Introduction
Since the mid-1990s, donors and the Government of Tanzania have worked very hard to repair relations that had become severely strained. Today, Tanzania is regarded by many as a model of donor-Government “partnership.” The Poverty Reduction Strategy (PRS), which received the endorsement of the Boards of the IMF and World Bank in late 2000, is the basis for the partnership. A variety of mechanisms have been developed to encourage greater alignment of donor assistance with the priorities outlined in the PRS and the harmonization of operational procedures among donors (Odйn and Tinnes 2003, OECD/DAC 2003, Ronsholt 2002). Most recently, donors have begun discussing the possibility of developing a joint country assistance strategy. All of these measures are intended to enhance local “ownership” of the development process and reduce the transaction costs of aid for the Government. Principles governing the relationship between donors and the Government are spelled out in the Tanzania Assistance Strategy (TAS), and both parties’ adherence to their respective commitments is evaluated in advance of Consultative Group meetings by an Independent Monitoring Group (IMG)1. This type of institutionalized “mutual review” process, conducted by an independent body, is unique to Tanzania.
As these processes have developed, Tanzania has seen a significant increase in the amount of official development assistance (ODA) it receives. Between 1999 and 2002, net ODA rose from $990 million to over $1.2 billion, of which 58 percent is estimated to have accrued to the Government (World Bank 2003a). In addition, donors have increasingly shifted their assistance away from financing individual projects toward more flexible forms of assistance, including sector baskets and general budget support. In Tanzania's FY02, the share of assistance
received by the Government that was provided as program support stood at 58 percent, up from 32 percent in FY99 (World Bank 2003a)2. And it appears this trend is likely to continue (see Table 1). Some donors that have not contributed to sector baskets, such as Belgium, expect to begin providing assistance in this manner. The UK has become the first donor to shift its sector-earmarked assistance into general budget support, and other donors hope to follow suit3. USAID does not contribute to any of the sector baskets, nor does it provide assistance in the form of general budget support. In Tanzania, USAID stands out as an obvious outlier among donors.
This brief paper represents an effort to capture, in a very modest way, the effectiveness of general budget support as an aid instrument in Tanzania. It is based mainly on interviews conducted over the course of a few weeks with a sample of donors, most of which provide general budget support, though in varying degrees; a small number of Government representatives; and several non-governmental actors4. It thus provides only a rough snapshot of the salient issues surrounding the increasing shift among donors to provide assistance in the form of general budget support in Tanzania. An attempt is made to examine the issues in the context of a broader international effort to evaluate the effectiveness of general budget support. The paper then explores situations in which general budget support may not be the most appropriate aid instrument and offers suggestions for the types of complementary investments that might improve the effectiveness of general budget support.
Footnotes:
- This paper was prepared to inform the development of USAID/Tanzania’s Country Strategic Plan for the period 2005-2014. Views expressed herein are those of the author and should not be attributed to USAID.
- The author is an Economist in USAID’s Bureau for Africa (AFR/DP/POSE). I am grateful to Deanna Gordon, Axel de La Maisonneuve, and Geir Sundet for helpful comments and suggestions and to Ray Kirkland, Erin Holleran, and their staffs for facilitating the interviews on which this report is based. Additional comments can be sent to bfrantz@usaid.gov.
- The development of the TAS and IMG can be traced to a report prepared under the leadership of Gerry Helleiner in 1995, popularly known as the Helleiner Report, which examined the relationship between donors and the
Government and recommended ways in which the relationship might be improved.
- Tanzania's fiscal year begins on 1 July and ends on 30 June. As such, FY99 refers to the period 1 July 1998 – 30 June 1999.
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It was also reported that NGOs perceive they are receiving less funding from donors as a result of the increasing
use of general budget support, but figures were not available to confirm this. When asked, most donors said they
had no intention of reducing the amount of assistance made available directly to NGOs.
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A list of persons interviewed is provided in Annex 1.
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