Contacts In Washington: Rachel McColgan-Arnold (202) 458 5299 rmccolgan@worldbank.org In Dar es Salaam: Nicodemus Odhiambo (255-22) 2163246 nmarcus@worldbank.org Washington, October 21, 2008 - The World Bank’s Board of Executive Directors today approved an International Development Association (IDA) credit* of US$160 million to support implementation of Tanzania’s National Strategy for Growth and Reduction of Poverty (MKUKUTA). The sixth Poverty Reduction Support Credit (PRSC-6) focuses on sustaining high and shared economic growth and expanding the effective delivery of basic services through financing the government budget. It is the third in a series of five annual PRSCs and is provided in the context of a harmonized framework among 14 donors for general budget support to help the government pursue its policy objectives laid out in the three clusters of the MKUKUTA: growth and reduction of income poverty; improved quality of life and social well being; and good governance and accountability. The PRSC-6 Board presentation was delayed by six months following the revelation of the Bank of Tanzania External Payment Account (EPA) fraud, to allow the government to take remedial actions and provide comfort in the fiduciary handling of PRSC funds. In particular, the IMF undertook a Voluntary Safeguard Assessment of the Bank of Tanzania, evaluating the situation, risks, and remedies related to the Bank of Tanzania’s control environment. Continued high levels of financial support from the World Bank depend on sustaining efforts to fight corruption, improving the governance climate, and strengthening domestic accountability and transparency, especially in public financial management and large infrastructure contracts. The government’s action plan to follow-up on the recommendations of the Special Audit of the EPA account will be integrated in next year’s Performance Assessment Framework for budget support. PRSC-6 supports the progress achieved by the government in improving the institutional and financial set-up in the energy and transport sectors and in strengthening the legal framework for governance through the enactment of a new anti-corruption and a new audit bill. The credit, together with other partners’ budget support contributions, also sustains the government in funding its basic services and infrastructure development needs, while strengthening the country’s financial management and budgetary delivery systems. "This Poverty Reduction Support Credit demonstrates the World Bank’s strong commitment to helping Tanzania improve service delivery in the public sector,” said John Murray McIntire, World Bank Country Director for Tanzania, Uganda, and Burundi. “The credit .underpins the country’s reforms to sustain macroeconomic stability, increase domestic resource mobilization, promote pro-poor economic growth, and increase investment in core social services such as education, healthcare, and water supply.” Going forward, the PRSC series will give increased emphasis to shared economic growth, particularly by increasing income generation in rural areas and in areas where rural migrants are settling. “To promote broad-based economic growth, future PRSCs will give additional attention to supporting rural development and improving the environment for private sector development, including in remote and rural areas,” added Paolo B. Zacchia, the World Bank Task Team Leader for PRSC-6. “It will also be important to improve budgeting through increased integrity and strategic alignment of budget funds, and by better integrating public expenditures with more effective monitoring and evaluation systems.” Tanzania has implemented a comprehensive reform program, including macroeconomic stabilization, privatization, reduction of barriers to trade, strengthening of the tax system, decentralization, strengthening of public expenditure and financial management, and public service reforms. However, reforms have stalled in the past few years in some key sectors, such as the business environment and public financial management. Also, remaining infrastructure bottlenecks impose a costly tax on business. Public sector capacity remains weak and governance requires further strengthening. Tanzania’s reforms, supported by significant amounts of development assistance, have helped bolster Tanzania’s GDP growth, which reached an estimated 7.3 percent in 2007. Despite such growth, the pace of poverty reduction remains too slow, highlighting the need for a renewed focus on broad-based economic growth and private sector development, as well as the need for more frequent and robust poverty data to guide Tanzanian policy makers. It also highlights the need for the World Bank and other development partners to sharpen the focus of development assistance on poverty reduction. A detailed description of the credit is contained in the PRSC-6 Program Document, which is publicly available at the web link below, or by sending an email to nmarcus@worldbank.org, or by requesting a hard copy at the World Bank office in Dar es Salaam. ______________________________________________________________________________ *The credit is provided on standard International Development Association (IDA) terms, with a commitment fee of 0.5 percent, a service charge of 0.75 percent over a 40 year period of maturity which includes a 10-year grace period.
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