1 in2002 and is still maintained while in secondary schools the gender parity ratio has increasedfrom 1:0.87 (2002) to 1:0.93 (2003). For the implementation o f national applicationof USD 10 (Tshs 10,000/=) capitation grant per pupil, a total of Tshs 32.19 million was disbursed to councils for 6,536,798 pupils in 2002/03. This is equivalent to USD4.9 per pupil. To enhance teaching and learning processes and improve the quality o f education. The inspectorate system inspectedvarious education unitsin2002. The results are shown inTable 9. Inall categories of education unitsthe targets were met or exceeded. T Source: MOECBudget Speech (2003) 22  0 The enrolment rate in secondary schools (Form I-IV) increased by 8% (2003). Therefore the PRS target of 7% by 2003 has beenreached. Lessonsand Challenges Some of the Councils have shown weakness in the use of funds as per action plan. This weakness delays the release of funds by donors for the quarter that follows. Other councils do not adhereto the specified standards for construction of classrooms and teachers' houses nor do they follow criteria for the management ofprimary schools. Some of the Councils' Directors and District Education Officers do not inform Head Teachers and School Committees about the amount of funds released by the central government. As a result Head Teachers, School Committees and the society are unable to follow up, or participate fully in the implementation of PEDP activities. Costing of interventions secondary school Physical facilities. 4,800.0 1,474.6 850.2 1,020.2 1,224.2 3. TeachersTraining 61,100.0 1,685.4 7,620.0 69,540.0 69,540.0 4. HIViAIDS 1,390.0 587.7 547.9 1,520.0 1,520.0 TOTAL 306,538.3 149,822.2 248,545.5 353,029.2 377,974.3 2. 2001/02 and 2002/03 Budget book 23  4.2 Roads Overview Overall road network improvement in the past three PRS years has increased the accessibility of rural areas, thus improving the flow of people and commodities. Agricultural, forest and fisheries products can more easily reach urban and rural market centers. Manufactured goods such as household goods and farm implements more easily flow into rural areas. However, increased number o f accidents due to over- speeding raises concern: Measures taken to address the concern include road user education campaigns, enforcement of traffic regulations and construction of speed humps on some highways. During the financial year 200212003 the following planned actions were to be implementedby the government in order to improve the road network conditions taking into consideration the poorest regions. 0 The Government to continue allocating Tshs. 1.84 billion monthly to improve transport link to the northwestern and southern regions of the country. 0 To increasenormal budget allocations to rehabilitate feeder, district and regional road network inthe poorest eight regions. 0 To give special attention to footpaths, tracks and trails and to mobilize communities in carrying out neededimprovement 0 To carry out routine maintenance, emergency repair and spot improvement in all districts to ensure uninterrupteduse ofthe roads. 0 Develop and prepare a program similar to the "Urgent Road Rehabilitation Program" (URRP) for the districts, feeder and urban roads. 0 Improve the capacity of district engineers to manage execution of road maintenance works at district level. Progressand Achievement The use of the Tshs. 1.84 billion per month (SpecialProject). The Government allocated funds for the improvement o f the transport link to the Northern-Western and Southern regions of the country by upgrading to bitumen standard some road sections on the Southern Corridor namely Dar es Salaam-Lindi-Mingoyo and Central Corridor namely Dar es Salaam-Dodoma- Singida. The rehabilitation work is going on, which will cover a total of 468 km. A total of Tshs 25.36 billion has already been spent. 24  Threeyear Program on rehabilitation of regional roads This involves road works on 923 km of road network in four regions (Kagera, Dodoma, Singida and Tabora), which are under ADB and GOT financing, and regional network rehabilitation program involving about 320 km under OPEC and GOTfinancing for Lindiand Kigoma regions. Maintenance Works Government continues to address capacity requirementsfor District Engineers to managethe execution o f road works, both maintenance and construction. Improvementof district andfeeder roads,footpaths, track and trails, and use of IMT. During2002/03, a program similar to the "Urgent RoadRehabilitation Program" (URRP) for the districts, feeder and urban roads was developed. The District Roads Management System is now being considered for rolling out to the 92 District Councils, which were not in the pilot scheme. At the same time a total network under PORALG o f 7,049 km o f rural roads (5 1.4%), o f the planned 13,727 km received routine, spot improvement and periodic maintenance. The expenditure for the work amounts to 63.4% of the planned budget o f Tshs 13,854 million. A number o f bridges, culverts and drifts were also repaired and maintained at a cost o f Tshs 1,961.2 million. The reason for achieving only 65% o f the planned works is inadequate capacity at district level, lack of competent contractors in some Councils and late release of Road Fundallocation by RoadFundBoard. Tshs 4,927 million earmarked for PORALG for rehabilitation /construction from the development budget for year 2002/2003 was not releasedthus making it difficult to rehabilitate the 4, 500 km originally planned. Promotion of Labor Based Technology The Ministry is currently promoting use of labor-intensive technology in rehabilitation of the road network, More than 700 people (mostly laborers) are employed at the Chalinze-Melela roads rehabilitation project. Out o f these about 12% are women. The Makuyuni-Ngorongoro roadthat is being upgraded to bitumen standard employs about 500 people (mostly laborers). 2% o f them are women. In the SouthernHighlandzone, several pettycontracts were awardedto village contractors and communities. Promotion of labor-intensive technology helps to generate income to local communities, which ultimately contributes to poverty reduction inthe country. Lessons learned and Challenges One of the major challenges is to enhance the capacity o f local government authorities to manage district, urban and feeder roads. The ongoing Local Government reforms need to go further to establish a mechanism that will ensure that the road networks under their jurisdiction are managed 25  properly by local authorities. Strengthening local government capability through training and allocation o f skilled manpower remains critical for the achievement of planned work. The Ministryhas planned for the UrgentRoadRehabilitation Program (UW), under the Trunk and Regional Roads Network and the Ten Year Road Sector Rehabilitation Program (1OYSRP). For districts and feeder roads, the District Roads Management System (DROMAS) has been developed, which needs to be rolled out to more districts. Given the scope of work needed to raise the condition of the road network and ensure proper maintenance, the financial resources available prove to be insufficient implying a need to go beyond the RoadFundResources. Only 17% o f the District road network is in good condition (requiring recurrent maintenance). The rest are in fair and poor condition, which require development budget. More efforts need to be directed towards establishment and reinforcement o f technical departments with the requiredpersonnel, tools and equipments, andenhance accountability and transparency. Cost of interventions Table 11 shows the summary o f program costing for the road sector. 1. Total Sector Requirement is the overall road sector including the construction costs for trunk and regional, district, urban andfeeder roads 2. Rural Roads in this table means the road network under the RegionalAdministration and Local Government 26  4.3 Water Overview Availability of adequate water supply with good quality reduces time spent in fetching water, increases health standards, and ensures a favorable environment for increased children's school attendance. The economic use of water for irrigation is also an important consideration especially in drought prone areas. Water is a fundamental natural resource for socio economic development. For example, the poor suffer most during water shortages as they usually pay more per liter from informal water suppliers than their affluent neighbors with water connections, puttingtheir health at risk. Progress and Achievements Urban Water Supply and Sewerage service was fairly good compared to Rural Water Supply and Sanitation during the period under review (2000/0 1-2002/03) due to donor commitments favoring urban areas especially during the first two years of PRS implementation. Rural water supply service coverage increased from 48.5% in 2000 to 53% in 2003, failing to hit the PRS target of 55% by 2003. During 2002/03 the sector recorded the following achievements: (i)The sector has maintainedcoverage of access to water in urbancenters at 73% for the second consecutive year and has raised the sewerage service coverage in the two cities (Dar es Salaam and Mwanza) and seven municipalities (Arusha, Moshi, Tanga, Morogoro, Dodoma, Tabora and Iringa) from 10% in June 2002 to 17% inJune 2003. This has been made possible because of the following interventions: 0 Rehabilitation and expansion o f urban water supply systems in Songea, Kigoma, Musoma, Bukoba, Sumbawanga, Shinyanga, Mtwara (where 11 pumping stations were strengthened) and Lindi town (where 10 deepboreholes were built for productionof4.2 million liters per day), 0 80% progress in implementation of the 2nd phase of expansion o f water supply systems in Tanga, Moshiand Arusha, 0 Installation of 2,300 water meters which increased installed meters to 50% of all customers in the 18 UWSAs, (ii)Ruralwatersupplycoveragehasincreasedfrom50%inJune2002to 53% inJune2003. Measures behindthis increaseinclude: 0 Rehabilitation and expansion of 28 rural water schemes in 24 Districts and rehabilitation of 14 water pumps in 14 pumped schemes. 