Tanzania - Primary Education Development Program Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No: P7466 TA REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL DEVELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS C)N A PROPOSED ADJUSTMENT CREDIT IN THE AMOUNT OF SDR 119.1 MILLION (US$ 150 MILLION EQUIVALENT) TO THE UNITED REPUBLIC OF TANZANIA FORA PRIMARY EDUCATION DEVELOPMENT PROGRAM PROJECT August 22, 2001 Human Development 1 Country Department 4 Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS (Exchange Rate Effective July 30, 2001) Currency Unit = Tanzanian Shillings (TSH) I TSH = US$0.001124 US$1 = TSH 890 FISCAL YEAR 2002 - 2004. ABBREVIATIONS AND ACRONYMS BoT Bank of Tanzania CIDA Canadian International Development Agency DANIDA Danish International Development Association DFID Department for International Development (UK) ESDP Education Sector Development Program EU European Union GER Gross Enrollment Ratio GNP Gross National Product HIPC Heavily Indebted Poor Country HRDP Human Resources Development Project IBRD International Bank of Reconstruction and Development IDA International Development Association IEC Information, Education and Communication JICA Japanese International Cooperative Agency LGRP Local Government Reform Program MCDWAC Ministry of Community Development, Women Affairs and Children MDAs Ministries, Departments and Agencies MLYD Ministry of Labor and Youth Development MoEC Ministry of Education and Culture MoF Ministry of Finance MoSTHE Ministry of Science, Technology and Higher Education MTEF Medium-Term Expenditure Franework NBS National Bureau of Statistics NECTA National Examination Council of Tanzania NGO Non-Governmental Organiiation NORAD Norwegian Agency for International Development PEDP Primary Education Development Program PER Public Expenditure Review PMO Prime Minister's Office PO-RALG President's Office- Regional Administration and Local Government PRSP Poverty Reduction Strategy Paper PSRP Public Service Reform Program Sida Swedish International Development Agency TASAF Tanzania Social Action Fund TIE Tanzania Institute of Education UNICEF United Nations Children's Fund UPE Universal Primary Education URT United Republic of Tanzania Vice President: Callisto Madavo Country Director: James W. Adams Sector Manager: Dzingai Mutumbuka Task Team Leader: Donald Hamilton  FOR OFFICIAL USE ONLY THE UNITED REPUBLIC OF TANZANIA PRIMARY EDUCATION DEVELOPMENT PROGRAM (PEDP) PROJECT TABLE OF CONTENTS Credit and Program Summary ................................................... ............. i I. Introduction ................................................................. I II. Macroeconomic Context ................................................................ I III. Primary Education Development Program (PEDP) .............. . ....................... 3 A. Sector Issues ................................................................ 3 B. Government Strategy and PEDP ................................................................ 7 (1) Primary School Grants ................................................................ 8 (2) Institutional Capacity Building ....... ..............................10......................... 10 (3) Improving Design of Educational Initerventions ............................................ i 11 C. Program Feasibility ................................................................ 11 D. Poverty Reduction and Social Impact ............................................................ 12 IV. Proposed IDA Credit ................................................................ 12 A. Rationale and Coverage ................................................................ 12 B. Risks ................................................................ 13 C. Credit and Disbursement Arrangements ............................. I .......................... 14 D. Agreed Actions of Tranche Release .............................................................. 14 V. IDA Operations ................................................................ 18 VI. Collaboration with IMF and Other Donors ........................ ....................... 19 VII. Recommendation . ............................................................... 20 Annexes Annex A: Tanzania Social Indicators Annex B: Tanzania Key Economic Indicators Annzex C: Status of Bank Group Operations in Tanzania Annex D: Credit Data Sheet Annex E: Letter of Primary Education Sub-Sector Policy Annex F: Government of the United Republic of Tanzania: Institutional & lmplementation Arrangements Annex G: Key Performance Indicators Annex H: Economic and Financial Analyses Annex 1: Tanzania at a Glance This operation is prepared by a team led by Donald Hamilton. (AFTH I), with team members of Rest Lasway (AFTI II ). Dandan Chen (AFTH 1). Angel Mattimore (AFTH3), Preeti Ahuja (AFCTZ). Andrei Markov (ECSHD), Eva Ngegba (AFTH 11) Pascale Dubois (LEGOP). Pascal Tegwa, Mercy Sabai (AFTQK), Aya Aoki (HDNED). Steve Gaginis ([,OAG2), Rogati Kayani. and Marius Koen (AFTQK). Quality assurance team consists of Richard Cambridge. Brian Falconier (AFTQK). Eduardo Velez (LCC IC). and Adriaan Verspoor (AFTHD. This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.   i THE UNITED REPUBLIC OF TANZANIA PRIMARY EDUCATION DEVELOPMENT PROGRAM PROJECT CREDIT AND PROJECT SUMMARY Borrower: The United Republic of Tanzania Amount: SDR 119.1 million (US$ 150 million equivalent) Terms: Standard IDA credit terms with a maturity of 40 years Credit Objectives And Description: The proposed credit is to support the Government of Tanzania to reform its primary education system through the Primary Education Development Program (PEDP). The objectives of the PEDP are: to improve education quality, expand school access, and increase school retention at the primary level. The objectives would be achieved through measures to increase resource availability, improve resource allocation and utilization; to improve educational inputs; and to strengthen institutional arrangements for effective primary education delivery. The PEDP would include (a) introduction of capitation and development grants for primary schools; (b) further development of educational inputs; and (c) institutional capacity building at central, district, and school levels for efficient operation of primary education system. Risks: The overall program risk rating is not high given government's long-term commitment to the sector and institutional development, particularly with the Prime Minister's Office's oversight of the program. Major risks include: (a) weak coordination between Ministry of Education and Culture (MoEC) and Regional Administration and Local Governments (PO-RALG); (b) primary school enrollment may exceed program estimates and system capacity in the first year; (c) insufficient capacity to manage primary education delivery at the district level. In addition, although Tanzania is establishing a sound system of formal rules for financial management, issues of non compliance, limited execution, inadequate monitoring, insufficient capacity and weak enforcement constitute major risks in financial accountability and management. Benefits: The major benefit of the operation is to produce more and better qualified primary school graduates to establish a solid foundation for building a much strengthened labor force to support the overall development efforts of Tanzania. In addition, decentralized education management will lead to more effective service delivery with greater involvement of schools and communities. Estimated Disbursement: Three tranches of SDR 39.7 million (US$ 50 million equivalent) each will be disbursed after the agreed actions of tranche release are successfully completed.   I REPORT AND RECOMMENDALTION OF THE PRESIDENT OF THE INTERNATIONAL DEV'ELOPMENT ASSOCIATION TO THE EXECUTIVE DIRECTORS ON A PROPOSED PRIMARY EDUCATION DEVELOPMENT ADJUSTMENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA 1. INT]RODUCTION 1. I submit for your approval the following report and recommendation on a proposed adjustment credit to the United Republic of Tanzania in the amount of 119.1 million Special Drawing Rights (SDR), or US$ 150 million equivalent, in support of the Government's reform program for primary education. The credit would be on standard IDA terms with 40 years maturity and a 1 0-year grace period. 