Third Highway Project -Tanzania

RESTRICTED Report No. P-978 FILE COPY This report is for official use only by the Bank Group and specifically authorized organizations or persons. It may not be published, quoted or cited without Bank Group authorzation. The Bank Group does not accept responsibility for the accuracy or completeness of the report. INTERNATIONAL DEVELOPMENT ASSOCIATION REPORT AND RECOMMENDATION OF THE PRESIDENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPMENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A THIRD HIGHWAY PROJECT July 15, 1971  INTERNATIONAL DEELOPMENT ASSOCIAT-ON REPORT AND RECOMMENDATION OF THE PRESIDENT TC THE EXECUTIVE DIRECTORS ON A PROPOSED DEVELOPM'ENT CREDIT TO THE UNITED REPUBLIC OF TANZANIA FOR A THIRD HIGHWAY PROJECT 1. I submit the following report and recommendation on a proposed credit to the United Republic of Tanzania for the equivalent of US$6.5 million on standard IDA terms to help finance a Third Highway Project. PART I - THE ECONOINY 2. Since attaining independence in 1961 Tanzania, under the out- standing leadership of President Nyerere, has had an enviable record of political stability. The absence of tribal and racial strife has enabled the country to devote much time and thought to the formulation of medium- and long-term development objectives and also to apply a considerable pro- portion of its meagre resources to development. 3. Soon after its independence Tanzania declared its intention to establish a socialist society. In the furtherance of this objective, the country has steadily enlarged the scope of the public sector and shown determination to secure a commanding role for the Government in the economy. The ever-wqidening role of the Government has inevitably eroded the role of private enterprise in many activities. The Government is aware of the dislocation of economic life resulting from some of its policies but does not consider the price too high when viewed against the background of its socio-economic objectives. Considerable emphasis has been placed on austerity and self-help, and there has been a conspicuous absence of projects which are mainly prestigious. A serious effort has also been made to bring about a more equitable distribution of incomes. Wages of low income workers have steadily risen - although a recent policy has linked this to productivity increases - while politicians, ministers, high-placed civil servants and employees of public corporations have had to accept cuts in emoluments. 4. For many years the Government has been particularly concerned to improve the living standard of the rural population. This has not been easy, since Tanzania is a large country and the majority of the people live on scattered holdings on the periphery. The absence of population concen- trations makes it difficult to provide social or economic services, such as health services, education, extension services, water supplies and feeder roads. To help remedy this situation, the Government launched a program of village settlements during its First Five-Year Plan (1964-69), aimed at bringing about a regrouping of the rural population. This program proved expensive and was abandoned at an early stage of the Plan.  5. During the present Plan (1969-74), the Government has formulated an ambitious, but very different, program to encourage the rural population to live together in newly formed villages. These villages, known as Ujamaa villages, are to be established on a voluntary basis and operated by the villager themselves. UJjamaa villages are based on the extended family principles which have for long governed traditional African life and require that members of the group perform tasks such as constructing dwellings, clearing and cultivating land and harvesting within a cooperative frame- work and share the goods held in common. Apart from extending socialist ideas and organization to the countryside, Ujamaa villages provide the most economical and, perhaps, the only means of bringing a variety of essential services to the rural population. 6. The fcrmation of Ujamaa villages proceeded slowly at first but has lately been gathering momentum. The initial suspicion of people is giving way to greater acceptance and during the first two years of the Plan some 2,500 villages were established. The response to the Ujamaa movement has not been uniform throughout the country; progress has been particularly slow in areas where peasant farmers are already engaged in the production of well-established cash crops and hence often do not feel the necessity to change to a new and untried way of life. WThile the Government is anxious to speed up the formation of Ujamaa villages, it recognizes that the movement will gain ground and be successful only if the principle of voluntary association is preserved. The process of bringing the bulk of Tanzania's rural population into Ujamaa villages will take a long time. In the meantime, it is necessary to monltor the program carefully and assess its costs and benefits. 