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NEWS
By COSTANTINE MUGANYIZI, TEA Special Correspondent
Posted Saturday, May 9 2015 at 14:33
IN SUMMARY
Budget support to Tanzania by donors is growing thinner after the UK, Norway and Germany pulled out of the programme.
The three follow in the footsteps of Switzerland and the Netherlands, which withdrew earlier.
This leaves the African Development Bank, Canada, Denmark, Finland, Ireland, the European Commission, Japan, Sweden, and the World Bank as the only ones offering budget support.
As a result of the pulling out, Tanzania now has to turn to Chinese grants, private foundations and borrowing from local and international sources.
European Union ambassador Filiberto Sebregondi confirmed that Germany and Norway had taken the decision.
"The UK will continue giving aid, but with a sector-focused modality," he said.
Diplomats said that the donors are pulling out because of the government's failure to deal with the IPTL escrow account scam.
But Treasury Permanent Secretary Dr Servacius Likwelile blamed the group for undermining the current budget and derailing efforts to alleviate poverty.
Dr Likwelile said the government would have to do without budget support since it was unpredictable and had fallen in amount over time.
"It's important to understand also that any budget requires a predictable source. Unfortunately budget support has of late not been a predictable source," Dr Likwelile told The EastAfrican.
"Donors dictate its disbursement depending on how satisfactory they are with certain developments: as they have done with the IPTL issue! Our budget credibility suffers as a result of that," he said.
Fiscal analysts agree that despite Tanzania's desire to end donor dependence, the country cannot do so soon due its narrow tax base. Official figures show that currently direct taxes in Tanzania are paid by less than two million people and organisations.
In the provisional estimates for the 2015/16 budget, only eight per cent will come from donors, down from 14.8 per cent.
In the 2014/15 fiscal year, aid was to comprise five per cent but due to the IPTL saga only 69 per cent of the promised $558.8 million has been released to date. A diplomatic source cast doubts as to the likelihood of its disbursement.
He cited, first, the withdrawal of three donors from the budget support aid mechanism, which was introduced in 2001 as a successor to the Multilateral Debt Fund, through which donors helped Tanzania service debts owed to international financial institutions. Second, the government's refusal to meet the budget support group on how new aid will be provided and better managed in the future.
The decisive factor is however the IPTL case. So far little has been done about the people who took money from VIP Engineering and Marketing Ltd of James Rugemalira.
He was to receive 30 per cent of the $122 million that was withdrawn from the standby account at Bank of Tanzania. To date, nothing has been heard of the beneficiaries of the 70 per cent that was transferred to Stanbic Bank and then withdrawn.
Since the days of the late Mwalimu Julius Nyerere, the country has been among the top 10 recipients of aid in the world that averaged $2 billion annually.
In the latest budget support report, Tanzania is ranked among the top, having received $5 billion during the years 2005/6–2011/12.
Between 2012/13 and last month, donors gave Tanzania another $1.61 billion under budget support. They say they can only release the remaining $175.4 million for 2014/15 and make commitments for 2015/16 after Treasury organises the budget support annual review meeting.
Dr Likwelile said no meeting was coming up until all of the pledged general budget support funds are released.
"The Annual Policy Dialogue was supposed to be held in November. It couldn't because the IPTL issue was unresolved. They have not fully disbursed until now. Some of them have decided not to continue with this aid modality," Dr Likwelile said.
"Money associated with budget support has also diminished to as low as $90 million. So who is not interested in budget support and what is the use of holding the annual review meeting if programmes have not been financed by budget support money? I just hope all of us will concentrate on what matters for the development of Tanzania and its citizens," he added.
The current head of the budget support development partners group Mr Sebregondi said the donors have always respected and surpassed their aid pledges.
He said from 2007 to 2015, 12 per cent more than the initial pledges has been disbursed. For example, in the last financial year, donors gave $643 million instead of the promised $561 million.
Mr Sebregondi said 2014/15 was an exception with only $383.4 million provided.
He said the donors were to continue with the budget support modality but with conditions. They also want it to honour the Partnership Framework Memorandum (PFM) under which budget support is given. The PFM principles include good governance, accountability of the Government to its citizens, and integrity in public life, including the active fight against corruption in accordance with Tanzanian laws.
"For the financial year 2015/16, Budget Support Development Partners (BS DPs) have allocated $317.5 million, which could be disbursed if the provisions spelled out in the PFM are met," Mr Sebregondi said.
"This means that the government and BS DPs should hold a joint (BS) Annual Review to assess: how the Government development strategies have been implemented in the previous year, the commitment to the so-called underlying principles, and the progress in relation to the indicators agreed as triggers for disbursement," he added.
Mr Sebregondi said talks are under way to fix a date for the event.
By COSTANTINE MUGANYIZI, TEA Special Correspondent
Posted Saturday, May 9 2015 at 14:33
IN SUMMARY
- Budget support to Tanzania by donors is growing thinner after the UK, Norway and Germany pulled out of the programme.