2. The objective of the IDA adjustment operation is to provide support to the Government of Tanzania in reforming the delivery of primary education through the Primary Education Development Program (PEDP) as the first phase in the development of its Educat on Sector Development Program (ESDP). The PEDP project aims at improving quality, increasing school retention, and expanding school access at the primary level. The objectives are to be achieved through measures to improve resource availability, allocation and utilization; to strengthen educational inputs; and to improve institutional capacity for effective delivery of primary education. The IDA operation would support major policy measures including: (a) introduction of primary school capitation and development grants, (b) provision of funds for further development of educational inputs, and (c) institutional capacity building at central, district, and school levels for efficient operation of the primary education system. Based on the projections of the resources needed for achieving the government's policy goals for the development of primary education, available budgetary allocation without the external support would be over 40 percent lower than the estimated costs during fiscal years 2001/02 through 2003/04. To effectively tackle the sector issues, immediate additional funding is therefore necessary to support investments in the Government's PEDP. 3. The structure of the report is as follows. Part II of this document presents the macroeconomic context in Tanzania. Part I].I describes government's overall program and major components of PEDP. Part IV provides details of IDA's operation. Part V discusses IDA's portfolio implementation, particularly with regard to lessons learned from IDA operations in the country context. Part VI discusses the collaboration between Tanzania and the International Monetary Fund and other external donors. The report concludes with a recommendation for credit approval from the Executive Directors. II. MACROECONOMIC CONTEXT 4. Over the past four years, the Government of Tanzania intensified macroeconomic policy reforms with the aim of creating a more stable macroeconomic environment. Tanzania has successfully completed implementing actions agreed to under the three-year IMF's Poverty Reduction and Growth Facility (former ESAF) and IDA's Programmatic Structural Adjustment Credit (PSAC). The macroeconomic reforms were pursued with the understanding that such stability was necessary to achieve sustained growth, which is required to reduce the pervasive poverty in the country. As a result, Tanzania has progressed significantly in reestablishing macroeconomic stability. Inflation has fallen from levels in excess of 30 percent in 1995 to single  2 digit at 5.1 percent at the end of June 2001; the exchange rate remained reasonably stable for the 18 months prior to the recent 11.3 percent depreciation. Official external reserves increased from about 1.6 months of imports of goods and non-factor services in 1995 to 5.1 months of goods and non-factor services in 2001. The overall fiscal balance, including grants, has had a surplus of between 0.2 percent and 1.6 percent of GDP from 1998 to 2000. The deficit to GDP outturn (excluding grants) was 2.6 to 5.8 percent between 1998 to 2000. In the medium term, however, this improvement will need to be grounded in a strong fiscal system to ensure sustained macro- stability. 5. In parallel with the macroeconomic reforms, the GOT also carried out structural reforms focusing on realigning the incentive structure toward increased exports, using scarce foreign exchange more efficiently, liberalizing markets for goods and services, and reducing the involvement of the public sector in commercial activities. A large part of the economic distortions have been dealt with effectively. Although still fragile and shallow, markets are relatively free, the parastatal sector and the civil service are considerably smaller, and a significant improvement in fiscal discipline has taken place, particularly in enforcing cash budgets and introducing a computerized budgeting and accounting system - the Integrated Financial Management System (IFMs). 6. Notwithstanding the above progress, growth remains low by the standards of strong African performers and is fragile because of high dependence on foreign aid. The growth rate from 1998 to 2000 has averaged around 4.6 percent, or approximately 1.7 percent growth in per capita terms. With 51 percent of the population living below the international poverty line of $1 a day, the Government has embarked on an aggressive poverty reduction strategy, which emphasizes both higher growth and more effective public service delivery. Tanzania's PRSP was endorsed by the Boards of the IDA and IMF on November 30, 2000 (document number IDA/SecM2000-618). The strategic prioritization areas are reflected in the budget for FY01, and in the budget for FY02 presented to Parliament in June 2001. The poverty reduction strategy emphasizes priority sectors of primary education, primary health care, agricultural research and extension, rural roads, the judiciary, and HIV/AIDS. A progress report on the first year of implementation of the PRSP is to be submitted to the Boards of the IDA and the IMF by September 2001 prior to being considered as one element required for reaching the HIPC completion point. 7. Tanzania's economy today is largely market oriented and has in place many elements required for private sector-led growth. However, it does not have an adequately qualified and trained work force essential for rapid economic growth, and effective diversification of the production and export bases. The combination of intermittent economic growth, fiscal constraints, and inadequate sector policies and programs constrained the performance of the education sector in the late 1980s and early 1990s. The gross enrollment rate in primary schools has been stagnant at around 77 percent since 1995. In addition, only about 60 percent of the relevant school age children complete primary school while the secondary school gross enrollment rate is still extremely low at 8 percent. 8. Overall, the education system in Tanzania performs far below what is required to meet its development needs. Poor education quality, low access and retention in primary schools are primarily due to insufficient school inputs, resulting in inefficiencies in the system. These issues are further linked to the insufficient public funding of the sector, thus high and unaffordable costs imposed on households. At the secondary level, limited public provision, together with increased demand results in expanded private provision and rising costs. Increasing public financing of the education sector is therefore essential for improving sector performance in the areas of enhancing education quality and expanding enrollment coverage.  3 111. PRIMARY EDUCATION DEVELOPMENT PROGRAM (PEDP) 9. PEDP is a major component of the Government's Education Sector Development Program (ESDP) which also includes, secondary, tertiary and higher education, and non-formal education. Because of the sizable nature of the task to develop an investment program for all sub- sectors concurrently, the decision was made to first address issues in the primary education sub- sector. The first phase of ESDP will focus on policy measures and investments designed to provide sufficient public funding to primary education in order to alleviate the cost burden on households, provide inputs necessary to ensure minimal standards of instruction quality, enhance internal efficiency, as well as increase access to primary education, particularly in areas and among demographic groups that are socially and economically disadvantaged. A. Sector Issues 10. Extensive sector analyses have been done since mid-90s. Government has also recently finalized the Education Sector Country Status Report (CSR), which drew from the analytical work which had been done previously, and deepened the analysis of costs and financing issues. Assessment of the impact of socio-cultural factors, household costs of primary education, as well as the possible impact of the removal of UPE fees and other levies on school quality and enrollment was also based partly on studies prepared by agencies and NGOs such as UNICEF, Maarifa ni Ufunguo, and the Aga Khan Foundation. The CSR and these studies formed the basis of extensive discussions of sector issues and development strategies with donors and .NGOs. In addition, the Public Expenditure Review and Medium-Term Expenditure Framework processes have provided insights into public finance issues in the sector. The major sector issues identified in these analyses and addressed in PEDP are summarized in the following section. Quality II. Examination scores. In the absence of standardized performance assessment, the results of the Primary School Leaving Examination is used as an proxy for academic performance. Based on the PSLE, the quality of primary education is low. The average score during 1997-99 was just above the minimum passing score of 40 percent. Regional and gender disparities are large. In 1999, the average PSLE score was 60 in Arusha and 55 in Dar es Salaam. In contrast, it was 30 in Shinyanga and 32 in Tabora. The overall average score of pupils in urban schools was 53, compared to 39 for those in rural schools. With regard to gender differences, the 1999 PSLE average score was 36 for girls and 42 for boys. 12. School Inputs. The average teacher-pupil ratio in primary schools was 1:39.8 in 1999, which is lower than the government benchmark of 1:45. However, there are variations across regions: teacher-pupil ratio varies from 1:32 in Kilimanjaro to 1:56 in Shinyanga. At the same time, primary school teacher qualifications are low: 54 percent of the primary teachers have minimal training beyond their own primary schooling while only 46 percent have the required grade A qualification. Urban authorities benefit from a larger percentage of the more qualified grade-A teachers (47 percent) than rural areas (37 percent). 