7. In its external relations Tanzania has pursued a 'non-aligned' policy and has good relations with both western countries and communist countries in Europe and Asia. The major proportion of external assistance to Tanzania has been and continues to be provided by western countries. At the same time, small amounts of aid have been obtained from Russia and other countries in eastern Europe. In addition, a large project to estab- lish a rail link between Landlocked Zambia and the Tanzanian port of Dar es Salaam is being financed by the People's Republic of China, which has also provided finance for other projects in Tanzania. 8. Following the military coup in Uganda in January 1971, which resulted in the replacement of President Obote by General Amin, and the subsequent refusal by Tanzania to recognize the new Ugandan Government, some strains have developed in the East African Community. Since that time, the East African Authority (the highest executive organ of the Community comprising the Heads of State of the three member countries) has not met and the various Ministerial CouLicils of the Community have also not been convened. Pending a resolution of the political impasse, the three countries have shown a willingness to seek a modus vivendi for en- suring continuity in the day-to-day operations of the Community Secretariat and the common services. Routine operations requiring the cooperation of  - 3 - the three countries have been conducted through informal contact. In this way, a major disruption of the Community's activities has so far been avoided. In addition, despite the differences between the Heads of State, the East African Legislative Assembly met in May 1971 and approved the 1971/72 budgets of the Community Secretariat and other institutions. None- theless, as recent reports have underlined, the political difficulties between Tanzania and Uganda have not yet been resolved and continue to interrupt the Community's progress. 9. An economic mission from the Bank visited Tanzania during August and September 1969 and its report "The Economic Development and Prospects of Tanzania" (No. AE-7 in two volumes) was distributed to the Executive Directors in March 1970. The mission reviewed Tanzania's Second Five-Year Plan which was launched in July 1969 and concluded that the targets of the Plan were generally realistic and that the programs were worthy of external support. It was the mission's assessment that Tanzania's capacity to im- plement the Plan was now significantly better than during the First Plan but that a resource constraint might appear if external assistance fell short of the required amounts. 10. Tanzania's Second Five-Year Plan envisages an overall investment of Sh 8,055 million during the fiscal years 1970-74. The Bank's 1969 economic mission concluded that investment during the Plan could amount to about Sh 7,430 million - some Sh 600 million less than the Plan target - with most of the shortfall occurring in the private and parastatal sectors. The mission estimated that the Central Government's development program (including contributions to parastatal organizations) could amount to about Sh 3,380 million, of which internal sources - mainly recurrent budget surpluses and borrowTing - would provide about 55 percent and external sources the rest. 11. During the first year of the Plan, the Central Government's development expenditure amounted to Sh 623 million which, on the average, is close to the Plan target. In fiscal year 1971, however, development expenditure rose steeply to Sh 850 million. During these two years ex- ternal aid amounted to Sh 450 million or only 30 percent of development expenditure, substantially short of the Plan's expectation that it would amount to about 45 percent of the total. Hence there has been considerable pressure on internal resources, resulting in a high level of borrowing from the Central Bank and a consequent rundown in foreign assets. In order to prevent an aggravation of the situation, the Government has decided to limit development expenditure in fiscal year 1972 to about the level attained in 1971. 