27  0 Completion o f the Chalinze Water supply pumped scheme project that covers one small town and 21 villages with 105,000 beneficiaries. 0 Over 90% progress in the implementation of the East Kilimanjaro and Hai District rural water supply projects that involves construction of the 8 large gravity water supply schemes for 779,958 beneficiaries inRombo, Moshirural and Hai districts inKilimanjaro region. 0 Completion of impact evaluation of the Rural Water Supply Project that covered 15 Districts in Iringa, Ruvuma and MbeyaRegions. The project serves 902,000 people. 0 Completion o f impact evaluation of the Health through Sanitation and Water Project (HESAWA) that covered 17 districts in 3 regions (5 in Kagera, 8 inMwanza and 4 in Mara). The project serves 3,248,000 rural inhabitants. This coverage is equivalent to 61% of the total population. 0 Construction of 328 water wells inrural areas and 100 water wells in selectedperi-urban areas. 0 Adequate project design manuals have been prepared and disseminated to District Water Engineers for enhancing community and private sector participation inwater service delivery. (iii)Government launched the National Water Policy of 2002 inMarch 2003. The new policy underlines issues of sustainable management of water resources with emphasis on equitable allocation and environmental conservation, private/public sector partnerships, community participation through demand responsive approaches, inter-sectoral coordination, collaboration and information sharing, gender awareness and mainstreaming, use of appropriate technologies, promotion of rainwater- harvesting technologies, and appropriate institutional and regulatory framework. (iv) In reinforcing legal and institutional involvement of local communities and the private sector in developingwater supply schemes, Government continues to sensitize communities, private sector and Local Government Authorities to participate in developing water schemes, protect water sources and enact by-laws to protect water sources intheir respective areas. (v) Divestiture o f DAWASA has been completed. City Water Services Ltdhas taken over DAWASA and undertakesto improve technical efficiency of existing water and sewerage systems and ensure reliable services to about 3 million beneficiaries in Dar es Salaam city, Kibaha and Bagamoyo. Lessons learnt and challenges 0 Capacity building of village water funds management i s very important for enhancing community ownership of water schemes through meetingtheir operation and maintenance costs and developing new sources of water inthe same areas. A legal framework to govern the operations and management 28  of the Village Water Funds to ensure transparency and avoid mismanagement and particularly misappropriation of these funds is beingworked out through the ongoing review of water legislation. Water users and Local Authorities need further sensitization for increased participation with ultimate goal o f reducing donor dependency. Sector financing is still fragmented into different major, medium and small projects based on bilateral agreements. The sector recognizes the need for a coordinated approach through a Sector wide approach in planning, Capacity at Local Government Authorities, which are central organs in implementation of water sector activities needto be strengthenedthrough meritrecruitments and training of personnel. Water Sector PRS indicators are ambitious, especially the possibility of reaching the 85% by 2010, and therefore needs to be reviewed through a consultative process during the comprehensive PRS review. At the same time, Water Sector co-ordination and steering o f the sector reform process continues to be strengthened. Implementation, monitoring and evaluation of sanitation activities continues to be challenging due to a stretch of uncoordinated obligations amongst three main implementingagencies (MoWLD, M o H and PORALG). This challenge will be addressed through a consultative process during the PRS review so as to determine clear and harmonizedtargets. Costing of Interventions During 2002/03 and 2003105, the Development Budget share to Rural Water Supply rose by 100% as indicated in Table 12, compared to about 30% decline in investment financing for urban water and sewerage. Government believes that increased direct allocation for the water sector to district councils to implement rural priority schemes will enhance capacities for managing increased expenditures and raise service coverage o f water supply in rural areas. The financing position for 2002/03 and 2003104 in the table below reflects budget ceilings. Followingthe Public ExpenditureReview (PER 2003 Water Sector), budget allocations for investment inrural water supply have almost doubled as shown inTable 12: 29  * "Others" meansthe Development budget shares goingto Regions andthe Local Government. This allocationhas a very strong bias infmancingrural water supply schemes. ** Projections for 2004/2005 and 2005/2006 consider achange insector planningthrough introductionof the sector SWAP that incorporatesLGA's plannedsector requirements and donor commitments for rural andurban sub sectors respectively. The sector is planning the WSDS that will be in place by June 2004. This strategy i s expected to guide sector programs, implementation and financing modalities that will capture aid-financed spending that is currently off-budget. 4.4 Legaland Judicial System The Government is currently implementing the Legal Sector Reform Program. The Medium Term Strategy and Action Plan 2000-2005 was reviewed in March 2003. Its implementation will enhance timely and accessiblejustice for all, inline with basic human rightsfocusing on personal safety, accessto justice, overall efficiency, fairness, and transparency of the administrative system. Government financing reflects this commitment. Progressand Achievements Various initiatives were undertaken in the year 2002/03 to improve efficiency and fairness in delivery of legal andjudicial services. These were: 0 A move by Parliamentto open the legislative processto participation by civil society organization as part of the legalreform process; 0 Recruitment of two Judges o f Court of Appeal, 6 Judges of the HighCourt, 7 ResidentMagistrates, 84 Primary Court Magistratesand 36 State Attorneys was undertaken infiscal year 2002/03; 30  The introduction of the Alternative Dispute Resolution (ADR) system which has contributed to a significant reduction in the backlog of pending civil cases inthe HighCourt and Resident Magistrate Courts. Government extended this system to all Resident Magistrates and District Courts in April 2002; Training of 600 Primary Court Magistrates, 300 Resident Magistrates and 34 Judges of Court of Appeal and HighCourt; Establishment o f the Human Rights and Good Governance Commission in March 2002, now operational; The preparations for Tanzania Accountability, Transparency and Integrity (ATIP) are beingfinalized as part ofthe reform program. I t has the objective of strengthening good governance; Preliminary preparation of a comprehensive program for the rehabilitation of buildings and other facilities o f primary courts has started. Lessons learned and challenges Despite these achievements the sector continues to face the following challenges: Formulation o f the Legal Sector Policy; Mainstreaming gender andHIV/AIDS issues inthe legal sector, policy, plans and budget. The changing social cultures o f the people arising from urbanizations and expanding and intensifying interaction with other cultures calling for an appropriate legal framework. The new pluralistic democratic political environment coupled with the movement towards participatory management o f legal and social economic development; The rapid expanding and institutionally complex private sector-led market economy and globalization; The vast growing electronic (e)-commerce. E-commerce raises many new legal issues including those relatingto regulation, taxation, contact, liability, patent, data protection, etc; and The need to create a legal framework to cater for the needs of the National Development Vision and Long term Development Strategy (Vision 2025). 31  Costingof Interventions 4.5 Health Sector Overview According to HBS 2000/01 about 91.4% of the population are less than 10 km from a health facility and 75.4% are less than 6 km. Essential drugs and services are now available at all levels and the target is to continue to improve the district health services. However, provision of quality health services is constrained by dilapidated infrastructure, shortage oftrained staff and limited management capacity. Malaria continues to be number one killer disease, accounting for 17% of all deaths and approximately 30% of all hospital visits. Other diseases are Acute Respiratory Infections, waterborne diseases, skin conditions and increasing chronic diseases such as hypertension and diabetes. HIV/AIDS continues to threaten and has mostly affected the productive work force. In 2003 MoHconducted a review of the health sector performance, which was preceded by a technical review on district health services. The technical review was used as an input into the new Health Sector Strategic Plan (HSSP), which was completed inApril 2003. The new HSSP is expected to be a key step towards the implementation o f the second PRS. The new strategy aims at improving quality of health services and client satisfaction at a cost the individuals and community can afford. The new strategy integrates nine other strategies into three components; (i)District Health Services (ii) Hospital Services and (iii)Central Level, and spells out their roles: 0 The district health services component focuses on quality service delivery within the context of comprehensive district health planning. 