Contacts In Washington: Rachel McColgan-Arnold (202) 458-5299 rmccolgan@worldbank.org In Dar es Salaam: Nicodemus Odhiambo Marcus (255-22) 216-3246 nmarcus@worldbank.org Washington, June 9, 2009 - The World Bank’s Board of Executive Directors today approved an International Development Association (IDA) credit* of US$190 million to support implementation of Tanzania’s National Strategy for Growth and Reduction of Poverty (MKUKUTA). The Seventh Poverty Reduction Support Credit (PRSC-7) focuses on sustaining high and shared economic growth and expanding the effective delivery of basic services through financing the government budget. PRSC-7 is the fourth in a series of five annual PRSCs and is provided in the context of 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. Within the MKUKUTA framework, the PRSC series focuses on two sets of objectives; sustaining high and shared economic growth and expanding the effective delivery of basic public services through the government budget. As a policy-based budget support loan, the disbursement is triggered by the government’s performance in implementing the MKUKUTA on the basis of selected indictors and agreed policy actions. The credit, together with other development partners’ contributions, sustains the government in funding its basic services and infrastructure development needs, while strengthening the country’s financial management and budgetary delivery systems. It supports the progress achieved in improving the institutional and financial set-up for managing the energy sector in general, progress towards moving to a national public private partnership policy, including for infrastructure, the production of better result information on important social sectors, such as health and education, and improved capacity for audit and procurement of the national budget. Tanzania has implemented a comprehensive economic reform program that has produced good macroeconomic performance and stability characterized by relatively high economic growth and low inflation. For the last three years, the rate of growth has been within the range of seven percent. The foreign reserve position has improved as well. Although the country’s leadership is still committed to pursuing a broad structural reform agenda needed to modernize the economy, implementation of structural reforms has weakened over the last few years, and, in some areas, policy reversals have occurred. Tanzania’s ranking on the Cost of Doing Business and on the World Competitiveness indicators has declined slightly; the Public Expenditure and Financial Accountability assessment and the UK Department for International Development’s Public Financial Management risk assessment have downgraded Tanzania; its ranking by Transparency International has fallen; and the 2008 Country Policy and Institutional Assessment rating, though still relatively high at 3.8, has also been revised downward by 0.1 points. Progress on the government’s main private sector development and public financial reform programs has been rated unsatisfactory by development partners as have two other core reforms, namely legal and local government. “The credit was reduced from an initial indicative amount of US$200 million to US$190 million to reflect the government’s mixed performance in implementing policy reforms, in particular inadequate progress with respect to the business climate for small local investors, and Public Financial Management Reform,” said John Murray McIntire, World Bank Country Director for Tanzania, Uganda, and Burundi. Based on the recent Household Budget Survey, reaching the Millennium Development Goals (MDGs) also remains elusive at this time, even in areas previously considered within reach such as income poverty, health and access to safe drinking water. In particular, attention needs to be focused on enabling broad-based growth that would diversify sources of growth and make a greater impact on poverty reduction. “Despite encouraging economic trends, growth remains inadequate to meet development and poverty reduction objectives of the MKUKUTA and must be accelerated,” added the Bank . The major challenge is to achieve and sustain higher rates of growth, while ensuring that achievements at the macro level translate into genuine economic benefits at the grassroots level.” Continued high levels of financial support from the World Bank depend on sustaining efforts to fight corruption, strengthening domestic accountability and transparency, and increasing income generation opportunities in rural areas and for small and medium enterprises. A detailed description of the credit is contained in the PRSC-7 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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