13. Learning materials and educational inputs are in short supply. Textbook shortage exists in almost all subjects. In some districts, available textbooks in the two basic subjects of Kiswahili and Math provide only 60 - 65 percent coverage (based on the target book:student ratio of 1:3), while other subjects can be as low as 12 percent. Library facilities are practically non-existent, and the curriculum content is deemed to be inappropriate and rigid. Internal efficiency 14. At the primary level, while an estimated 83 percent of the age cohort currently enters grade 1, only 70 percent of the entrants reach the end of the primary cycle (Grade 7). This implies that on average only 58 percent of each age cohort obtains a complete primary education.  4 The dropout rate is highest in grade 4 which is to a large extent related to poor performance in grade 4 exams, which is used to screen students for upper grades. On average, it is estimated that it takes 9.6 years to complete the 7-year cycle of primary education. 15. Late school entry. Studies on Tanzania show that over 81 percent of school entrants start school later than age 7. Most importantly, late school entry is highly correlated with higher likelihood of dropping out. Over-crowded classrooms limit entrants to grade 1, creating a backlog which often forces some children to start school later as older children are given preference. Long distances between households and schools in some areas also affects school entry age. Children need to be big enough in stature to cover the long distances and there are safety concerns associated with girls and for children in areas with wild game commuting long distances. School access 16. Current overall entry rate to grade I is reasonably high at 83 percent and gender disparities do not appear to be significant. However, regional disparities in enrollment are prevalent. In some regions, the entry rate falls to below 70 percent. 17. Scarcity of schools and classroom facilities are major obstacles to achieving UPE, especially with a growing school-age population. Classrooms are estimated to be 41 percent below requirements and staff houses at 78 percent. Toilets, desks, chairs and other school inputs are also in short supply. On average, there are two teachers and 76 pupils per classroom. The impact of these shortages is aggravated by very limited use of double-shifting and multi-grade teaching. 18. The direct monetary cost of schooling imposed on parents curtails household demand for schooling: school fees and levies, expenditure on textbooks, uniforms, as well as development levies all add to the financial burden of households with school-age children. Supply-side constraints have also seriously suppressed household demand for education as many schools are inconveniently located to allow easy access. These factors add to the already high opportunity costs of schooling. HIV/AIDS and school health issues 19. A particularly important and growing threat to the education system is the HIV/AIDS pandemic. HIV/AIDS affects both education coverage and quality. It dampens the demand for education as affected households have fewer resources to spend on education either because of reduced income due to illness of income earners or diversion of scarce resources for health care. Children in these households are often pulled from school to care for ill parents or have to work to make up for lost household income. At the same time, the epidemic affects the supply of educational services at all levels through increased mortality, morbidity and absenteeism among teachers and education personnel. Currently, there are a number of health programs under implementation to reduce HIV transmission for both children and teachers. However, the momentum of the epidemic will continue to cause decreased supply and demand if actions are not taken to mitigate its effects (including actions that can be taken in the education sector). Therefore, systematic forecasting and planning is needed for future sector and human resource development. 20. There are also other health and nutrition problems that constrain the learning of school age children. Poor physical condition and malnutrition are important underlying factors for low school enrollment, absenteeism, poor classroom performance and early school dropout Some recent school health pilot programs have proved to be quite effective. However, a national school health and nutrition program has not yet been developed. A coordinated program and action plan for implementation will be developed during the program period for implementation.  5 Sector resource and private costs 21. Public finance: Tanzania's education sector is under-funded. Currently, public spending on education constitutes only 2.3 percent of GDP. This level of expenditure is low even when compared to other African HIPCs' current average of 4.0 percent. The low public expenditure on education reflects the weak fiscal capacity of the government with tax revenues averaging only I I percent of GDP during 1997-1999. Therefore, even with around one-fifth of government spending being devoted to education, the total public expenditure on education is only a small proportion of Tanzania's total GDP.Consistent with the Tanzanian government's policies and given its limited resources, budgetary priority is accorded to primary education. In 1999, 62 percent of the education recurrent spending was devoted to primary education to support government's goal of UPE. 22. Resource allocation: Within primary education, the resource allocation pattern is largely inequitable and inefficient. As teacher salaries represent a bulk of the resources allocated to primary schools, the deployment and utilization of teachers generally underlies the pattern of resource allocation. Rural-urban and regional variations in pupil-teacher ratios indicate discrepancies in the deployment of teachers according to school enrollment size, suggesting that there are more teachers in urban than in rural schools. Another factor related to public resource allocation across primary schools is the profile of teachers with different levels of education, training and experience and thus different pay scales. For example, grade A teachers constitute about half of the total teaching staff in urban schools on average, compared to around 40 percent in rural schools. Therefore, for primary schools of the same enrollment size, teacher salary cost per student is higher in urban schools (estimated at 20,000 Tsh per year) than in rural schools (estimated at 16,400 Tsh per year). 23. Resource utilization: Since 1995, personal emoluments have averaged 96 percent of total government recurrent expenditure at the primary level, leaving only 4 percent of the residual to be devoted to various recurrent outlays on teaching and learning materials, examinations and related expenses. This implies that most schools and students have limited basic teaching and learning materials and facilities. 24. The extra resources from savings due to efficiency gains are limited given the current national primary teacher-pupil ratio of 1:40 and the low proportion of grade A teachers. In addition, there is no strong evidence that teachers are overly compensated for their qualifications or skills in the context of the Tanzanian labor market, particularly with regard to the pay structure of the civil servants. Therefore, additional resources are essential for primary education development. 25. Private costs. In the mid-1990s, the GoT instituted cost-sharing in primary education, mainly through UPE fees and other school levies. The policy objective was to enhance private and community participation and sustainability of financing education given the government's fiscal constraints. As a result, many households shoulder a significant share of their children's educational expenses which they can ill afford. During the 1998/99 school year, households with children in primary or secondary schools paid over half of the total cost per student. The opportunity cost of schooling, thus forgone child labor and income, takes another toll on household's resources. Institutional arrangements and management 26. Historically, the MoEC was responsible for policy formulation as well as the delivery of education. However, the centrally controlled system proved to be unsustainable and started to crumble by the mid-80s, when the central government was no longer able to plan and monitor  6 effective delivery of education service. In view of this, responsibility for education delivery and operations has been decentralized to districts under PO-RALG. Currently, PO-RALG is being restructured to carry out decentralized functions including education delivery. Limited human and financial resources have been the major constraints at the district level. Efforts at the school and community levels to address issues of coverage, quality and efficiency of primary education have largely been ineffective, due to the inadequate training and insufficient resources for school committees and school operations and development. In addition, in spite of the change, MoEC's current organization structure remains oriented to programs and education delivery. To address this, the ministries' roles and mandates have been redefined from direct services delivery towards strategic, policy and regulatory functions under the ongoing Public Service Reform Program. Staffing at the MoEC is yet to reflect the re-orientation to policy and regulatory functions. There is a dearth of professionals with skills and experience in policy analysis and formulation, planning and monitoring and evaluation. Furthermore, the current staff in the ministry needs to undertake a difficult reorientation from a hands-on service delivery and directing culture to a strategic and guiding role. 27. Availability of funds: One of the major factors of resource deficiency is how funds flow downstream to the school level. Currently, subventions are made to meet personal emoluments and other charges from the Ministry of Finance (MoF) to councils to fund recurrent expenditure requirements of primary education. In addition, the disbursements via MoEC were mainly for centrally procured goods and services such as administration of examinations rather than on educational inputs. At the same time, the system suffers from intermittent disbursement of the development funds from the central govemment to the districts. This constitutes one of the major obstacles to strategic planning of school development. 