12. An economic and preinvestment studies mission visited Tanzania, Kenya and Uganda during October and November 1970, with the principal objective of preparing a program of preinvestment studies to provide a firm basis for the investment programs. Volume I of the mission's report (No. AE-16) which deals with recent economic developments within the East  African Community, Kenya, Tanzania and Uganda was distributed to the Executive Directors on July 14, 1971; basic data on the economy are given in Annex II. The report confirms that Tanzania has experienced difficulty in raising resources on an adequate scale to finance its investment program and that increased external assistance is required if the rising tread of development expenditure is to be maintained. The draft volumes of the report dealing with preinvestment studies have recently been discussed with the governments and it is expected that these volumes will be distributed to the Executive Directors by mid-August. 13. At the end of 1969, Tanzania's outstanding external public debt, including undisbursed amounts, was $347.0 million equivalent (including $72.1 million representing a notional one-third share on account of the East African Community Corporations). Interest and amortization payments on account of Tanzania's own debt amounted to $14.7 million equivalent in 1969 while the notional share of payments on account of the Coiporations was a further $5.4 million. Together these payments absorbed 7.4 percent of the foreign exchange earnings during the year. Although Tanzania has succeeded in raising considerable amounts locally to finance development, its low per capita income and the relatively limited prospects for its predominantly agricultural exports justify lending on concessional terms. PART II - BA1NK GRLOUP --IT,h TO TYiNZJATIA 14. Tanzania joined the Bank Group in 1962. Beginning with an IDA credit for education in 1963, Tanzania has to date received a total of nine credits and three Bank loans amounting to $102.9 million. In addition, Tanzania has been a beneficiary of six loans totalling $162.8 million which have been extended for the cevelopment of common services operated on a regional basis for the three member countries of the East African Community (EAC), Kenya, Tanzania and Uganda. Sur,mary statements of the Bank and IDA's assistance to Tanzania and the East African common services are in Annex I. 15. Taking account of the lending for the East African common serv- ices, about half of the Bank Group's assistance to Tanzania has so far been for the improvement of transportation, including railways, highways and harbors. The remainder of the Group's support has been directed towards the development of agriculture, education, power and telecormuni- cations. A large part of the lending to Tanzania, both directly and through the corporations of EAC, has occurred in the past three years. 16. Reflecting the central place of agriculture in the Tanzanian economy and the heavy emphasis placed by the Government on the development of the rural sector, it is expected that our assistance to Tanzania in the coming years will to an increasing extent be aimed at raising agricultural production. A smallholder tea development project is now in an advanced stage of appraisal, and a cotton project and a second livestock project for which Bank Group assistance will probably be requested are under  - 5 - preparation by the Government irith assistance from our Permanent lNission in Eastern Africa (PMEA). Apart from such directly productive projects, we expect that, as in the case of the proposed Third Highway Project, our operations in other sectors will also be largely geared to serving the rural community. 17. Although delays have occurred from time to time in the execution of Bank and IDA projects in Tanzania, performance has for the most part been satisfactory and there are no serious current problems. Reconstruc- tion of the 880 kIn of primary roads included in the First Highway Project (Credits Nos 48 TA and 115 TA) was completed in 1970, and work on the Second Highway Project (Credit No. 142 TA and Loan No. 586 TA), wJhich consists of the reconstruction of a 510 km section of the Tan-Zam Highway, is progressing satisfactorily. With the Association's agreement, the rights and obligations of the National Development Credit Agency (NDCA) under the Agricultural Credit Project (Credit No. 80 TA) and the Flue- Cured Tobacco Project (Credit No. 217 TA) were transierred to the newi Tanzania Rural Development Bank (TRDB) with effect from May 1, 1971. 18. IFC's only investments in Tanzania to date, totalling $4.4 million, were made in Kilombero Sugar Company in 1960 and 1964. This company encountered financial difficulties and in 1969 IFC and other investors sold their interest in the company to the Government. Dis- cussions have recently been taking place regarding the possibility of IFC investing in a tourism venture in Tanzania. PART III - THE PROJECT The Transport Sector 19. 