32  0 The hospital component provides referral services. Regions will assure availability o f supervisory and technical support to councils; and ensure adherence to policy and guidelines. 0 The central ministry will be responsible for development o f necessary policies and regulatory framework, tracking policy implementation, reform management, monitoring andquality control. The strategic plan highlights (i)greater integration of health services, (ii)the importance of human resources, skill mix, and deployment and retention, (iii)the importance of Public Sector Reform process and the role of Public Service Management Office and issues of pay reform and staffing levels, and (iv) the role of PO-RALG in overseeing the proper functioning of the various levels in the health system; the regional and district hospitals, health centers, dispensaries and communities. Furthermore having the correct number o f competent staffwith the appropriate skills inthe Regional Secretariat i s emphasized. Progressand Achievements In order to create the necessary linkages and adopt a common frame the PRS was mainstreamed inthe revisedhealthpolicy and inthe HealthSector Strategic Plan2003-2008. The Health Sector HIV/AIDSstrategy 2003-2006 was developed and accepted by all stakeholders and translated into MTEF activities for HIV/AIDS. It aims at integrating HIV/AIDS in the functions of all the structures of Ministry of Health. Plans for introducing antiretroviral therapy are at an advanced stage. Births attended by trained personnel were sustained at 80%. Furthermore MoH is seeking to improve the quality o f work delivered by TBAs. A policy guideline on TBA activities was developed and distributed. Vaccination coverage rose to 88% for BCG, 89% for measles and 83% for DPT3 (EPI 2002). Malaria program i s being strengthened through the Roll Back Malaria approach with vector control, drug supplies and management protocols including intensificationo f research. M o H has introduced a voucher system whereby all pregnant mothers will be provided with a voucher, which will subsidize the purchase of an insect-treated bed net. Inthe Household Budget Survey it is reportedthat 37.1% of all households are inpossessiono f a mosquito net. All 113 districts have been includedinthe HSRProgram. A resources allocation formula for basket funds was developed and accepted by the Basket Finance Committee. This formula aims at redirecting resources to main priorities in the health sector, with a special focus to areas where the majority o f poor and vulnerable groups live. 33  The Health Boards are being rolled out to all 113 LGAs and the district hospitals. At lower level inthe health system Health Facility Committees are beingestablished. Health Boards have been established in 16 districts and 76 districts have been sensitized. CHF has been introduced in 23 districts. 72 districts have been sensitized and are ready to start the CHF Program. Accreditation of more private facilities is being undertaken by National Health Insurance Fund and it is expectedto strengthen service delivery. Essential Reproductiveand Child Health Packagedocument was developed and distributed. Hepatitis B vaccine immunization was introduced countrywide. 47 new councils were trained in IMCI, community strategy for IMCI was developed, Kiswahili versions o f IMCImodules are now available and IMCI indicators have been developed. The National Food and Nutrition policy Guidelines on Community-Based Nutrition has been reviewed. Micronutrient supplementation on Vitamin A, Iron-folate and Iodine are going on. Vitamin A supplementation coverage was over 90% in2002 compared to around 22% in 1999. Information, Education and Communication materials that are tailored to meet requirements of different level of healthdelivery were developed and distributedto all health facilities. 61,606 TB cases were reported in 2001 (MTUHA 2002). The TB and Leprosy unit reported that the completion rate in2001 o fDOTS was 81% andthe cure rate was 76.3%. Lessonsand Challenges The health sector is still under-funded.The target for M o Hhas been set at US$ 9 per capita, although according to the World Development Report (1993) US$ 12 is an absolute minimum to ensure sufficient resource allocation to priority areas such as malaria, TB and HIV/AIDS. Inthe PER 2003 the allocation was USD 6.3 per capita. The current level of funding is approximately US$6 per capita, leaving a gap of US$3 per capita from the target o f US$9 per capita. The sectoral allocation to health is increasing very slowly, from 7.5% in FYOO to 8.7% inFY03. A Financing Task Force has been established with an aim o f negotiating with MoF and donors to increasethe resourcesenvelope. HIV/AIDS and related diseases are a huge burden on the health care system. More than 30% of the resources are spent on diseases related to HIV/AIDS. Surveillance on HIV among antenatal clinic 34  enrollees (2001-2002) showed prevalence of 9.6% (NSS). HIV/AIDS interventions are still not sufficiently funded. HSRneeds ahighdegreeof coordinationwithother ministries,donors and communities. Inadequacy o f staff in terms o f numbers and skill mix: It will be necessary to look at deployment, development, motivation, incentives and retention schemes The information systems inthe health sector need to be improvedand coordinated. A Task Force on information systems and performance measurementhas been established. Routine data are not readily available which makes it difficult to track progress in health sector outcome and impact. Run-down and dilapidated health units due to lack of rehabilitation or repair needurgent attention. Delays indisbursement o fbasket fund are still a problem. Costing of Interventions The MoH is every year preparing a PER and MTEF.The resources for 2003/04 are 6.6 USD per capita. The budget for the year 2003/04 for the health sector is TShs. 141.08 billion. Table 14 shows the breakdownofthe costs of priority interventions. Source (PRS- PB 2002 -updated) MoH 35  4.6 Agriculture Overview The Agricultural Sector DevelopmentProgram (ASDP) is an instrument for achieving the PRS objectives in the Sector. The program spells out priority areas for investment inthe context of the PRS. The broad objective of the ASDP is to create an enabling environment for improving productivity and profitability in agriculture, improve farm income and ensure household food security. Through the ASDP, the sector has designed and is strengthening a system involving districts and wards and participatory approaches in the design of DADPs. The DADPs act as a focal point for identifyingpriority areas for poverty reduction in the rural areas. Through these teams, a community-based monitoring systemwill be strengthenedfor the community to provide feedback on the outcome and impact on the agriculture interventions. Available statistics show that duringthe implementation ofthe PRS, yield levels for major cereals such as maize and paddy have increased due to improved adoption rates inthe use o f better seeds, better farming practices and general increase in area under irrigation. As a result household incomes and food security have improved. Progressand achievements During the fiscal year 2002/2003 priority has been to improve the productive capacity of smallholder farmers and livestock keepers and the provision of favorable legal and institutional framework, aiming to accelerate private sector investment. During the year the following progress and achievements were made inthe agriculture sector: A. Sector Level Initiated detailed formulation o f key ASDP sub-programs (Phase II), issuance of guidelines including for preparation o f District Agricultural DevelopmentPlans (DADPs). The local government taxes and levies were harmonized. Non-core (nuisance) taxes that have negative impact on agricultural growth have beeneliminated. Private Agribusiness 'Sector Support (PASS) was implemented. As a result 77 gender balanced farmers groups were organized. They received assistanceon contract farming, input supply, producer- price negotiations and advisory services. 78 businesses received financial linkage and 75 credit guarantees were issued for agriculture investments. A review of the role and funding arrangementso f Crop Boards is underway incollaborationwith the MinistryofCooperatives and Marketing 36  B. Crop Sub-Sector Achievements made under crop sub-sector include: Irrigation development: For the year 2002103 land under irrigation farming increased by 8,995ha thus totaling to 200,895ha compared to 191,000ha under irrigation in200112002. e Advisory, Research, Training and Regulatory Services Support Extensionservices and Training: Achievements made during 2002103 include training of 6,688 farmers and 1,130 village extension staff on participatory methodologies and broadcasting of 104 radio programs with regard to crop production and distribution o f 6 leaflets on agriculturaltechnologies to farmers Training to technical staff and farmers at the agricultural institutes continued focusing on commercial farming. 