28. Fund flow from the district to the school level is another serious issue. Currently, few districts fund education activities from their own sources. Moreover, the district councils retain close to 60 percent of UPE fees contributed by parents, in spite of a 1997 directive from the MoEC requiring that these fees be retained at the school level. A number of ad hoc initiatives with donor support are currently underway to help increase the fund flow to the community or school level. However, to establish a more sustainable system, clear criteria for regular and adequate releases of funds directly to the school level have to be established, along with systems and capacity building at the district and school levels for effective fund utilization. 29. Decentralization: As noted above, the government has reformed the system for primary education provision. This effort is correctly understood as part of the nation-wide process of a comprehensive reform of local government, and its relationships with other agencies at the central and regional tiers of government. However, decentralization is a complex and slow process demanding considerable technical and financial resources at both the central and local government levels. Resources were neither ample nor readily available at the launch of the reforms. In addition, many perceived risks by stakeholders plus resistance to the changes at the technical levels have resulted in significant delays of the actual implementation. These issues are now being addressed by the Government. 30. Donor Support: The donor community has made considerable efforts to support the decentralization process and to ensure that resources are devolved to the school and community levels. A significant portion of donor contributions is transferred directly to districts. However, as a substantive part of the aid inflows do not pass through the Government budget, government's capacity to carry out policy formulation, planning (including resource allocation) and implementation of its development programs is reduced. Further, given the complexities and delays involved in decentralization, donor-supported efforts are not yet fully harmonized with the government's broader decentralization policy and programs. Some projects are too donor-driven, costly and unsustainable and appear to favor districts with better-established capacities.  7 Additionally, each donor has unique funding processes and modalities, making donor coordination difficult for MoF, MoEC and PO-RALG. Therefore, the establishment of clear procedures for managing the delivery of education at the decentralized level with respect to funds allocation, utilization and auditing would facilitate better use of donor resources and bring these within the regular government administrative structure. B. Government Strategy and PEDP Government Strategy 31. Social sector development is regarded as one of the most important elements within the overall poverty reduction and development framework. In 1995, MoEC prepared an Education and Training Policy that emphasized liberalizing the education sector in step with the rest of the economy and increasing the accountability of service providers to clients. The Education Sector Country Status Report, Education Sector PER and MTEF have identified the critical constraints on the provision and further development of primary education as well as the broader education sector issues. Furthermore, with the overall objective of producing more and better qualified graduates to support the development efforts of Tanzania with much strengthened labor force, the Government's sector policies are being refined and finalized based on extensive consultations with technical working groups comprising all stakeholders. 32. As stated in the Government's Letter of Primary Education Sector Development Policy, PEDP is the priority of the Govemment's sector-wide development program, focusing primarily on policy measures and investments designed to provide sufficient public funding to primary education, to alleviate the household cost burden, to ensure adequate school inputs, to enhance education quality and internal efficiency, and to increase access to primary education. 33. Large increases in fund flows, together with the abolition of school fees and other levies, would result in a sharp enrollment increase in school year 2002. In order to manage this enrollment surge, the Government has developed a number of options for rapid progress towards UPE based on managed growth strategies that will avoid widespread deterioration in learning conditions and will be financially sustainable. Currently, government has considered a phased approach to the enrollment expansion. The 3-year target between 2002 and 2005 will be to enroll all 7-10 year olds, thereby eliminating the backlog of 8-10 year old out of school children while establishing the capacity to admit all seven year olds in grade I from 2005 onwards. This target would be reached by admitting about 1.5 milllion children per year in 2002-2005, almost doubling the current number of new admissions. By 2004, the gross enrollment ratio would reach 117 percent. 34. Government plans to take well-coordinated actions covering the areas of new admission policy; flow of school capitation grants; provision of school development grants and related classroom construction; teacher employment and allocation; and institutional capacity building at each level. The sector would face a huge challenge in this regard, as the national projection shows that over 9,000 teachers need to be hired, and about 14,000 classrooms need to be built before school year 2002. 35. In addition, strengthening the technical design of educational inputs such as curriculum, examinations and assessment, pre-service and in-service teacher training, school health and nutrition programs, particularly in the context of the threat of HIV/AIDS epidemic, is to start immediately.  8 Primary Education Development Program (1) Primary school grants A. Capitation grants 36. To address the issues of scarcity of resources and limited school inputs, the program will introduce capitation grants to allow funds flow to school level through the council bank account no. 5 to finance school recurrent costs. The capitation grant is estimated at US$10 per pupil, including US$4 for textbooks, and US$6 to support other teaching and learning materials, school operation and administration, and cluster-based teacher professional development. 37. The capitation grant will finance school plans for school operations prepared and implemented by school committees under the supervision of wards and districts. However, school plans will follow broad specifications of inputs prepared within the policy framework adopted at the central level. The plans will also have to be prepared within the administrative structure of the Local Government Reforms which require school committees to prepare the plans in a participatory manner and have them approved by the legally constituted body, the Village Council. 38. At the initial stage, US$4 out of the capitation grant will be distributed to the district level in line with GoT's current phased textbook decentralization program until full decentralization of procurement of textbooks is realized at the school level. Eventually all schools will receive $10 per student when they start to manage textbook purchase themselves. In order to adequately prepare all districts for developing school plans, managing grants and to test the system, the rest of the US$6 of capitation grant will be implemented in two phases. In the first phase starting January 2002, a capitation grant of $3 will be provided to all schools for maintaining minimal operational costs. The additional $3 will be added to those schools/communities which have completed and submitted annual plans for their budgets, respecting guidelines that have been agreed upon at the district and central levels. It is anticipated that around 30 councils will receive the full amount of $6 capitation grant by school year 2002. In the second phase starting in January 2003, all schools are expected to have developed school level plans and will receive $6 in capitation grants. To help ensure community interest and supervision of the spending of the grants, voluntary community contributions will be commingled with the capitation grants into one bank account. B. Development grants 39. In addition to lack of school materials and inputs, there is currently a severe shortage of physical facilities. Classroom deficit exists in every district using MoEC's standard of 45 pupils per classroom. However, the degree of classroom deficit varies. An efficient allocation of about 14,000 new classrooms would aim at equalizing pupil-classroom ratio across districts. 