'rhe transport sector in Tanzania presently consists of about 34,000 km of roads, of w7hich the bulk are low standard gravel or earth roads; 2,500 km oi railway operated by the East African Railways Cor- poration (EARC); three ocean ports operated by the East African Harbours Corporation (EAHC), of which the port at Dar es Salaam is the most imn- portant; coastal shipping; and regularly scheduled air services. The development of the sector is dictated by the need to serve the productive activities and population widely distributed around the country, to facil- itate the movement of Tanzanian exports and imports to and from the porbs and to accommodate the transport needs of neighboring landlocked coun- tries - Rwanda, Burundi, the Eastern part of Congo (Kinshasa), and to an increasing extent Zambia. 20. For several decades, transport policy was directed almost ex- clusively toward the requirements of external trade and emphasis was placed on the development of the East African Railways, which now forms  - 6 - the backbone of the transport sector and carries the bulk of heavy, 'Long distance traffic. With assistance from the Bank, substantial expenditure has been incurred in recent years in modernizing and expanding the East African Railways in accordance with the growth of traffic, and this program of development is continuing. 21. In the past the East African Railways were protected from road competition by restrictive licensing of truck operators. Under the ar- rangements for Loan No. 428 EA of September, 1965 for the former East African Railways and Harbours Administration, the C-overnments of Kenya, Tanzania and Uganda agreed to carry out a study to assist them in formu- lating sound regulatory, investment and pricing policies for all surface modes of transport in the three countries. This study, financed by UNDP with the Bank as executing agency, concluded that competition between road and rail of'fered the more economic solution to coordination between the two modes of transport. It recommended that iARC's rate and tariff struc- ture be revised to prevent any uneconomic transfer of traffic from rail to road transport and that restrictive road licensing practices then be abolished. Under the terms of Bank Loan No. 674 EA to EARG signed in INay 1970, the three Govrernments have agreed to implement the study's main findings and this is in progress. 22. The railway system in Tanzania is now undergoing a further major extension through the construction, wTith finance from the People's Republic of China, of the Tanzania-Zambia Railway which, though basical'y designed to carry Zambian transit traffic, should help to stimulate agricultural and industrial development in the southern part of Tanzania. A 500 km section of this railway, between Dar es Salaam and Nlimba, is scheduled to come into service by the end of 1971. Plans are in hand to provide the new facilities at the port of Dar es Salaam which will be required to handle the additional traffic generated by the new railway when it becomes fully operational, which is currently expected to occur in early 1975. The Bank has been approached by EAIC for another lean to help finance the proposed port development. 23. In addition to the extension and modernization of the railway system, a substantial program was initiated during Tanzania's First Five- Year Plan to improve primary and secondary roads in order to foster regional development. During the Second Five-Year Plan, particularly the first three years of it, the highway program will continue to be dominated by trunk route development, particularly by the reconstruction of the Tan- Zam Highway. Nonetheless, it is hoped during the Second Plan period to achieve a better balance betwreen the development of trunk routes and other types of roads and a careful review is currently being made by the Govern- ment of the priority of all proposed expenditures on highways with this in view. In accordance with the importance attached by the Government to developing the rural sector, increased emphasis is being given to roads which will assist agricultural expansion.  -7- 24. Highway planning is carried out by the Planning Divrision of the jilnistry of Communications, Transport and Labour (C0C1;'5RXS) in close con- tact wnith the Roads and Aerodromes Division (RAD) of CWiWMORKS. The RAD is responsible for design, construction and maintenance of primrary anc secondary roads and has recently begun to take cover responsibility for feeder roads frcm the District Councils. During the past few years a lack of competent and experienced engineers has adversely affected COW1FORIKS' performance, especially in road maintenance and planning. However, a number of additional staff have now been recruited, partly under the Staffing and Training Program initiated under the First IDA Highway Project, and bilateral technical assistance from Canada has further eased the staffing situation. Road maintenance is a continuing problem but it is hoped that major steps to deal with this will be initiated following a study of road maintenance requirements in Tanzania which is currently being carried out with financial assistance from the United States. The Bank has indicated its willingness to consider providing finance for a road maintenance project based on the outcome of this study. 