6,031 farmers (2,524 female and 3,507 male) received formal training in Oxen plough farming, crop processing and sugar cane production. The number of farmers trained during the year increased by 59% compared to 3,803 farmers trained in 2001/02. An increase was attributed to an increase in Ministry budgetary allocation to farmer training. Inaddition 1,079 farmers, o f whom 491 were women, attendeda special courseon irrigation for paddy production inKATC Moshi. Crop researchservices: Nine(9) new breeder seeds for paddy, sorghum, beans, pigeonpeas, soya, wheat, wheat potatoes and UK91were generatedfrom researchinstitutions. Improved Seeds: For 2002103, actual availability of improved seeds was 10,426 tons, equivalent to 35% of total requirement. Seed production was carried out in both government seed farms, smallholder farms and private seed production companies contributing 1%, 2% and 32% o f the total requirements respectively. AgriculturalEquipment: For the year 2002103 achievement made include: o 274 big tractors, 75 power tillers, 19,319 oxen-ploughs and 2,107,550 hand hoes were imported. o 83 hand small tractors were distributedto farmers. 37  o Oxenization centers were rehabilitated in 16 regions and about 520 extension staff and 8,717 farmers were trained on this aspect. Crop pests: Itis estimated 30% ofcrops inthe country is lost annually dueto pests anddiseaseoutbreaks. The Ministry in collaboration with district councils, farmers and other institutions managed to fight pests and disease outbreak as the outbreak occurred. Outbreaks experienced include: quelea quelea and parrots, locusts, army warms, rodents and various plant diseases. The outbreaks were contained in 19 out of 21 regions in Tanzania Mainland. The ministry also in collaboration with other stakeholders saved 90% of crops and grasslands invaded by armyworms. Inputscredit: 0 The Inputs Trust Fund started to issue fresh loans for importers and input distributors through bankingarrangement system in collaborationwith district councils. 0 InputTrust Fundsigned contracts with EximBank and Kilimanjaro Cooperative Bank through which loanamountingto Tshs 2.05 billion have been issuedfor various agricultural inputs. C. Livestock Sub sector Achievements made inthis area include: AnimalHealthServices: 0 A total of 39 zoo sanitary checkpoints were equipped to implementits activities and a total of 399 zoo sanitary inspectors were trained 0 National Artificial Insemination Center (NAIC) was strengthened and a total of 41,250 doses of semen were produced which is a 9% increasecompared to 38,560 doses o f 2001l02. 0 Newcastle disease thermo-stable vaccines continue to be produced and distributed. A total of 6.2 millionchickens were vaccinated in 145 villages. 0 6 Veterinary InvestigationCenters (VICs) continue with the disease investigations and surveillance, out of these 4 VICs Mpwapwa, Mtwara, Tabora and Arusha were rehabilitated and equipped with laboratory equipments. 0 A total of 60,000 doses o f rabies vaccines were procured and distributed to 30 districts, which reported rabies. Also, a total o f 3,000 leaflets on rabies and 15,000 leaflets on modem livestock 38  keeping, pasture and range management, poultry, beef production and control of diseases were produced and distributed. 0 The production and testingof the 1-2Newcastle vaccine continued. More than 13 million doses were produced and most o f it sold. The vaccine was distributedall over the country. The thermo stability of the vaccine under different storage conditions was tested and the results suggestedthat the vaccine can be kept under room temperature for about 1 month, 6 months in the refrigerator and for some years when frozen. Dairy production services 4,494 in-calf heifers were produced and distributed to smallholder livestock keepers, 3,880 were distributedby NGOs and 614were obtained from Government Livestock Multiplication Farms. 0 Introduction o f Mpwapwa cattle breed at the smallholder farms resulted into increased milk production in the central zone ranging from 4 - 6 literdday with average production of 5 lts/day. This excludes the amount sucked by the calves. An increase of about 4 extra liters is an achievement compared to the local breeds that are producinghardlya liter per day. D. Cooperative and Marketing Sub-sector Achievements made inthis area include: Cooperative development: 0 Interested groups of people were sensitized to form Cooperative Societies in regions comprising of disadvantaged group such as women, youth and people with disabilities: 150 Cooperative Societies were formed intotal. 0 123 SACCOS were registered whose memberships include farmers, fishermen, workers, women, youth, groups and small traders. Also 16 SACCOS inMbeya, Dodoma, Morogoro and Dar es Salaam regions were monitored, evaluated and provided with management advisory services. Marketingdevelopment services: 0 The Ministry,in collaboration with PORALG, is coordinating two projects dealing with construction and rehabilitation o f rural agricultural marketing infrastructure, Agricultural Marketing Service Development Project (AMSDP). These projects are: Morogoro and Kongwa Rural Agricultural Marketing Project funded by the French government which i s expected to build a market center at Kibaigwa in 2003 and Agricultural Marketing System Development Program funded by ADFOFAD. This program is implemented in 36 districts o f Rukwa, Mbeya, Ruvuma, Iringa, Tanga, Kilimanjaro 39  and Manyara. In collaboration with other stakeholders, the Ministry is preparing the Agricultural Marketing Policy. Lessonsand Challenges Low use o f agricultural inputs (such as improved seeds, farm machinery, agro-chemicals, fertilizers) resultinginto low productionand productivity. Unreliable crop and livestock marketing caused by poor marketing infrastructure - acting as disincentive to producers. Dependence on rain-fed agriculture and low use of technology by smallholder farmers and livestock keepers leading into unreliable food productionto satisfy both domestic demand and foreign market. Inadequate extension services (technology dissemination) causing low adoption of agriculture technologies by farmers. Low crop product quality resultinginto low prices andmarket uncertainty. Inadequate capacity .inmanaging agricultural projects and programs at district level. Low level of investment from both public and private sector leading into low growth rate in the sector. Costing of interventions 1Table 15: Summary of costing o f sector programs 2003/04 - 2005/06 (Tshs. `Millions) Priority Area for PRS I2003/04 I2004/05 I2005/06 25Okgs 290.8I 392.5I 529.9 Strengthen Veterinary Investigation Centers (VICs) to carry out effective 305.6I 412.6 40  production, diseases, control, management, book keeping and husbands 41  V. CROSSCUTTING ISSUES 5.1 HIV/AIDS Overview In an effort to intensify the fight against ltLe EIV/AIDS pandemic, the institutions framework for 1 le national responsehas beentransformed from NationalAIDS Control Program (NACP) underthe Ministry of Health (MoH) to the centrally placed Tanzania Commission for AIDS (TACAIDS) under the Prime Minister's Office. This transformation is meant to provide strategic leadership and multi-sectoral coordination, advocacy, resource mobilization, monitoring and evaluation o f the national response. The commission has strong representation from the civil society. Ithas a fully staffed Secretariat since January 2003. The Multi-SectoralStrategic Framework (NMSF) on HIVIAIDS The Prime Minister officially launched the Multi-sectoral Strategic Framework (NMSF) on HIV/AIDS on 10 May 2003. The framework translates the National Policy on HIV/AIDS by providing strategic guidance to the planning o f programs, projects and interventions by various stakeholders in the fight against HIV/AIDS. It identifies goals, objectives and strategies inline with internationalcommitments by the Government o f Tanzania as incorporated in the Millennium Development Goals (2000) and the Declaration o f Commitment of the United Nations General Assembly Special Session on HIV/AIDS (UNGASS) o f June 2001. The framework also attemptsto address the national aspirations with respectto the Vision 2025, poverty eradication as outlined inthe Poverty Reduction Strategy. NationalResponse Although there are encouraging signs of increasing awareness and interventions from different parts of the country by various public and private institutions and civil society organizations, more serious and targeted interventions are necessary to have an impact on slowing down the rate o f new infections and protect the 85-90% of HIV free people inthe community. Emphasis inthe national response is therefore directed towards increasing individual and community awareness on the risk o f HIV infection of the individual and families and its serious implications on the individual, the family and community. Attention to HIV/AIDS in the workplace would also be an entry point to upscale national efforts. Measuresbeing taken include the following: e Government Ministries, Departments and Agencies are developing plans for mainstreaming HIV/AIDS intervention into routine activities including workplace interventions and integrating HIV/AIDS control activities in the ministry's MTEF. Many private enterprises have workplace 42  HIV/AIDS interventions including provision of anti retroviraltreatment. There is much potentialfor more involvement ofthe private sector inthe national responseto the epidemic. In order to ensure that communities at the grassroots level have sustained HIV/AIDS interventions, local government authorities are being supported in developing comprehensive HIV/AIDSprograms that involve all stakeholders. Regional FacilitatingAgencies (RFAs) will provide technical assistance to local government authorities and civil society organizations to empower communities in rural and urban areas in responding to the epidemic. Guidelines for