40. The development grant will support the construction, rehabilitation, furnishing and equipping of classrooms, including sanitary facilities, and construction of teachers' houses. Construction methods will be built on ongoing low-cost school community building programs supported by the PO-RALG and donor agencies such as DfID, Ireland Aid and the Netherlands. Efforts will also be made to coordinate with districts covered by TASAF to continuously promote community participatory approach in school construction. School places would especially be expanded in rural areas and poor or remote communities. To promote community ownership and participation, voluntary community contributions either in cash or kind will be encouraged. 41. Construction feasibility is a major concern in some districts, due to the large number of additional classrooms needed. For example, in Kahama district, over 1,000 classrooms are needed before 2002 school year starts. Detailed construction plans at the district level are to be laid out immediately to identify the construction sites and mobilize both financial and human resources.  9 42. Teacher employment and allocation: The overall rapid increase of enrollment requires additional teachers with adequate qualifications. The new hiring need is even more pressing given the rigidity of teacher deployment across districts. It is projected that an average of about 10,000 new teachers are needed each year between 2002 and 2004, assuming around 10 percent of the teachers teach double-shift. According to the most recent teacher audit report, there are an estimated 20,000 to 25,000 unemployed teachers on the job market. Therefore, overall teacher supply does not constitute a serious constraint for the next three years. However, a difficult issue is the uneven teacher distribution across districts, reflected by a wide variation in pupil-teacher ratios across districts. Using 45:1 PTR criteria, it is estimated that about one-third of the districts currently have surplus teachers. An efficient allocation of teachers with standard pupil-teacher ratio is necessary for efficient resource allocation, as well as to ensure adequate education delivery. However, redeployment of teachers may be difficult because of social and political constraints. Therefore, government's current strategy to deal with surplus teachers would focus on utilizing the existing teaching force by promoting school enrollment so as to utilize as much existing teaching resources as possible in teacher-surplus districts, and assigning new teachers to districts with highest PTRs. However, the enrollment expansion has its upper bound. Therefore, although school-age population growth will eventually eliminate surplus of teachers within 5 to 10 year period, wastage of resources in the short-run is unavoidable if re-deploying teachers is practically difficult. 43. Current teacher allocation plans relate to the uneven needs of new hiring of teachers across districts. For example, according to district-level projection, in 2002, about 900 of the new teachers should be needed in Kahama district. Nationwide, more than 4,000 new teachers will be needed in 5 districts of Mbulu, Musoma rural, Bariadi, Kwimba, and Kahama. These districts are to a large extent economically or socially disadvantaged areas. Therefore, incentive schemes, such as relocation packages including provision of teacher housing, are to be designed in line with teacher allocation targets for these and similar areas. 44. Furthermore, the deployment of teachers within districts is also a key aspect of efficient teaching resource allocation. Detailed district plans will be put in place to ensure equitable distributions and adequate provision of teacher resource across wards and schools. 45. Teacher trainin: Teachers are the main instrument for bringing about quality improvement in the learning experience and learning progress of children in primary schools. In this regard, Government plans to provide support for in-service professional development of teachers on a continuous basis through cluster-based training within individual schools. Supported by the capitation grants, the focus of this program is to strengthen the capacity of primary school teachers including head-teachers to take greater responsibility for improving classroom teaching and learning. The training program would cover classroom management, multi-grade and double-shift teaching, work plan preparation, pedagogical and teaching skill development, etc. In addition, school heads would acquire improved capacity for professional leadership, organization and management, planning and mobilization of resources, and collaboration with communities. These cluster-based training will be facilitated by a professional support network through Teacher Resource Centers. 46. In addition to cluster-based teacher professional development, other in-service programs for upgrading the levels of qualifications of teachers will be enhanced based on a revised structure of existing initiatives which are already being supported by some donors. 47. In parallel, priority also needs to be given to quality improvement in pre-service teacher education in order to ensure production of high quality teachers. Quality improvement strategies will include re-structuring pre-service training and consolidation of the teacher training college system for effective utilization of resources. This would require improvement in the areas of  10 recruitment of quality staff and students; staff professional development; financial and resource base; organization and management structure; and curriculum development; and the linkage of the pre-service and in-service teacher training and development system. (2) Institutional capacity building 48. To ensure that primary school grants and teacher resources are managed effectively, management at each level will be fully involved. During the initial six months of the PEDP, all parties from the central level down to the school and community level will undergo a sensitization program which will focus on how the PEDP will be implemented. They will also receive intensive training and equipment to ensure that everyone is prepared to implement the program at the beginning of the school year in January 2002. Regional offices will provide technical support to district and ward education officers who will be responsible for the overall oversight of the use of both the capitation and development grants in the PEDP program. District and ward education officers will monitor progress and supervise school operations and provide technical support to school committees and supervision of substantive issues addressed in school plans. To help districts take on these additional responsibilities, each district will, in addition to undergoing sensitization programs and receiving equipment and training, receive the equivalent of ten percent of the capitation grant to facilitate the supervision and implementation of the Program. 49. School and Community Level: In order to prepare school committees for various managerial responsibilities in education delivery, the district implementation support team, together with the ward education officers, will train the village/Mtaa council, school committee, head-teacher and other teachers in: (i) how to make a school plan and budget; (ii) how to shop for and procure goods and services; (iii) how to evaluate bids; and (iv) how to keep records of cash inflows and expenditures. Head teachers will be trained in pedagogical support and school management, including accounting, supervision of teachers, data collection and use, and school- community relations. Community leaders will also be trained to better understand the role of the community in the provision of education, as well as in the management of resources for school improvement. 50. District Level: The district implementation support team and ward education officers will be resourced to provide technical and logistical support to school committees and guide school management teams on education policies and standards. In the context of the Public Sector Reform Program, capacity building at this level would emphasize strengthening management capacity to monitor and evaluate provision of primary education by establishing mechanisms for supporting wards and communities which would be responsible for the day-to- day-running of schools. This would include collection and analysis of data on implementation progress, achievement of district and national education development goals, as well as the extent to which communities' needs are met. The current functions at this level of the administration of national examination and assessment and school inspection will also be strengthened. 