Tanzania - Country assistance strategy public information notice

Report No. PIN42 Tanzania CAS: Public Information Notice World Bank Board Discusses Tanzania Country Assistance Strategy On June 15, 2000, the World Bank's Board of Executive Directors discussed the Bank Group's Country Assistance Strategy (CAS) for Tanzania covering the period covering FY01-FY03. Country Context Tanzania is one of the few countries in Africa with a long record of political and civic stability, in which citizens share a strong sense of national identity. Nearly 15 years into its transition from a socialist to a free market economy and five years since the adoption of multiparty elections, the country is steadily moving toward a fully democratic society. Following the 1995 elections, the Government of Tanzania, headed by President Mkapa, has focussed on efforts at macro stabilization and introduced deep institutional and structural reforms. Growth has averaged about 4 percent a year during the past four years-strong performance considering the severe weather conditions. Performance reflects strengthened macroeconomic and structural fundamentals as well as the economy's greater flexibility in responding to shocks. A large number of the distortions that existed in the 1990s have been dealt with. Markets are freer and the public sector smaller. The foreign exchange market and the trade regime have been liberalized. And privatization has proceeded, albeit slowly, with more than half of the country's 400 public enterprises now privatized. Tanzania successfully completed its first ESAF program in 1999 and has now acceded to the new IMF Poverty Reduction and Growth Facility. Earlier this year the IDA and IMF Boards discussed Tanzania's Interim Poverty Reduction Strategy Paper (PRSP), and decided that Tanzania is eligible for debt relief under the enhanced HIPC Initiative. The Government is targeting additional resources coming from debt relief to the sectors that have the largest impact on poverty and human development, and the Medium Term Expenditure Framework for 2000/2003, buttressed by solid reforms in budget management, reflects this commitment. Furthermore, within each priority sector, poverty priorities are being specified in the context of the PRSP. The Government is now finalizing the Tanzania Assistance Strategy (TAS), which provides the national strategic framework for guiding external aid programs in Tanzania; its main objectives are to strengthen Tanzanian ownership of its development agenda, improve the partnership between Government and key stakeholders, and enhance aid effectiveness. Indeed, Tanzania has made impressive progress in assuming ownership of its reform and development programs and is making efforts to see these gains consolidated into a more effective partnership with donors and civil society. Bank Strategy The development challenges Tanzania faces are significant. Tanzania remains a very poor country, with over 50t of the population below the poverty line and real income and social service delivery standards below those of the mid-1970s. Major challenges remain in the areas of governance/corruption, HIV/AIDS and public and private human capacity. Building on the stable macroeconomic conditions to reduce poverty and enhance human development, is now central to the development agenda. The focus of this CAS is on higher growth, poverty reduction, and institutional reforms to improve governance and service delivery. It shares the main strategic directions of the TAS: adherence to macroeconomic  stability, renewed emphasis on rural development, improved governance, and increased private sector participation in the economy. It also supports the government's desire to enter into new relationships with partners, based on the phased switching from projects to programs for a more effective use of aid resources. The CAS suggests a lending program increasingly geared towards operations with a direct bearing on poverty and social conditions, in a shift from the earlier emphasis on infrastructure development. A move away from traditional project financing towards budget support is also envisaged. Finally, IFC will build on the reforms initiated with IDA support to invest in private infrastructure provision, expand and deepen financial markets and institutions, and provide financing and capacity building to Tanzanian SMEs. Priorities for Bank Assistance The Bank has supported Tanzania's development efforts through concessional IDA credits and non-lending instruments: As of March 31, 2000, a total of 112 IDA credits and 27 IBRD loans, amounting to some US$3.5 billion (US$3.2 billion from IDA and US$356 million from IBRD) had been approved for Tanzania (original principal less cancellations). Of the 27 loans, 8 loans amounting to US$42.5 million were extended to Tanzania through the East African Community. Total disbursements amounted to nearly US$3,096 million (some US$2,741 million from IDA and US$356 million from IBRD). As of March 31, 2000, the active portfolio consisted of 22 projects with total commitments of US$1.2 billion. Overall, the Bank program underlines the contribution of various sectors to sustainable development. For example, the quality of social sector services is of vital concern to the rural population and progress there will be essential to the well-being of the rural poor. Physical infrastructure improvements both offer the prospect of opening up areas to the market economy (through improved roads) and providing services that simply don't reach rural areas at present. Finally, the implementation of the public sector reform will improve governance and the delivery of public services. Bank work across all the areas below will be vital for reaching sustainable development and making progress towards poverty reduction. Besides dialogue on macroeconomic and public expenditure management, the CAS proposes to focus lending and non-lending interventions in four areas of strategic importance. The choice has been informed by Government's preferences, a consideration of both the Bank and IFC comparative advantages, relative to that of other donors, and by the potentially large impact of these interventions in the economy. They include: n Private sector and infrastructure development, to support the Government's objective of making private sector the engine of growth; n Sustainable rural development, to improve the livelihood of the majority of the poor who live in rural areas; n Improved social infrastructure, to improve social indicators and enhance access for the poor to essential public services; and n Public sector reform and institution building, to increase the effectiveness of public service delivery and improve governance. This program does involve a broadening of efforts from the macroeconomic focus of the last CAS. This reflects judgment that this is now essential to ensure that the benefits of the reforms are realized by the population, particularly the poor in the rural areas. However, considerable selectivity will be exercised in the choice of Bank interventions across these areas. In our base case scenario, IDA credits to Tanzania over the next three years are expected to average up to $260 million per year, assuming overall satisfactory macroeconomic management, structural reform, and adequate portfolio performance. - 2 -  Partnerships This is a joint CAS of the World Bank Group, and IDA, IFC, and MIGA will collaborate in implementing it. The Bank's strategy is also premised on partnerships with other donors, as well as with civil society and private sector representatives. The Bank is working closely with the IMF to help the government sustain and broaden the improvements in macroeconomic management; and it coordinates with the African Development Bank (AfDB), the UN system, the EU and bilateral donors. The Bank and other donors hold regular senior-level consultations to discuss and coordinate on issues of strategic importance to Tanzania. -3-