25. In accordance with Tanzania's development philosophy, the role of the Government in the provision of road transport services has been extended over the past few years. A Government-onmed National Transport Company has been created to control Zambia-Tanzania Road Services, which provides the bulk of road transport services for Zambian exports and imports via Dar es Salaam, and the Dar es Silaam lvHotor Transport Company, wihich provides urban bus services. The Gcvernment has tentatively proposed to expand tha activities of this organization into the field of inter-regional road transport by taking over existing long distance operations now largely owned and operated by private interests, but no finm policy has yet evolved. Financing has been requested from UIDP for a study of the implications of the proposed nationalization policy and the most suitable course of action with respect to the developnent of the National Transport Company. 26. The Bank Group's assistance to the highway sector in Tanzania has so far been concentrated upon the development of primary and secondary roads. As already indicated, the First Highway Project consisted prin- cipally of the reconstruction of six sections of main roads in various parts of the country. The Second Highway Project, which is being financed jointly wiUl SwTeden, provides for the reconstruction of a section of the Tan-Zam Highway; the reconstruction of other parts of this road is being financed by the United States. Because of the continued low standard of much of Tanzania's main highway system and the growth of traffic, further improvements to certain major road links are necessary. At the same time, increasing attention is being given by the Bank and other agencies to the need to improve minor roads serving agricultural districts in order to support the Government's endeavors to promote rural development.  -8- The ProJect 27. A report entitled "Appraisal of the Third Highway Project in Tanzania" is being circulated separately. A Credit and Project Summary is provided in Annex III. 28. The project, which was partly prepared through studies financed under the First Highway Project, was appraised in the field in December 1970. Negotiations were held in lWashington in HIay 1971. The Tanzanian Government was represented by Messrs. I.M. Kiaduma, Principal Secretary, COTIJORKS; R. Korosso, Senior Assistant Secretary, Ministry of Finance; H. Singh, Engineer-in-Chief, Department of Wlorks and. Supplies, CCNJORKS; R.M. i'Iinja, Engineer, C024CRKTS; and E.F. Kapinga, Attorney General's Chambers. 29. The project comprises: (a) the paving of a 200 km section of the main Southern Trunk Road between 1Utwara and Masasi, part of wJhich was improved to gravel standard under the First Highway Project; (b) betterment of 475 km of agricultural feeder roads in the Geita district and Iviara region in Northern Tanzania through the creation of departmental units and the provision of staff and equipment for them; (c) technical assistance to direct and supervise the above works, train local staff required for the betterment units to be established under (b), and continue the staffing and training program in COMOCRKS initiated under the First Hiighway Project; and (d) engineering and other studies for the preparation of the present project and a further 250 km of roads wihich seem likely candidates for inclusion in future highway projects in Tanzania. 30. The works included in the project, though varying considerably in their character, are all geared to the general objective of stimulating agricultural development. The Ntwara-Masasi road forms a part of the regional highway linking the port of Mtwara and the entire southern fringe of the country inland to the Tan-Zam Highway near Mbeya. Most of the present traffic is agricultural and is principally concerned writh the movement of the substantial cashew nut crop grown in the area. The feeder roads in the Geita district provide an outlet for the district's important cotton crop, while the Mara region roads are essential to a milk-producing scheme established recently with Danish technical and financial assistance,  31. The main economic benefits from the project will be savings in road maintenance and vehicle operating costs, increased local capacity to provide betterment and maintenance services for rural roads, and agri- cultural development induced by the roads. The estimated economic rates of return on the major elements of the project range from 14 percent to 28 percent. The project is not expected to give rise to any serious ecological problems. 