51. Central Level: Following the design of the Public Sector Reform Program, PEDP also provides technical assistance to strengthen the capacity of MoEC and related institutions in technical design, implementation and monitoring and evaluation of primary education programs as well as in policy and planning, consistent with the changed roles and responsibilities of MoEC. Changes in staff size and profile will be handled in the context of PSRP. Technical assistance will also be given to strengthen the roles of PO-RALG in providing technical support to the District Councils in planning, budgeting and program implementation of district plans. 52. Information System for Monitoring and Evaluation: The Government proposes to strengthen the information systems and processes used for monitoring and evaluation. This is critical given GoT's focus on further development of primary education and as HIPC resources  11 and increasingly donor funds begin to be disbursed through the regular government budget. Substantial computer capacity to support an EMIS system is being established in the MoEC. Similar capacity would also be established to link the PO-RALG and districts into the system. Further focus would be on the establishment of the capacity at the PO-RALG for data recording and compiling, and MoEC for data analyses for the purpose of effective system monitoring and evaluation. (3) Improving Design of Educational Interventions A. Educational inputs 53. PEDP includes measures to further strengthen basic education, introducing reforms as necessary in the areas of curriculum and textbook design; examinations and assessment design and administration; pre-service teacher training; in-service teacher training and teacher upgrading, professional development and support at the school level and general school administration and management. Funds will be provided to identify existing deficiencies and provide technical advice in these areas. Policies and timebound action plans would be developed to implement more efficient arrangements to increase the availability and effective utilization of these inputs in schools. B. School health and HIV/AIDS program 54. A school health and nutrition prograrn is to be introduced to improve the health status of pupils. In addition, an effective strategy for HIV/AIDS prevention and impact mitigation is to be developed, specifically focusing on increasing knowledge and life skills to protect primary school children, teachers and educational personnel from AIDS as well as to develop central and school level policies to prevent and mitigate the negative impact HIV/AIDS will have on the education sector (teacher absences, teacher deployment, sexual harassment, etc). C. Program Feasibility 55. PEDP is ambitious yet technically sound. The technical design of various components of the program was done through government's thematic technical working groups on school access, education quality, financing and resources, and institutional arrangements. These technical designs are built on on-going programs which are being further revised and modified and will be used as a basis for preparing school plans. To ensure program feasibility and effectiveness, government has commissioned technical assistance for consultation in the areas of: school construction and rehabilitation; further expansion and development of the Interim Textbook Program; strengthening the content of in-service teacher professional development. In addition, to ensure the successful implementation of PEDP, the Government has established adequate institutional arrangements including a series of revised regulations and procedures in financial management and procurement to ensure efficient funds flow to the school/community level and effective fund utilization particularly at school/community level. See Annex F for the Government's detailed PEDP implementation and institutional arrangement. 56. PEDP is also financially feasible. An adequate amount of sectoral budget allocation has already been included in the newly published government budget for fiscal year 2002. The budgetary increases particularly reflect the priorities given to the improvement of primary education delivery under local government. The budget envelop projection figures for FY2003 and FY2004 are taken from Tanzania Ministry of Finance's cross-sector MTEF. The projections from FY2005 and onwards follow the assumptions of the key parameters as follows: * 5-6 percent GDP growth; * marginal tax rate 13 percent in 2005, gradually increased to 15 percent; * around 55 billion Tshs (in nominal terms) of HIPC funds in-flow annually; * 25 percent of government recurrent expenditure goes to education sector;  12 62 percent of education spending goes to primary education. 57. Total PEDP cost is estimated at 977 million US dollars for fiscal year 2002 and 2004. The projections indicate that external resource requirement would be reduced to zero in 2012 as domestic revenue grows mainly due to economic growth. However, 427 million US dollars of external resources would be needed between FY2005 and 2012. Currently, donors such as DfMD, EU, Netherlands, SIDA, JICA, Ireland Aid, CIDA, have contributed a substantial resource pool to PEDP for FY 2002. With the Government commitment to the sector development and donor's continuous support, adequate public resources to the sector, particularly to primary education would ensure a sustainable path for further development. D. Poverty Reduction and Social Impact 58. PEDP will benefit all households with school age children by improving school inputs and education quality. The abolition of school fees will especially benefit poor families that could not previously afford primary education. The expansion of primary education would also improve school access in remote areas where most of the economically and socially disadvantaged populations are lozated. With better access and quality of basic education, the poorest population would have an opportunity to strengthen their capacity of earning a decent income. 59. Besides benefiting the target populations, better educated graduates would provide the overall development efforts of Tanzania with much strengthened labor force. Poverty reduction will be achieved at a potentially faster rate. Improved quality of life, beyond those resulting directly from higher income, will reduce mortality rates and improve nutrition and health standards. In addition, large amount of fund flows into communities for school construction and school materials will bring increased demand for local goods and labor thus potentially increased individual income. 60. An improved public policy and financial management system would increase the effectiveness in the use of public sector and donor resources by better identifying priorities of investments, and improving targeting of resources to high priority areas with minimum leakage. Decentralization of education management will lead to more appropriate solutions for communities and more effective delivery of education services. Schools and communities will have greater input in decision making, giving them a greater stake and interest in the success of education service delivery. IV. THE PROPOSED PRIMARY EDUCATION DEVELOPMENT ADJUSTMENT CREDIT A. Credit rationale and coverage 61. The education sector has been given priority in the context of government's comprehensive poverty reduction strategy. Supporting Tanzania's primary education is one of the most important strategic components specified in IDA's latest Country Assistance Strategy (CAS, discussed by the Board on June 15, 2000; document number IDA/R2000-90[IFC/R2000- 96]) in Tanzania, targeted at fostering socially and economically sustainable development by reducing poverty and inequality through investment in human capital. With projected deficits resulting from the comprehensive scope and goals of PEDP, the IDA operation would provide funding to support the major components of the sector development program 62. IDA has a fairly rich body of up-to-date cross-sectoral and sector-specific analytic work undertaken for Tanzania, including the Country Assistance Strategy, the Country Economic Memorandum and the Tanzania Social Sector Review, produced in close consultation with a  13 broad cross-section of Tanzanian stakeholders. Combined with the Tanzania-specific operational experience culled from a series of education projects supported by IDA and other donors, this knowledge base is expected to help further the achievement of Tanzania's goals in the primary education sub-sector. 63. IDA's work in supporting the decentralization and devolution program in Tanzania in the context of the Local Government Reform and the Public Service Reform Programs would also provide critical inputs for the development of appropriate institutional systems and capacities for improved delivery of primary education. IDA-Government collaboration on a range of issues, should create a strong foundation on which to build and implement the PEDP. 64. Finally, IDA has been instrumental in the establishment of a solid and candid dialogue between the Government and the donors active in the education sector in Tanzania. Continued close work with these donors should produce a well-coordinated and robust support package for primary education. B. Risks 65. The overall risk rating is not high given government's long-term commitment to the sector development, particularly with the Prime Minister's Office's oversight of the program. However, major risks include: (a) weak coordination between MoEC and PO-RALG, including regional and district administration in the delivery of primary education; (b) primary school enrollment may exceed program estimates and/or system capacity in the first year, and there may not be enough classrooms or teachers to handle the surge in enrollment; (c) insufficient capacity to manage primary education delivery at the district level. 