the establishment of District AIDS Committees have been disseminated to all local government authorities aimed at facilitating more community mobilization and involvement in the fight against HIV/AIDS, Modules for training members o f the District AIDS Committees and technical functionaries have been developed and training was expectedto start inNovember 2003. Efforts to mainstreaming HIV/AIDS in the planning/budgeting process inthe public sector have been initiated. This is aimed at ensuringregular budgetary allocations for the sectors HIV/AIDSactivities. Codes for tracking HIVIAIDS related activities have been developed and will be applied in the fiscal year 2004/05. MediumTerm Expenditure Review (MTEF) for 2003/04 - 2005/06 for TACAIDS has been developed and TACAIDS now operates own vote. National monitoring and evaluation framework for the national response has beendeveloped and core team of trainers has been trained. A protocol for Tanzania HIV Indicator Survey (THIS) has been developed and will be carried out in November 2003. This study will provide information on HIV prevalence inthe community. The process of developing National Advocacy Strategy is ongoing. A draft outline has been developed. An advocacy forum for religious leaders from all Christian and Muslim denominations was held in March 2002. The leaders unanimously agreed to use their strategic leadership in the communities to further promote awareness, care and support and impact mitigation in the fight against the epidemic inline with their religious ethics. Partnership The national response initiative enjoys good partnership with Development Partners, civil society organizations, the private sector and faith-based organizations. Inrecognition o f the existing partnership and transparency in the national response initiatives, Development Partners and Government signed a Memorandum o f Understanding (MoU) to reaffirm their joint commitment and support to the National Multisectoral Strategic Framework on HIV/AIDS. The main thrust of the M o U is to enhance and harmonize partnership between the GOT and Development Partners inthe implementation of the national 43  multi-sectoral strategic framework on HIV/AIDS through a common program o f work for planning, management, resource mobilization and allocation and monitoring and evaluation. The Global Fund Country Coordinating Mechanism (GFCCM) that brings together some 28 members from all sectors is a good example o f multi-sectoral coordination. Consultations are ongoing to expand the mandate of this forum to other global and internationalmulti-sectoralprograms. The Global Fund Grant Agreement for scaling up effective district response focusing on communities, primary schools and the informal sector in Tanzania was signed on 3 July 2003, for USD 5.4 million for one year. The World Bank funded TMAP agreementwas signed on 27 August 2003 for providing USD 65 million and USD 5 million for Tanzania Mainland and Zanzibar respectively for the next five years. Rapid Funding Envelope that has mobilized over USD 2.5 million from willing partners to finance short term quick impact projects by civil society organizations and institutions is one of the innovative approachesinthe national response. Collaboration with civil society organizations inthe national response i s being strengthened. A network of AIDS service organizations has been formed (TANASO). Also, people living with HIV/AIDS (PLHAs) are in the process o f forming their Council to cater for the welfare of all PLHAs regardless of their organizations. Care and Treatment for people living with HIV/AIDS Government and the Clinton Foundation have formulated a draft Care and Treatment Program that aims at providing care and treatment to about 400,000 people living with HIV/AIDs in five years at an estimated cost of about US$535 million. The policy, financial and human resources implications are being addressed. To ensure sustainability and continuity, the program will be integrated into the existing systems. A secondfive-year program willbe developed inthe course of implementation o fthe program. 5.2. Gender Overview In 2002/03 Government, together with other stakeholders, continued to mainstream gender within the Poverty Reduction Strategy (PRS) particularly the MTEFRERprocesses, and within the sectors so as to address the gender specific issues and constraints related to poverty reduction. Government continues to address the gender disparities in employment and income between women and men and conditions that will reduce child labor. The focal ministries in this process were the Vice-President's Office, Poverty Eradication Division; the MCDGC and the Ministry o f Finance. The responsibility o f gender mainstreaming within the line ministrieswas left with the concerned sectors. A number of CSOs were involved in these efforts. The 44  MCDGC, with its special responsibilityfor promotinggender equity, prepareda 3-year master plan with the overall objective of formulatinga Gender Policy (2000). This planand the ongoingPRS review will integrate CSOs' efforts and their participationin PRS implementationand monitoring. The Ministry has also initiateda detailedcomputerizedgender disaggregatedmonitoringsystem that will supplementNBS database and will enable the ministryto reportfully on CEDAW, the Beijing Platformof Action and the MDGs. In2002 the GOT publishedthe results of two key surveys: the Household Budget Survey (HBS) and the Integrated Labor Force Survey (ILFS)that includeda special survey of children.Datafrom these surveys show that gender disparities still persist. These findings have increased the recognitionof the need to mainstream gender in the PRS Monitoring System. Recent analyses such as the Poverty and Human DevelopmentReportsfor 2002, 2003 havepaidconsiderableattentionto the gender specificaspects ofthe performanceof all priority sectors.For further understandingof gender disparitieswithin PRSmonitoring further detailed studies were conducted on Aj?ican Gender Development Indicators (AGDJ and the Female HeadedHouseholds (FHHs). Progress and achievements For 2002/2003, specific activities were planned inthe context of the PRS andthe following progresswas madetowards achievingthem. Gender focal points 0 To institutionalize gender in central and local government PRS priority sectors, gender focal points were appointed. A plan for providing such persons with the appropriate training and tools to carry out gender mainstreamingwas developedandwill bediscussedby the relevantstakeholders. Reform of Laws that are Discriminatory towards Women 0 The reform of laws that are discriminatory towards women is ongoing within the Law Reform Commission. In order to strengthen the implementationof the Law against Sexual Offences and PhysicalAbuse (SOSPA), the MCDGC organized a workshop to discuss a NationalPlan of Action for Combating Violence against Women. Meanwhile, NGOs have been working on creating awarenessaboutother discriminatorylaws suchas the InheritanceLaw andthe LandLaw. The Legal Reform Commissionisworking onthe findings. Capacity Building As part of its attempts to promotegender within the sectors, the MCDGC helda Workshop for Permanent Secretaries and Regional Administrative Secretaries inearly 2003 on the need for mainstreaming gender within the sectors and the LGA's. Italso supportedthe trainingof gender trainers for Tengeru College to 45  enhancethe mainstreaming of gender inthe curriculum of this college that trains community development officers. In order to develop an appropriate tools and training package for mainstreaming gender in the public finance management modules, a study on gender budgeting status inTanzania was undertaken. Women's Empowerment e In order to enable women to disseminate information about their products and to link them up with prospective markets within and outside Tanzania, MCDGC in collaboration with NGOs supported women entrepreneurs to participate in the Dar es Salaam International Trade Fair and other trade displays. A survey is neededto see the effectiveness of such efforts. e The MCDGC has completed a study on the feasibility to set up a "Business Incubator" for women entrepreneurs. A business incubator is a facility established to help entrepreneurs to launch or to expand business, which in turn creates value and jobs. An effort will be made to find ways o f integratingthis initiative inthe PRS framework. e Women workers engaged in hazardous and low paying jobs have been assisted to form women economic groups and have their capacities enhanced in organizational skills, job skills, business management and marketing skills, savings and credit. 731 women workers have been organized into 14 economic groups to mobilize group saving. Jobs skills including mushroom farming, poultry keeping, food processing and handcraft have been given to women. 1,026 child laborers have been withdrawn from child labor. They were provided with alternatives for primary education and vocational training. Lessons IearnedKhalienges There is a mistaken assumptionthat gender mainstreaming and monitoring is solely the responsibility of the MCDGC. The MCDGC cannot do it alone; all sectors and programs at all levels need to give gender a center stage. This i s particularly necessary at the local government level where implementation of most activities relatedto PRS takes place. The importance of gender mainstreamingis beginningto be accepted but still not fully understood as a development issue. There is need to have more gender disaggregated data and analysis to show the role of menand women in household food security, incomes, and the provision of the other needs for social reproduction to fully appreciate the role of gender indevelopment. Cultural beliefs about the role o f men and women insociety still persist in-spite of several workshops, sensitization programs, and media coverage of gender specific constraints by females at all ages. 46  0 There i s as yet no systematic modality to obtain information about the activities carried out by sectors, NGO's and CBO's to mainstream gender. Some very significant activities are thus not reported inthe PRS ProgressReports. This will be taken care of duringthe PRS review process. 