32. The total cost of the project is estimated at US$9.5 million equivalent. The proposed credit of US$6.5 million will cover the esti- mated foreign exchange component representing about 68 percent of this total. About US$163,000 of the credit would be provided for retroactive financing of studies undertaken in connection with the preparation of the project. The local currency component of the project cost amounting to US$3.0 mil:Lion woulc be financed by the Government. 33. The RhD, assisted by qualified consultants, would be responsible for the execution of the project. The RAD is also responsible for exec- uting the First and Second Highwifay Projects and hence is fam.liar with the Association's procedures. 34. The contract for improvement of the Htwara-Masasi road would be awarded in accordance with the Association's guidelines for international competitive bidding. The execution of these wiorks would be supervised by consultants. 35. The betterment w-forks for the feeder roads in the Geita district and Mara region, whlich are small-scale and scattered and would be of little or no interest to contractors, would be carried out by units to be estab- lished in the two areas using departmental forces. Procurement of equip- ment and materials required by these two units would comply with the Association's guidelines for international competitive bidding. Gon- sultants wQould be engaged to direct and supervise the activities of the betterment units and would train local staff to take over the operation of the units in due course. Once the condition of the selected roads had been improved, the equipment would be utilized for betterment works else- where and general road maintenance. The project would thus enable Tanzania to build up a permanent capacity to plan, execute and maintain rural roads. The lessons learnt from these pilot betterment units would assist the Government in setting up the countrywide maintenance/betterment program which is now under preparation. 36. In addition, in order to prepare the next group of roads for consideration for Bank Group financing, consultants would be engaged under the project to undertake feasibility studies and detailed engineerirg of about 250 km of high-priority roads. These roads would be selected on the basis of a general review of priorities in the highway sector presently being carried out by the Planning Division of CCI;1,ORKS and due to be completed by the end of October 1971.  - 10 - PART IV - LEGAL L\ISTRUIENTS AND AUTHORITY 37. The draft Development Credit Agreement between the United Republic of Tanzania and the Association, the Recommendation of the Committee provided for in Article V, Section l(d) of the Articles of Agreement and the text of a Pesolution approving the proposed Develop- ment Credit are being distributed to the Executive Directors separately. The draft Development Credit Agreement conforms to the normal pattern for credits for highway projects. 38. I am satisfied that the proposed Development Credit would comply with the Articles of Agreement of the Association. PART V - RECOI'MENDATION 39. I recommend that the Executive Directors approve the proposed credit. Robert S. iscNamara President Attac'nments Washington, D.C. July 15, 1971  ANTNEX I Page 1 TANZANIA Statement of Bank Loans and IDA Credits to Tanzania at June 30, 1971 Loan or (Amount in US$ million) Credit No. Year Borrower Purpose Bank IDA Undisbursed 45 TA 1963 Tanzania Education 4.6 48 TA 1964 Tanzania Roads 14.0 80 TA 1966 Tanzania Agricultural Credit 5.0 518 TA 1967 TANSCO Power 5.2 .8 115 TA 1968 Tanzania Supplementary Roads 3.0 1.0 132 TA 1968 Tanzania Ranch Devel- opment 1.3 o.8 142 TA 1969 Tanzania Roads 15.5 3.4 586 TA 1969 Tanzania Roads 7.0 7.0 149 TA 1969 Tanzania Education 5.0 4.9 217 TA 1970 Tanzania Tobacco 9.0 9.0 715 TA 1970 TANESCO Power 30.0 29.8 232 TA 1971 Tanzania Education -3.3 3.3 Total (less cancellations) 42.2 60.7 of which has been repaid to Bank and others Total now outstanding 42.2 Amount sold: 0.1 of which has been repaid 0.1 Total now held by Bank and IDA 42.1 60.7 Total undisbursed 37.6 22.4 60.0  ANNEX 1 Page 2 Statement of Bank Loansl for Comnion Services in East Africa at June 30, 1971 (Amount in US$ m.illion) Loan Nqo. Year Borrower Purpose Bank Undisbursed 110 EA 1955 East African Railways Corporation 2/ Railways 24.0 428 EA 1965 East African Railways Corporation 3/ Railw-ays 32.4 1966 East African 1Harbours Corporation 3/ Harbors 5.6 483 EA 1967 East African Posts and Teleconimnications Te'Lecommuni- Corporation 3/ cations 13.0 1.3 63B EA 1970 East African Harbours Corporation Harbors 35.0 30.2 674 EA 1970 East African Railways Corporation Railways 42.4 41.8 675 EA 1970 East African Posts and Telecommunications Telecommuni- Corporation cations 10.4 10-4 Total (less cancellations) 162.8 of which has been repaid to Bank and others 17.4 Total now outstanding 145.4 kaount sold: 24.4 of which has been repaid 17.3 7.1 Total now held by Bank 138.3 Total undisbursed 83.7 8L7.. 