66. Although a relatively high CPIA rating has been proposed for Tanzania this year, the weakness in Tanzania's financial accountability and arrangements also calls for effective risk mitigation and management measures. 67. Recently Tanzania has put in place a sound financial management system with the introduction of an Integrated Financial Management System, and the enactment of the new Public Finance Act No. 6 of 2001 and the Public Procurement Act No. 3 of 2001. However, a lot of work remains to be done particularly in the area of capacity building and strengthening of the institutional monitoring and reporting framework. Specifically, weaknesses include (1) central and local government accounting and financial reporting; shortage of qualified and experienced accounting and internal auditing personnel due to unattractive civil service salaries; lack of effective sanctions for non compliance; lack of Government IT policy and weak records management, and (2) public sector auditing: inadequate resourcing both financial and human. The recently finalized Country Financial Accountability Assessment has identified the areas of relatively high risks. 68. The risks are reduced substantially given PO-RALG's full engagement and commitment to the program. Collaboration between MoEC and PO-RALG is strengthened as the program evolves. Regional Secretariats are further strengthened to support district level program implementation and effective education delivery. In addition, the enrollment influx in school year 2002 is expected to be more gradual than some neighboring countries' experiences, as enrollment increase has already started in many places with the information on PEDP and related policies passed through media. 69. Mitigation measures for risks in financial management and accountability include consistent utilization of the EPICOR Platinum system, public expenditure tracking, and a financial management manual for use at the school and community levels.  14 C. Credit and Disbursement Arrangements 70. The proposed IDA credit would be US$150 million. The borrower would be the United Republic of Tanzania. The credit would be disbursed in three tranches of US$50 million each for FY2002, FY2003 and FY2004. These tranches would be essential to fill Government's budgetary gap, particularly in the balance of payments, thus maintaining sound implementation of PEDP within a solid financial and macroeconomic framework. The first tranche would be released upon Board approval and effectiveness of the Development Credit Agreement. The other two tranches would be subject to satisfactory implementation of the reform program; and the completion of applicable actions for tranche release. The final draft policy matrix specifying the content of tranche release actions and performance targets was developed and agreed with the URT government during appraisal. 71. Disbursement arrangements will follow the simplified procedures approved by the Board on February 1, 1996. The Govemment of URT will open an account in the Bank of Tanzania. Upon IDA notification of tranche release, proceeds of the IDA Credit will be deposited by IDA in this account at the request of the URT government. Although a routine audit of the account will not be required, IDA reserves the right to require it. D. Agreed actions for tranche release 72. The Government is committed to the implementation of PEDP and has taken the following actions to facilitate PEDP progress. General education: * Completed and discussed the Education Sector Country Status Report prepared in 2000-01; * Approved the Primary Education Development Program (PEDP) as the first phase of the Education Sector Development Program, consistent with the 1995 Education and Training Policy. Expanding Enrollment: * Approved a policy for the introduction of double-shift in two-thirds of all primary school classrooms to intensify classroom utilization; * Lifted the freeze on teacher hiring; * Abolished fees for pre-service teacher training. Improving Quality of Teaching and Learning Processes: * Introduced public funding for regular school level professional development of all teachers as part of the capitation grant; * Approved a policy to provide incentives for teachers who have to teach double-shifts. Building Capacitv within the education system and other public and private sectors with a stake in education provision: * Approved a policy authorizing School Committees to manage capitation and development grants; * Established a Capacity Building Fund equivalent to US$500 per School for the Training of School Committees. Strengthening the institutional arrangements that support the planning and deliverv of education services: * Prepared a strategic plan for re-orienting the Ministry of Education and Culture (MoEC) to provide policy guidance and technical support, to establish minimum educational standards, and to monitor and evaluate education standards and delivery; * Prepared a strategic plan for improving the function of PO-RALG in education service delivery;  15 * Allocated Tanzanian Shillings 160 billions in the budget to meet the FY02 recurrent costs of the PEDP 73. The following table contains other proposed tranche release conditions.  16 Policy Matrix and Tranche Release Conditions Area of Reform Effectiveness Tranche Release Second Tranche Release Third Tranche Release General Achieved progress on PEDP Achieved progress on PEDP Education annual performance indicators as annual performance indicators as outlined in the Letter of Primary defined in the Letter of Primary Education Sector Development Education Sector Development Policy Policy. Completed school development Allocated at least 20 percent of the plans for 60% of schools and full primary education budget to non- capitation grants transferred to salary expenditures. eligible schools. Expanding Abolished UPE fees and other Introduced double-shift in 50% of Introduced double-shift in 80% of Enrollment school levies. (Completed) all primary school classrooms. schools with pupil-classroom ratio greater than 60:1. Issued guidelines for implementing government's policy for admission to primary schools to ensure all 7 - 10 year old children absorbed in primary schools by 2004. Improving Prepared Terms of Reference for Prepared an incentive package for Started paying incentives for Quality of revising the designs of in-service the inter- and intra-district teacher deployment Teaching and and pre-service teacher training deployment of teachers, especially Learning programs, primary school to increase teacher availability in Processes curriculum, and examinations to rural areas. facilitate enhanced student learning and classroom interaction. Revised the designs of in-service Started implementing revised in- and pre-service teacher training service and pre-service teacher programs, primary school training programs, primary school curriculum, and examinations to curriculum, and examinations to facilitate enhanced student learning facilitate enhanced student learning and classroom interaction. and classroom interaction Building Issued instructions for School Issued a strategy for Completed School Development Capacity within Committees to establish and operate implementation of the National Plans in schools; opened and the education bank accounts into which Policy for non-formal and adult operated school bank accounts. system and other Capitation and Development Grant education. public and funds would be disbursed. Trained staff with direct private sectors responsibility for PEDP with a stake in Established mechanisms for the management in planning, education delivery of primary education implementation, monitoring and provision through regional secretariats, local evaluation, as well as policy government authorities, wards, and analysis and formulation. schools. (Completed) Strengthening Developed a national IEC strategy, Issued specific guidelines and Established an improved the institutional including the provision of PEDP procedures for decentralized Educational Management arrangements information and guidelines to all school/community level Information System (EMIS) that support the staff at the regional and district procurement of goods and services according to an agreed plan planning and levels, teachers and School for school operations and  17 delivery of Committees with direct development, including textbooks, Implemented a decentralized education responsibility for PEDP other learning materials, and textbook procurement system in all services. implementation. (Completed) construction and furnishing of Local Government Authorities that classrooms and schools. permits schools to procure Designated an official in PMO for