5.3. Governance Progressand Achievement Duringthe financial year 2002/2003 Government continued with its efforts to promote good governance in the public service delivery by implementing a number of macro-economic reform Programs aiming at improving financial management and accountability, strengthening o f the judicial system, reduction of poverty and reduction of corruption. Specific undertakings during the year include:- Specialized government agencies e.g. the Ethics Secretariat, the Commission of Human Rights and Good Governance and the Preventionof Corruption Bureau (PCB), have continuedto report quarterly on matters brought to their attention. The PCB conducted four researches on strategic sectors, which are proven to have high degree of . corrupt incidences. The researchesinvolved are: .. Corrupt practices inthe importation of veterinary drugs Corruption inlocal government's income and expenditure Detailed study on the operations of the National HousingCorporation, and Corruption loopholes inthe fish industryinthe Lake Zone. The PCB has been strengthenedby increasing its budget and by decentralizingfrom zonesto regional and district offices. Inthe financial year 2002/2003, the Bureau opened 38 offices in districts. The commission for Human Rights and Good Governance conducted meetings with government Ministriesand Leaders to enlighten them on the workings of the commission. It has also met the Civil Society Organizations that are engagedinthe promotion o f human rights. The Labor Law Reform Task Force which comprised o f representatives from the government, employers, workers, civil society, academia and the private sector, finished phase one of its work and presented to the government its report with two proposed Bills: on Employment and Labor Relations; and Labor Institutions. These Bills seek to:- Promote employment and labor standards in line with present socio-economic realities and in compliance with Tanzania's obligation under international law. 47  Create new institutions in the labor sector to promote social dialogue by involving all the important actors: the government, workers' and employers' organizations; create new institutions and labor relations to promote social dialogue that would in turn pave way for industrial peaceneededto accelerate economic growth, employment, and poverty eradication Operationalprocedures particularly the financial guidelines to the Local Authorities are now inplace. The Mass Mediahave beengiven a crucial role inAnti-Corruption Strategy. PCB inconjunction with Transparency International, Tanzania chapter and Development Partners carried out seminars on the role o f vibrant media inexposing corruption. Coursesof an investigativejournalism were provided to improve the performance ofjournalists. A workshop for all Members of Parliament was conducted. The workshop looked at the state of corruption inthe country. Government continues with the exercise of improving salaries o f public servants, i.e., pay increases were implemented for the year under the Public Service Reform Program. The National Anti-Corruption Strategy and Action Plansof MDAshave beenrevisedandprinted. Efforts are underway to promoteparticipatory democracy and planning in which people plan their own development through participatory rural appraised and decision making through the Tanzania Social Action Fund (TASAF). Through the Fund 54 community service and infrastructure projects have been completed in overt 30 districts of 13 regions in Tanzania mainland and Zanzibar. 690 projects are still under implementation. The government has established the National Integrity Fund (NIF) to support the implementation of Anti-Corruption activities and plans developed by MDAs. Tshs 800 million was apportioned for this purpose inthe financial year 2002/2003. 5.4. Local Government Reform Program Overview The GOT and some o f its partners developed a Local Government Reform Agenda 1996 - 2000, which was endorsed by the then Steering Committee for the CSW. To operationalize the policy and strategy decisions, the Local Government Reform Program (LGRP) was designed and the Action Plan and Budget were prepared for July 1999-June 2004. 48  The program implementation began on lSt 2000 in38 Phase ICouncils. Government and donors January formally reviewed implementation experiencejointly in June 2001. The review team fully endorsed the policies and strategies o f the program and recognized the progress to date. Government, Development Partners and key stakeholders endorsed the review of the reform. It became the starting point for the participatory planning process and culminated in the production of the Medium Term Plan (MTP) and Budget July 2002 to June 2005. This is the current framework document o f the LGRP and the Annual - Work Program and budgets are derived from it. Government and Development Partners are financing the programjointly, Planned Priority Interventions for 2002103 Implementation experience has shown that the original overall plan, the Action Plan and Budget (APB) 1999 - 2004, was over ambitious and had unrealistic time horizon. The PSRP shows a series of broad reform phasesto 2011and local government reform should also be seen inthis 9-year time frame: Mid-Term Plan 2002105 The concept of phasing o f the reforms inLGAs has been fundamentally changed inthe current plan. The Government's Policy Paper outlines a phasing strategy, but allows for alteration and different phasing strategies based on experience and changing circumstances. The original APB, 1999- 2004, envisaged the program havingthree overlappingphases catering for roughly one third of LGAs ineach phase across the whole range of reform activities. This plan envisages a different type of phasing, with all LGAs free to implement reforms and central support being provided on a demand basis. In terms of fiscal decentralization, only those LGAs that will meet agreed criteria will qualify in the first instance. However, all LGAs will be assistedto meet the criteria and many reform activities. The activities during the 2002 -2005 MTP will dwell mainly on development, legalharmonization with sector ministries, and harmonization of Public Act No.8 o f 2002 with Staff Regulations 2000, capacity building, and reform coordinationwith sector reforms. Progress and Achievements The followingare some major achievements recorded through the reform process: . There is a clear policy statement onreform supported by the highest levels o fgovernment; Legislation to enable the reforms has been enacted; . Regulations and guidelinesto support the reforms have beenissues; Information on the reforms has been disseminatedto all local authorities and to the public; 49  Regional Administration has been restructured in line with its new role; 38 LGAs are at an advanced stage inthe processof restructuring their organizations; Work on improvingfinancial management in LGAs and on fiscal decentralization is underway; . The work of buildingcapacity inLGAsis underway; and Attitude towards reformis slowly changing among government officials and members of the public. Lessons Learned and Challenges Implementation o f the reforms to-date has been slow by the benchmarks of the original plans. It is now clear that early expectations were unrealistically high.It is now recognizedthat the process of reforming the local government systemis a major undertaking, which involves changingnotjust the way central and local governments carry out their business, but also fundamentally changing mind-sets at all levels o f government and the public at large. In addition, the following factors, among others, have hindered . implementation of the reforms. Resistanceto change at central and local government levels; Lack of implementation capacity at PO-RALG and at LGA levels; Weak financial management at LGA level; and The sheer magnitude ofthe task Costing of Interventions Table 16: Costing of Mid-TermPlan o fthe LGRP Cost Item 1 2002/03 Budget in I2003/04 Budget 1 2004/05 Budget in I Total in Tshs. 1 50  5.5 Human Capital Development Human capital development is critical for the success of the PRS. The government reports progress on the development o f human capital under PRS's crosscutting issues. Focus will continue to be on strengthening leadership and management qualities, meritocracy, and restoration o f ethical conduct, gender equality and pay reform. Inthis context the new Public Service Act No. 8 o f 2002 that gives legal backing to the modernization of the public service has been enacted. Performance management systems have been established in 16 ministries and departments so far and will be established in others to ensure that they set service delivery targets against which the public servants will measuretheir performance. Several measures were taken to implementthe Medium Term Pay Policy including annual enhancement o f salaries o f public servants and the implementation of job evaluation. Training and capacity building programs to enhance leadership and modern management capabilities in the public service are ongoing. Notable achievements in gender mainstreaming inthe public service are reflected in a sizeable increase in the number o f women at senior levels, 24% for Permanent Secretaries, 26% for Directors and 24% for Assistant Directors. There has also been establishment of 19 executive agencies as part of Government efforts to improve service delivery for selected functions that are operational in nature. These are ongoing activities that will be continued and tracked under the Public Service Reform Program for the Central Government and the Local Government Reform Program. The public service and local government reform programs have developed through a consultative process; so also were indicators to monitor progress on capacity building for the central and local government. Progress and achievements in developing and strengthening human capital will then be assessed through use of these indicators and reported inthe PRS monitoring framework. Government recognizes that children and young people are key to sustained future workforce. Specific sectors contribute to improving conditions for children and young people, notably ineducation and health. Critical cross-sectoral concerns, including the fight against HIV/AIDs, require close attention especially as they relate to children and young people. Government will thus continue its efforts to identify and address specific problems affecting children and young people and particularly facilitate access to skills and vocational training programs. 