1/ Guaranteed jointly and severally by Tanzania, Kenya and Uganda. 2/ Loan made originally to East African High Commission and also guaranteed by United Kingdom. 3/ Loan made originally to East African Common Services Authority.  ANNEX II Page 1 TANTZANIA BASIC DATA h~rea: 937,062 square km (including 53,483 square km of water area) Population: (1970) 12.9 million Rate of Growth: 2.7 percent, p.a. Population density: 15 persons per square kon Political Status: Independent since Decem}ber 1961 Gross Lbmestic Product at Current Factor Cost (1969): Sh 7,819 million, of which Monetary Product: Sh 5,557 million (71.1 percent) Non-monetary Product: Sh 2,262 million (28.9 percent) Per Capita GDP (1969): Sh 606 (US$ 85) Annual Rate of Growth (Constant 1966 prices): 1969 1966-1969 Total GDP 3.1 4.7 i4bnetary 5.7 6.1 Percent of Total GDP (Current prices, 1969): Agriculture 39.5 jiining 2.0 Manufacturing 7.6 Services including Commerce and Transport 45.2 Other Sectors 5.7 rercentage of EXpenditure of GNP at Current 'Karket Prices: 1969 1966-1969 Gross Capital formation 16.5 16.9 Consumption 84.2 84.4 Excports of Goods and Services 23.8 25.9 Tliorts of Goods and Services 24.5 27.2 Nloney and Credit: (Sh million) 1969 1968 Currency in circulation 605 529 Commercial Bank deposits /1 1,596 1,289 Commercial Bank Advances 71 1,093 899 A End of year.  ANNEX II Page 2 IH5blic Sector 0(erations: (Sh rillion) 1969/70 1968/69 Central Government: Recurrent revenue 1,535 1,257 Recurrent expenditure 1,435 1,186 Surplus on Current Budget 100 71 Development Expenditure 623 L60 Balance of Paymrients /a: (Sh million) 1970 1969 Merchandise exports 1,808 1,754 1-Lerchandise imports 2,360 1,790 Net invisibles 80 65 of which net factor income -25 -21 Balance on current account -392 108 Net capital inflowf 485 132 Commodity concentration of exports 1969 1964 (W) Sisal 10 29 Cotton 14 13 Coffee 16 14 Diamonds 11 9 Foreign exchange holdings (Bank of Tanzania) - February 28, 1971: Sh 365.3 million (US $ equivalent 51 million) ThF Position: (US . Million) Quota 32.0 Dawalings _ Allocation of SDR's 9.9 if.inus Drawings (August 1970) 3.5 6.4 External Public Debt: (US $ Million) December 31 December 31 1969 1964 Total debt outstanding Tanzania debt 274.9 168.5 One-third of EAC debt 72.1 62.5 Total debt service Tanzania debt 14.7 5.1 One-third of EAC debt 5.4 4.2 Debt service ratio, percent 7.4 4.0 ,a Includes Zmzibar.  AINNEK TIl Page 1 TANZATIA CREDIT AND PROJECT SUTIARY Borrower: United Republic of Tanzania. Amount: US$6.5 million equivalent. Terms: Standard IDA terms. Project: THIRD HIGHW;AY PROJECT Improvement of 200 km of primary roads and 475 km of agricultural feeder roads; technical assistance for project supervision and training of local staff; and engineering and other studies for preparation of the project and for the development of a further 250 km of high priority roads. Cost of (US$ '0OOs) Poject: Component Local Foreign Total Construction 1,546 3,284 4,830 Equipment, Materials and Labor 472 1,005 1477 Supervision and Training 340 643 983 Preinvestment Studies 182 657 839 2,54O 5,589 8,129 Contingencies 483 901 1,384 Total Project Cost 3,023 62490 9,513 Financing: The credit would finance the foreign exchange component of the project, amounting to 68% of total project costs. The local currency component would be provided by the Borrower. Procurement International competitive bidding for awzard of contract Arrangements: for primary road improvenment. Also for supply of equip- ment and materials required for betterment of feeder roads, which would be carried out using departmental forces.  ANNEX III Page 2 Estimated Fiscal Year Disbursements: PS$ 'oos) 1972 1973 1974 1975 Total 3W) 2,750 3,190 200 6,500 Rate of Economic rate estimated at 14-28%. Return: Map: A map is attached of Tanzania's highway system, indicating the proposed project.  = -uhe-r 89 < ikr V/or r_ B-c h oLak Vtto, io oke Victorira N-K. E N Y A S e n g c 4/4\~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~< /~~~~~~N rrrwc gc2 BJC MWANZA 5'~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~C os < \ \ \ < M aji M otof~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M r X / GEITA DISTRICT 0 0 MARA REGION Khrrmw,.\ 0 | ~~U G A N) r A , (1 ks~ ~ UGI NDA s~~~~~rcp ,Lak= ea r JFf> A ,t _K t Xf- 9725BUKOBA K E N Y A RWANDA j