textbooks PEDP coordination, and designated Program Coordinators in the Strengthened the school inspection Ministry of Education and Culture system under which each school is and in PO-RALG, to facilitate inspected at a minimum once every PEDP implementation. two years Financing the Introduced a decentralized primary Allocated adequate budget to cover Allocated adequate budget to cover PEDP school funding and financial (i) Capitation Grant and School (i) Capitation Grant and School management mechanism, under Development Grant to school Development Grant to school which funds for primary education committees; (ii) administrative committees; (ii) administrative are allocated and released from the costs related to Capitation Grant costs related to Capitation Grant Ministry of Finance to the primary and School Development Grant to and School Development Grant to schools accounts through the Local Govemment Authorities; (iii) Local Government Authorities; (iii) education accounts of local costs related to the provision of costs related to the provision of authorities. (Completed) primary school teachers on the basis primary school teachers on the basis of 1:45 teacher/pupil ratio. of 1:45 teacher/pupil ratio. Issued detailed criteria for Development Grant allocation between respective councils and all schools in each councils. Distributed the financial management manual describing mechanisms and procedures for the accurate accounting, reporting and auditing of PEDP funds to all schools and councils 74. The following actions have been completed: * Abolition of IUPE fees and other school levies through the 2001 Appropriations Act; * Establishment of mechanisms, satisfactory to IDA, for the delivery of primary education through regional secretariats, local govemment authorities, wards, and schools; Development of a national IEC strategy, satisfactory to IDA, including the provision of PEDP information and guidelines to all staff at the regional and district levels, teachers and School Committees with direct responsibility for PEDP implementation; * Introduction of a decentralized primary school funding and financial management mechanism, satisfactory to IDA, under which funds for primary education are allocated and released from the Ministry of Finance to the primary schools accounts through the education accounts of local authorities 75. The first tranche will be released upon the fulfillment of the following remaining conditions of effectiveness:  18 The Borrower furnishes to the Association evidence that it has: * issued guidelines, satisfactory to the Association, for implementing its policy to admit all 7 -10 year old children in primary schools by 2004; * prepared terms of reference, satisfactory to the Association, for revising the design of in- service and pre-service teacher training programs, primary school curriculum, and examinations to facilitate enhanced student learning and classroom interaction; * issued instructions, satisfactory to the Association, for School Committees to establish and operate bank accounts into which Capitation and Investment Grants will be disbursed; and * designated an official in PMO for PEDP coordination, and designated program coordinators, all satisfactory to the Association, in the Ministry of Education and Culture and in PO-RALG, to facilitate PEDP implementation. V. IDA OPERATIONS 76. IDA has had nine education projects in Tanzania starting with the First Education Project in 1964. Following the Seventh Education Project approved in 1980, most recent projects in the sector include Education Planning and Rehabilitation Project (1990), and still on-going Human Resources Development Pilot Project I. Most of these operations are rated satisfactory with regard to their development objectives including improving education quality and efficiency, increasing school access, as well as promoting school retention. Most importantly, these operations provide valuable experience, and constitute a good basis for designing various elements of the sector-wide PEDP. 77. Tanzania has a long record of implementing adjustment operations. The recent Country Assistance Evaluation (OED) has identified strength and weakness of IDA's adjustment operations in Tanzania. This operation has reflected IDA's emphasis on addressing the issue of stagnant social indicators in Tanzania. In particular, it has significant operational implications in addressing one of the outstanding issues identified in the above report regarding the lack of balance between the attainment of fiscal discipline and protection of operations and maintenance spending. The introduction of school capitation grant would increase the proportion of non-salary spending to 20 percent of total primary education budget from the current level of only 4 percent. 78. Further lessons learned and reflected in the program design also include: * It is critical that close and consistent inter-ministerial dialogue be established, with collective support from all key donors in the sector towards ensuring the emergence of a common playing field. The preparation and discussion of various sector reports, as well as the preparation of the PEDP were carried out under the guidance of the Inter- ministerial Steering Committee for Education and Training, and in close collaboration with donors, NGOs, and other stakeholders. The Government's PEDP document will be used by all donors as a basis for negotiating external funding for the program. * It is important to strengthen the government institutional arrangements through program implementation. Implementation of PEDP will be carried out by existing units of the PMO, MOEC and PO-RALG. Implementation arrangements will be adapted to be consistent with the evolution of the PSRP and LGRP.  19 * Fostering and respecting government ownership of its sectoral reforms is paramount for ensuring the sustainability of development program. Although there was close collaboration between GOT, donors and NGO's in the preparation of the PEDP, the final documentation was prepared by GOT officials and discussed and approved by the Steering Committee before it was issued to donors as a common basis for negotiating funding. * Support for local capacity strengthening and policy reform is necessary to ensure that the full potential of the program is realized in every community where it is introduced. Manuals and handbooks for schools and communities have been prepared to guide implementation. In addition, GOT has also allocated funds in its budget for an extensive IEC program and for capacity building at all levels. * Adequate financial management capacity at all levels within the sector is important to ensure program success. GOT has been gradually introducing an improved financial management system, the IFMS, which now covers central government agencies and some local authorities. The PEDP financial management systems and manuals have been developed on this foundation, and additions and improvements have been introduced to deal with districts and schools not yet covered by the IFMS. Staff training at all levels will be financed under the capacity building program. * Accountability and efficiency of resource utilization can be enhanced when fund flows downstream to the community level to be managed for school operations and improvement. The PEDP financial management arrangements provide for funds to be transferred from the MoF to school accounts through district councils. The funds are further to be managed by village/school committees. VI. COLLABORATION WITH IMF AND OTHER DONORS 79. In the context of the Enhanced HIPC program, IDA and IMF have been working together closely on education sector strategies to incorporate in PEDP a series of policy measures aimed at reaching sector performance targets for HIPC completion point. 80. In addition, bilateral donors have been very active in supporting the development of PEDP. IDA and all the bilateral donors have worked with the Government to integrate into the PEDP many of the on going donor-supported individual projects. These projects include support of (a) DflD in classroom construction, and provision of textbooks (b) Netherlands in District- Based School Program; (c) Sida in Textbooks Project and Teacher Training; (d) Ireland Aid in Whole School Development Program; (e) UNICEF in programs covering training of school committees, supporting teachers centers, strengthening of council and ward support systems; and promoting adult education and early childhood development. PEDP project tranche release conditions would be partly based on the results of the IDA/Donor joint review of PEDP implementation by the Government.  20 VII. RECOMMENDATION 81. I am satisfied that the proposed credit would comply with the Articles of Agreement of IDA and recommend that the Executive Directors approve it. James D. Wolfensohn President By: Sven Sandstrom Washington, D.C. August 22, 2001  Annex A: Tanzania Social Indicators Latest single year Same region/income group Sub- Saharan Low- 1970-75 1980-85 1993-99 Africa income POPULATION Total population, mid-year (millions) 15.9 21.8 32.9 642.8 2,417.1 Growth rate (% annual average for period) 3.2 2.7 2.6 1.9 Urban population (% of population) 10.1 17.6 31.7 33.8 31.4 Total fertility rate (births per woman) 6.8 6.5 5.4 5.3 3.7 POVERTY (