- Diplomats said that the donors are pulling out because of the government's failure to deal with the IPTL escrow account scam.
- But Treasury Permanent Secretary Dr Servacius Likwelile blamed the group for undermining the current budget and derailing efforts to alleviate poverty.
Budget support to Tanzania by donors is growing thinner after the UK, Norway and Germany pulled out of the programme.
The three follow in the footsteps of Switzerland and the Netherlands, which withdrew earlier.
This leaves the African Development Bank, Canada, Denmark, Finland, Ireland, the European Commission, Japan, Sweden, and the World Bank as the only ones offering budget support.
As a result of the pulling out, Tanzania now has to turn to Chinese grants, private foundations and borrowing from local and international sources.
European Union ambassador Filiberto Sebregondi confirmed that Germany and Norway had taken the decision.
"The UK will continue giving aid, but with a sector-focused modality," he said.
Diplomats said that the donors are pulling out because of the government's failure to deal with the IPTL escrow account scam.
But Treasury Permanent Secretary Dr Servacius Likwelile blamed the group for undermining the current budget and derailing efforts to alleviate poverty.
Dr Likwelile said the government would have to do without budget support since it was unpredictable and had fallen in amount over time.
"It's important to understand also that any budget requires a predictable source. Unfortunately budget support has of late not been a predictable source," Dr Likwelile told The EastAfrican.
"Donors dictate its disbursement depending on how satisfactory they are with certain developments: as they have done with the IPTL issue! Our budget credibility suffers as a result of that," he said.
Fiscal analysts agree that despite Tanzania's desire to end donor dependence, the country cannot do so soon due its narrow tax base. Official figures show that currently direct taxes in Tanzania are paid by less than two million people and organisations.
In the provisional estimates for the 2015/16 budget, only eight per cent will come from donors, down from 14.8 per cent.
In the 2014/15 fiscal year, aid was to comprise five per cent but due to the IPTL saga only 69 per cent of the promised $558.8 million has been released to date. A diplomatic source cast doubts as to the likelihood of its disbursement.
He cited, first, the withdrawal of three donors from the budget support aid mechanism, which was introduced in 2001 as a successor to the Multilateral Debt Fund, through which donors helped Tanzania service debts owed to international financial institutions. Second, the government's refusal to meet the budget support group on how new aid will be provided and better managed in the future.
The decisive factor is however the IPTL case. So far little has been done about the people who took money from VIP Engineering and Marketing Ltd of James Rugemalira.
He was to receive 30 per cent of the $122 million that was withdrawn from the standby account at Bank of Tanzania. To date, nothing has been heard of the beneficiaries of the 70 per cent that was transferred to Stanbic Bank and then withdrawn.
Since the days of the late Mwalimu Julius Nyerere, the country has been among the top 10 recipients of aid in the world that averaged $2 billion annually.
In the latest budget support report, Tanzania is ranked among the top, having received $5 billion during the years 2005/6–2011/12.
Between 2012/13 and last month, donors gave Tanzania another $1.61 billion under budget support. They say they can only release the remaining $175.4 million for 2014/15 and make commitments for 2015/16 after Treasury organises the budget support annual review meeting.
Dr Likwelile said no meeting was coming up until all of the pledged general budget support funds are released.
"The Annual Policy Dialogue was supposed to be held in November. It couldn't because the IPTL issue was unresolved. They have not fully disbursed until now. Some of them have decided not to continue with this aid modality," Dr Likwelile said.
"Money associated with budget support has also diminished to as low as $90 million. So who is not interested in budget support and what is the use of holding the annual review meeting if programmes have not been financed by budget support money? I just hope all of us will concentrate on what matters for the development of Tanzania and its citizens," he added.
The current head of the budget support development partners group Mr Sebregondi said the donors have always respected and surpassed their aid pledges.
He said from 2007 to 2015, 12 per cent more than the initial pledges has been disbursed. For example, in the last financial year, donors gave $643 million instead of the promised $561 million.
Mr Sebregondi said 2014/15 was an exception with only $383.4 million provided.
He said the donors were to continue with the budget support modality but with conditions. They also want it to honour the Partnership Framework Memorandum (PFM) under which budget support is given. The PFM principles include good governance, accountability of the Government to its citizens, and integrity in public life, including the active fight against corruption in accordance with Tanzanian laws.
"For the financial year 2015/16, Budget Support Development Partners (BS DPs) have allocated $317.5 million, which could be disbursed if the provisions spelled out in the PFM are met," Mr Sebregondi said.
"This means that the government and BS DPs should hold a joint (BS) Annual Review to assess: how the Government development strategies have been implemented in the previous year, the commitment to the so-called underlying principles, and the progress in relation to the indicators agreed as triggers for disbursement," he added.
Mr Sebregondi said talks are under way to fix a date for the event.