5.6 Environment Overview Tanzania's natural resources and environment are the main source of peoples' livelihoods and the backbone of the country's main productive sectors: agriculture, tourism and mining. Recent research by the Participatory Poverty Assessment has confirmed that most people in the country directly depend on a 51  robust, healthy environmentto support their income-generatingactivities and provide them with building and cooking materials, food and medicine.Environmentis thus critically linkedto poverty at the levels of livelihood, health and vulnerability, andhas been identified as a priority cross cutting issue for the PRS. Progressand Achievements Considerable progress has been achieved over the past year to mainstream environment into the PRS process. A number of steps were highlighted in the last PRS progress report. Progress has been made on all of these and in addition there have been other significant achievements. These include: Strengthening institutionalframeworkfor environmental management - The Cabinet approved a new institutional framework for environmentalmanagement inDecember2002. Environmentframework law Following approval of the institutional set up the VPO have ledon the - development of a single environmental framework law with a first draft prepared for consultation in December2003. Launch of Program to Integrate Environment into the PRS process. This program was formally launched on 26" September 2003 and is supported by UNDP, Dry lands Development Center, Poverty Environment Initiative, DANIDA and DFID. This program will be implemented by VPO (PED, DOE), NEMC, NBS and PORALG commencing inthe third quarter 2003. Outputs focus on: knowledge on poverty-environment linkages; use of environmentdata in poverty monitoring system; and, capacity building of government and nongovernment stakeholders. Environment Working Group - a cross-sectoral environment-working group (EWG) has been established. The goal of the EWG is to promote the integration of the environment into the GOT policies, plans to help ensure the sustainableuse of Tanzania's environment and naturalresources for poverty reduction. PER Environment - the first public expenditure review (PER) of the environment has been initiated. This is expected to produce inputs into the medium term expenditure framework (MTEF), and guidelinesfor sectors to mainstreamenvironmentexpenditure into their sectoral PERs. Utilization of poverty-environment datafor use in PRS process - Preliminary poverty-environment indicators were included in the revised indicator list for the poverty monitoring system for use by PRBS/PRSC. Terms of reference of a detailed study on poverty-environment indicators were developedand identification of consultants to undertake study is now underway. This study will also work on improving agricultural indicatorsfor the PMS. 52  . Improved knowledge ana' awareness onpoverty environment linkages - Activities on this have been - developed for implementation under the program to integrate environment into PRS process. In additionto this presentations have been given to a number of workshops and meetings attended by government and non-government stakeholders. VPO are now producing a bimonthly newsletter on poverty environmentissues, copies of this newsletterwill be placedon the VPO website when this is . established. Integration of environmental management in the sectoral programs. Approval of environment units . for sectors, anddevelopment ofstrategic environmentassessment(see below). Agricultural survey - VPO with NBS worked on the design and questionnaire of the agricultural . surveyto ensure it includedrelevant questionson environment sustainabilityand livelihoodissues. Sustainable development network - The former environmental champions and think tank have proposed to establish a sustainable developmentnetworkto give advice on povertyand environment . issues.Membersof this group havecontinuedto make inputsintothe PMSthematic workinggroups. Strategic environment assessment - Study completedon the use of strategic environment assessment andpovertyreduction. PRSC - Environment sustainability has been explicitly mentioned in the performance action framework for the PovertyReductionSupport Credit. Capacip building. Appointment of PovertyEnvironment Advisor to VPO, andrecruitmentof Poverty EnvironmentOfficer expected to commencework January 2004. Developmentof capacity building andtrainingprogramfor VPO and other stakeholdersfor implementationin2004. Lessons and Challenges A number of lessons and challenges have emerged over the last year as the Government has taken the . initiativeon environment mainstreaming. Theseinclude: Mainstreamingenvironmentinto PRS has varyingunderstandings and perceptions on the sectors this covers. There is a need to broaden this understanding to cover environment issues such as those relatedto agriculture,forestry, wildlife andfisheries etc. to includeother areas such as environmental . health, education, water, tourism, roads, energy andminerals. At presentattentionto crosscuttingissues is largelyundertakenon an issue-by-issuebasis. There is a need for greater attentionto how the different cross cutting issues are linked. For example, there are clear linksbetweengender andenvironment, andalso betweenHIV/AIDs and environment. 53  .While engagementwith different govemment sectors and civil society organizations has commenced on poverty and environment issues, involvementwith local govemment and with the private sector still needsto beaddressed. Duringthe preparationof TOR for environment PER study it appeared that the work in Tanzania is leadingthe way with few other countries havingundertakensuch a PER study. Giventhat it covers a wide range of sectors and levels of government, this has presented a number of methodological challengesthat will needto beaddressed. 54  VI. BUDGET FRAMEWORK FOR POVERTY REDUCTION PROGRAMS 6.1 Resource envelope: A macroeconomic perspective The budget fi-amework for poverty reduction in the year 2002/03 was based on the assumption of continued sound and stable macroeconomic environment conducive to attaining high levels of domestic savings and investment. While it was targeted that real GDP would grow by 6.3% in 2003, preliminary estimates based on the first half actual show that this is likely to stand at 5.5%. Consistent with the objectives of the MediumTerm Plan for Growth and Poverty Reduction for the period 2004/05-2006/07, the macroeconomic policy targets for the period are summarized as follows: Attain a real GDP growth of 6.3% in2004, thereafter up to 7% by 2006. Continued reducing inflation rate to 4.0% by the end of 2004. It is expected to level off at 4% during the 2004/05-2006107, consistent with our major tradingpartners; Domestic revenuecollection is expectedto reach 13.3% of GDP in 2003/04; Restrictingbroad money supply (M2)to levels consistent with GDP growth and inflation rate targets. Maintain adequate official foreign reserves of not less than a value equivalent of six months of imports of goods and non-factor services. Maintain a freely floating exchange rate, limiting interventions exclusively to smoothening wide fluctuations and for liquiditymanagement purposes. Government continuing with tax restructuring in some areas so as to improve the entire tax structure and remove nuisance taxes to enhance economic efficiency and reduce the nuisance and burden to producers/tax payers. To expand the revenue base in the medium term Government committed itself to a number o f measures: To review legislations on Export Processing Zones (EPZ) and Income Tax Legislation with a view to rationalizingthem and to enhancethe tax yield by closing loopholes. Completing preparations and rationalizing tax andvarious fees o f local government inorder to create conducive environment for the people intheir efforts to produce goods and services. Review the remaining exemptions with a view of abolishing them in order to expand the tax base. To review the tax contribution o fthe high-growth sectors such as mining. To improve administration o ftax and non-taxrevenue and public corporation dividends to check revenue leakages. 