European Union, Tanzania sign New Budget Support on Tanzania Economic and Fiscal Governance Programme
Monday, 03 April 2017, Dar es Salaam;
Mr Doto James, Permanent Secretary of the Ministry of Finance and Planning, and H.E. Roeland van de Geer, Head of the European Union Delegation to Tanzania and the East African Community, today have signed the Financing Agreement for a new budget support programme worth EUR 205 million (equivalent to TZS 486.9 billion). This is part of € 626 million grant [equivalent to TZS 1.5 trillion] that EU has allocated to Tanzania under the 11th EDF for the period 2014 – 2020 to support government budget as well as energy and sustainable agriculture sectors.
The "Tanzania Economic and Fiscal Governance Programme" will contribute to the effective implementation of the Second Five Year Development Plan (FYDP-II) of the United Republic of Tanzania (2016/2017-2020/2021), by providing direct financial support to the budget and ensuring that the necessary fiscal policies (i.e. policies in Domestic Revenue Mobilisation, Public Expenditure Management and Accountability of public funds) are adopted and followed-through.
This Sector Reform Contract is a sector budget support operation, with a focus on Economic and Fiscal Governance. The funds made available under this Financing Agreement will be disbursed in four yearly payments depending on progress made by the Government of Tanzania in the areas specified in the Financing Agreement. The benefits of budget support operations include predictability, accountability and increased aid effectiveness through the use of country systems.
Two complementary measures to this budget support are part of this programme: support to the Tanzania Revenue Authority (TRA) in their tax modernisation programme and a facility to provide high-quality research to foster the policy dialogue on economic governance.
Permanent Secretary, Mr Doto James said, "The support will play an important role in complementing domestic resources for financing priority expenditures under the 5-Year Development Project Phase II. The Government greatly values and appreciates European Union's commitment to Budget Support and would like to encourage other Development Partners to re-consider use of the instrument in channeling their financial support. I re-affirm the 5th Phase Government’s steady commitment to sound and prudent economic and public financial management and accountability”.
Tanzania is on a path of rapid industrialisation and aims to reach a middle-income status by 2025. To ensure that this growth is sustainable and inclusive, the Government of Tanzania has to ensure that it optimally captures potential revenues for the national budget, develops a relevant and credible budget reflecting the national development strategies, avoiding fiscal risks; and improves the execution of the budget to ensure value for money and effectiveness in the implementation of the national policies. Sectoral policies have suffered in the past years from shortages of resources, weaknesses in planning, un-expected expenditures competing with an approved budget, and problems with expenditure management. A well planned, adequately funded and properly executed and controlled budget will benefit these policies directly.
EU Ambassador H.E. Roeland van de Geer said, "We are fully aware of the considerable political and economic challenges that remain at present in Tanzania, and are committed to supporting the Government in facing them. It is felt that this Sector Reform Contract is best suited to assist Government in improving its economic and fiscal governance, and therefore achieve the progress it has set out for itself in the second Five Year Development Plan."
Background:
The EU, together with other Development Partners, is supporting the implementation by the Government of the second Five Year Development Plan (FYDP-II). Budget support is one of the modalities used to strengthen the capacity of the Government to deliver results and improve the lives of Tanzanian citizens, by reducing poverty and inequality.
Budget Support means that Development Partners (DPs) provide un-earmarked money to the Treasury to support Tanzania’s own development planning and implementation through the budget. The Government of Tanzania (GoT) decides on the allocation of funds in the budget, guided by national policies. The Parliament then approves the national budget.
An independent evaluation of Budget Support to Tanzania in 2013 concluded that Budget Support had an important influence on growth, on improved outcomes in the education sector and on improvements in non-income poverty. Budget Support funds allowed the Government to maintain a high level of development spending, without increasing domestic borrowing, contributing to a sustained level of public investment and a fast recovery from the global financial crisis. The Evaluation concluded that neither project funding nor common basket funding could have achieved the same results with the same degree of efficiency, effectiveness and sustainability.
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