55  6.2 Budget frame consideration for financing of priority sectors Government expenditure continues to be guided by the priorities set out in the Poverty Reduction Strategy. Table 17 shows trends inactual spending. Table 17: CentralGovernment Expenditure, 1998/99-2003/04(billion TShs) 11Original approvedbudget, with foreign development reallocations from energy to healthandroadsreflected 21 Basket funds (education and health) are not reflected in development but in recurrent expenditure 31 TACAIDS is a Government agency formed in 2001 to coordinate AIDS related priority interventions. For fiscal years 1998/99-2002103, HIViAIDS expenditure is shown as expenditure made by the TACAIDS Agency, while other HIV/AIDS expenditure was shown under the health sector. However, for fiscal year 2003104, all HIV/AIDS expenditure is shown as expenditure made by TACAIDS, the Ministry of Healthas well as other ministries, depts., regionsand local Govts. Source:Ministry of Finance 56  Despite the measures presentedabove, Government has not generatedsufficientresourcesto cover the entire requirements. More measures are going to be taken inthe medium term to enhance resource mobilization and allocation for all sectors including non-priority sectors. In the 2003/04 budget the Government put in place new measures to curb tax evasion, to reduce distortions and to eliminate nuisancetaxes. The measures also aim at increasing voluntary tax compliance. Noteworthy are measures to reduce smuggling and tax evasion on petroleum products, entering religious NGOs into the Treasury Voucher system, removal of impediments in the fisheries sub-sector and smuggling of fish by reducing the withholding tax on sale of fish from 3% to 1%. Nuisance taxes, mainly levies and fees at local government level were abolished to encourage development activities. In addition, the Government has adopted TRA's new corporate plan (2003/04-2007/08) which sets a program for strengthening revenue collection through improved efficiency of interface with taxpayers and overall governance so as to induce voluntary compliance. The corporate plan focuses on modernizing its organization and operations, and improving its effectiveness. In particular TRA will continue preparations for implementation of an integrated structure for domestic revenue administration during 2004/05. TRA is in the advanced stage o f implementation of a function- based Large Taxpayers Department (LTD) that integrates VAT and income tax administration and that is adequately resourced. In addition, there are plans for a complete transfer of an additional 100 large taxpayers to the LTD. An integrated computer system for administration o f income tax and VAT will also be piloted inthe LTD. TRA has also begunto integrateall district offices. Inthe area of tax reform, the new Income Tax law was passed by Parliament inApri12004. It is based on the principle of self-assessment and addresses a number of sources of revenue leakages, and will become effective from July 2004. The combination of policy and administration measures is expected to lead to increased domestic revenues, both in absolute and relative to GDP terms. However, the projected resource envelope and expenditure requirements for 2003/04-2005/06 in Table 18(a) & 18(b), reflect a declining share of domestic revenue in total from 53% in 2003/04 to 48% in the 2004/05 Budget. The shortfall will be met through support from development partners. 57  Recovery from NBC Bond HIPC relief (ADB, IMF, WB) 103,425 83,100 85,100 85,100 Non-bank borrowing 111,313 138,175 218,047 Bank borrowing 21,358 Adjustment to cash Privatisation Funds 17,000 14,000 14,000 14,000 TOTALEXPENDITURE 2,607,205 3,328,237 3,344,372 3,308,546 -DEVELOPMENTEXPENDITURE 807,440 I 1,246,256 I 1,154,717 I 1,020,583 Projects 807,440 1,246,256 1,154,717 1,020,583 Local 140,091 128,091 141,797 157,678 Foreign 667,349 1,118,165 1,012,920 862,905 Table 18(b): Budget Framework 2003/04-2006/07 (in % of GDP) I 2003/04 I 2004/05 I 2005/06 I 2006/07 I Budget ProjectionI TOTAL RESOURCES 24.9% 28.7% 26.1% 23.2% Domestic revenue 13.2% III Ceiling 13.7% III Projection 13.8% III 14.0% 58  DesignatedItems 0.2% 1.8% 1.7% 1.4% Other charges 8.7% 8.0% 7.5% 6.9% I I I I I Payment of arrears Contingency DEVELOPMENTEXPENDITURE 7.7% 10.8% 9.0% 7.2% Projects 7.7% 10.8% 9.0% 7.2% Local 1.3% 1.1% 1.1% 1.1% Foreign 6.4% 9.7% 7.9% 6.1% 6.3 Public ExpenditureManagement in the Medium Term Inthe medium term, Government will continue to strengthen management and discipline in Government expenditure in order to ensure sufficient accountability. The Government intends to amend the Public Procurement Act and the associated regulations to enhance accountability by separating the regulatory functions from the supervisory functions, and to strengthen capacity of the implementers. The Government has improved regulations o f the Public Finance Act of 2001 and will continue to strengthen the application of the IFMS for preparation of the budget and to effect payments in order to increase efficiency and transparent in the allocation of funds. In the next financial year, the Government will roll out the IFMSto the Offices of the Regional Administrative Secretariesand the National Defence Forces. 59  VII. POVERTY MONITORING AND EVALUATION This chapter reports for the first time the operationalisationof the Poverty Monitoring Master Plan. The report covers activities of four Technical Working Groups, namely, Census and Survey, Research and Analysis, Routine Data System, and Dissemination, Sensitization and Advocacy. The report highlights progress and achievements in implementing the PMMP during the period under review, drawing also on activities carriedout during the previousyear. 7.1 Performance Among the major activities performed include: Preparation of the Second PRS Progress Report (2001/02), publishing of the Poverty and HumanDevelopmentReport(PHDR 2002), disseminationofthe Household Budget Survey (HBS2000/01) and Integrated Labor Force Survey (ILFS 2002/01). A Participatory Poverty Assessment (PPA) exercisewas carried out throughout the country to gather views from the grassroots level on efforts and challenges encountered in the fight against poverty. The PPA focused on vulnerability. Dialogue between government, CSOs, external development partners and private sector was carriedout through consultative meetings. The dissemination, sensitization and advocacy strategy focused on poverty reduction policies and related issues, including findings from various studies and surveys. The major activities include: a simplified version of PRSP Progress Report (2000/01) in English and Swahili, which were published and widely disseminatedto different stakeholders. To enhance understandingof the poverty monitoring master plan, a user guide was preparedand disseminated. Efforts are also underwayto establish a Monitoring Website and Documentation Center within the Poverty Eradication Division. This will ease availability of information generated through the poverty monitoring system and other sources to enhance evidence- baseddecision making and implementationprocesses. The PovertyPolicy Week was held in September 2002 and October 2003 with the objective of sensitizing people and advocating for change. This provided opportunity for all key stakeholders to reflect on a number of issues including the contents of the PRS ProgressReport and PHDR. The deliberations are documented in the Poverty Policy Week Proceedings for 2002 and 2003, and will enrich the policy review process and facilitate the design of more effective intervention measures so as to adequately address the problemofpoverty inthe country. A number of workshops were organizedand conductedby the Routine Data System Technical working group at national and zonal levels. The objectives of these workshops were to raise awareness among sector ministries, regional secretariats, NGOs, local authorities, academia and other stakeholders on the 60  PMS and link it with the local Government Monitoring and Evaluation system. The workshops also providedan opportunity for exchange of experiences inthe field of data collection and use. 7.2 Operationalization of pooled fund mechanism for the PMS Pooled Fund partners have made pledges and contributed to the PMS Pooled Fund. The amount of money from Pooled Fund Partners deposited to the holding account in the Bank of Tanzania during financial year 2002103 was Tsh 408,390,000 deposited at the end of December 2002 by the Danish Embassy. The use of the hnds awaited the finalization of financial procedures for utilization of funds. These were finalized in2003. The Memorandum of Understanding (MoU) between GOT and Development Partners concerning the pooled fund for poverty monitoring was prepared and signed in March 2003. Also the TWGs and the Secretariat have opened their respective Bank Special accounts to facilitate smooth flow of funds and implementation of the planned activities. 7.3 Challenges encountered Generally the performance of all four Technical Working Group was satisfactory although some activities were not implemented according to plan due to irregular disbursement and shortage of funds. Operationalization of the joint funding mechanism provides for smooth operations. However, Government recognizes the need to make an open assessment of the weaknesses of the system at the operational level. 61  N 9   1 . m m 8 8 . 8 I 8 8 8 8 m 8 8 m m 8  f I I i L : I I L i I i i . . . i i  b 'CI 8M *e, 0 E 2 0 c) 9 .e 2. 9 3 2 0 .s * B c3 c8rflm u 0 92 . 8  . 18 m B . . 8 8 8 . 8 r . . . 8  I ! I i ! ! I ! = m a m i ! II if z! m m . a .I c: G 7nE ; ..c .L Q i 3 L I P 5 i 4 f m  v) E 0 2 c.' 0 m 0 9 Y 3 2 Y 0 5 2 F Y G + $9 . s3 I I . . I . I I . .: . . . . . . 2 . . . I .  I I I I . I I I I . Y 9 m 0 2 .-M C ze8 .n Y C I_ L mw e a 8 F e L B0 *C1 L 0 8 Y L & I I I I & I I .  8 8 V E cC 2 s e- E c a P 8 i t a- E c cE .-EEi e 9 L I i a 4 E-