Report No. 22078-TA The United Republic of Tanzania Public Expenditure Review (In Two Volumes) Volume II: Consolidating the Medium Term Expenditure Framework January 2001 Government of Tanzania and The World Bank Macroeconomics 2, Africa Region * §FIE: Cang GOVERNMENT FISCAL YEAR July I - June 30 (FY00 or 1999/00 = July 1, 1999 to June 30, 2000) CURRENCY EQUIVALENTS Currency Unit = Tanzanian Shilling (T Sh) Interbank Market mid-rate: US$1.00 = T Sh 887.0 (April 16, 2001) ABBREVIATIONS AND ACRONYMS ADT average daily traffic NECTA National Examinations Council of AfDB African Development Bank Tanzania AIDS Acquired Immune Deficiency Syndrome NBC National Bank of Commerce AITF Agricultural Inputs Trust Fund NGO non governmental organization ASYCUDA Computerized Customs Reporting and O&E organizational and efficiency (reviews) Recording System (UNCTAD) O&M operations and maintenance BEMP Basic Education Master Plan OC other charges BOP Balance of Payment OECD Organization for Economic Cooperation BOT Bank of Tanzania and Development CBMS Cash Budget Management Systems OUT Open University of Tanzania CG Consultative Group PAYE pay as you earn CSRP Civil Service Reform Programme PE personnel emoluments DANIDA Danish International Development PER Public Expenditure Review Agency PFP Policy Framework Paper DEO District Education Officer PHC Primary Health Care DMO District Medical Officer PSWB Public Sector Wage Bill DMT District, Municipal and Town Councils PTR pupil teacher ratio ESAF Enhanced Structural Adjustment Facility REO Regional Engineer's Office ESP Education Sector Programmne RPFB Rolling Plan and Forward Budget FAO Food and Agriculture Organization SAC Structural Adjustment Credit GDP gross domestic product SAL Structural Adjustment Lending GNP gross national product SGR Strategic Grain Reserve GOT Government of Tanzania SIP Sector Investment Program HIPC Highly Indebted Poor Counties Debt SPA Special Program of Assistance Initiative SSA Sub-Saharan Africa HIV Human Immuno-deficiency Virus STD Sexually Transmitted Disease IDA International Development Association TAC Tanzania Audit Corporation IMF International Monetary Fund TANESCO Tanzania Electric Supply Company IRP Integrated Roads Project TAZARA Tanzania Zambia Harbours Authority MAC Ministry of Agriculture and Cooperatives TB Tuberculosis MANTEP Educational Management Training THA Tanzania Harbours Authority Institute TRA Tanzania Revenue Authority MOEC Ministry of Education and Culture TRC Tanzania Railways Corporation MOF Ministry of Finance TTC Teacher Training Colleges MOH Ministry of Health UDSM University of Dar es Salaam MSTHEMinistry of Science, Technology and UNDP United Nations Development Program Higher Education UPE Universal Primary Education MTEF Medium Term Expenditure Framework VAT Value Added Tax Vice President: Callisto Madavo Director: James W. Adams Sector Manager: Frederick Kilby Task Team Leader: Benno Ndulu CONTENTS 1. MACROECONOMIC CONTEXT OF THE MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) .................. 1 1.1 INTRODUCTION .1 1.2 ECONOMIC GROWTH. 1 1.3 INFLATION. 2 1.4 GOVERNMENT FINANCE. 3 1.5 MONETARY DEVELOPMENTS. 4 1.6 EXTERNAL SECTOR. 7 1.7 PRIVATE SECTOR DEVELOPMENT. 8 1.8 IMPLEMENTATION OF THE DEVELOPMENT VISION 2025. 9 2. CROSS-SECTOR MTEF 2000/01- 2002/03 ...................................................... 10 2.1 INTRODUCTION ...................................................... 10 2.2 EXPERIENCE SINCE THE INTRODUCTION OF THE MTEF ...................................................... I 1 2.3 REVIEW OF SECTOR ALLOCATIONS FOR FY98 - FY00 ...................................................... 12 2.4 OUTSTANDING PRIORITY SECTOR ISSUES ............. ......................................... 14 2.5 OVERVIEW OF BUDGET PERFORMANCE FOR JULY 1999 - MARCH 2000 .................................. 20 2.6 MTEF FYO1-FY03 .21 3. PUBLIC SERVICE REFORM PROGRAM ................................................. 40 3.1 RATIONALE FOR THE PUBLIC SERVICE REFORM PROGRAM - PURPOSE AND PHASING . 40 3.2 STRATEGIC CONTEXT .41 3.3 THE CIVIL SERVICE REFORM PROGRAM -- CSRP (1991-1999) .43 3.4 THE PUBLIC SERVICE REFORM PROGRAM -- PSRP (2000-200 1).45 3.5 DETAILED DESCRIPTION OF EACH PSRP COMPONENT .47 3.6 REFORM TARGETS AND BENEFICIARIES .53 3.7 MANAGEMENT AND COORDINATION OF THE PSRP .54 3.8 VISION OF THE NEW PUBLIC SERVICE .57 3.8 PROGRAM ANALYSIS: .61 4. HIV/AIDS AS A DEVELOPMENT PROBLEM ................ ................................. 65 4.1 THE GLOBAL PERSPECTIVE ................................................. 65 4.2 THE REGIONAL PERSPECTIVE (SUB-SAHARAN AFRICA) ................................................. 66 4.3 HIV/AIDS SITUATION IN TANZANIA ................................................. 68 5. MTEF FOR THE EDUCATION SECTOR ........... ...................................... 76 5.1 INTRODUCTION ................................................. 76 5.2 REVIEW OF EXPENDITURE PERFORMANCE ................................................. 79 5.3 REVIEW OF SECTOR PRIORITIES ................................................. 86 5.4 EXPENDITURE PROJECTIONS ................................................. 90 6. MTEF FOR THE HEALTH SECTOR 2000/01 - 2002/03 ................................................. 102 6.1 INTRODUCTION .102 6.2 HEALTH SECTOR REFORMS .102 6.3 HEALTH POLICY OBJECTIVES .103 6.4 IMPLEMENTATION STRATEGIES .104 6.5 PRIORITY AREAS WITHIN THE SECTOR .105 6.6 HEALTH SECTOR OVERALL EXPENDITURE PERFORMANCE FY1997- 200 .108 6.7 FINANCIAL RESOURCES AND MEDIUM TERM FRAMEWORK FOR THE 2000 - 2003 .110 7. MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) 2000/01 - 2002/03 FOR THE MINISTRY OF WORKS ................................ 113 7.1 INTRODUCTION ................................ 113 7.2 OVERVIEW OF THE ROAD NETWORK ................................ 113 7.3 ORGANIZATION AND MANAGEMENT OF THE ROAD SECTOR . 117 7.4 REVIEW OF EXPENDITURE PERFORMANCE FY 1997/98-FY 1999/2000 ................ .................. 118 7.5 THEMTEF FORTHEROADS SECIOR ....................................................... 123 8. MTEF FOR THE WATER SECTOR 2000/01 - 2002/03 ...................................................... 139 8.1 NATIONALGOALS ................ ,139 8.2 VISION .......139....... ,,,.. 139 8.3 MISSION .........9...........,, 139 8.4 MEDIUM TERM OBJECTIVES ...................... 140 8.5 MEDIUM TERM EXPENDITURE STRATEGIES .............................. ,.,.,.,.,, ... 140 8.6 MEDIUM TERM PRIORITIZED SERVICE DELIVERY TARGETS AND ACTIVITIES WITH RESPECT To POLICY OBJECTIVES ........................ .... 141 8.7 MEDIUM TERM OPERATIONAL TARGETS AND BUDGET ESTIMATES BY SERVICE/ OUTPUT LEVELS IN TSHS MILLION . ..,.. 147 8.8 MEDIUM TERM DEVELOPMENT TARGETS BY SERVICE OR OUTPUT DELIVERY LEVELS AND BUDGET ESTIMATES IN TSHS MILLION .152 8.9 MEDIUM TERM EXPENDITURE FRAMEWORK FOR 2000/01 - 2002/03 FOR THE WATER SECTOR ................................................................................................ , 153 9. MTEF FOR THE AGRICULTURE SECTOR 2000/01 - 2002/03 .154 9.1 INTRODUCTION .........154.........., 154 9.2 CURRENT INSTITUTIONAL PERSPECTIVES ...........,.,,.,,,.,,.. 155 9.3 REVIEW OF BUDGETS PERFORMANCE (1997/98, 1998/99 & 1999/2000) AGAINST THE MISSION, PLANNED OBJECTIVES, POLICIES, STRATEGIES, TARGETS AND ACTIVITIES. 156 9.4 MEDIUM TERM EXPENDITURE FRAMEWORK (2000/01 - 2002/03) .................................... 160 9.5 CONCLUSION .168................,,,,,,,.,,,,,, ...............,, 168 10. MTEF FOR THE MINISTRY OF JUSTICE AND CONSTITUTIONAL AFFAIRS .172 10.1 INTRODUCTION........................................................................................................,,.,,,.,,,,.,,,.172 10.2 RFV IEW OF EXPENDITURE PERFORMANCE ..,,...... ...,,,,,,,,., . 173 10.3 REVIEW OF PROBLEMS AND PRIORITIES ......... , , ....... 189 10.4 PROJECTION FOR FUTURE BUDGETS ............................... . ,194 11. LANDSECTORMTEF .199 11.1 INTRODUCTION .............. . . . . . . . 199 11.2 REVIEW OF 1999/2000 PERFORMANCE .202 PREFACE As in previous years, the FY00 Public Expenditure Review (PER) process had the twin objectives of (a) providing support to the Government of Tanzania in the preparation of its budget and Medium Term Expenditure Framework (MTEF) and (b) undertaking an external evaluation of Tanzania's budget performance. The process was led by the Ministry of Finance. The program of work for PER FY00 was carried out with financial and technical support from various donors, including the World Bank, European Union, UNDP, DFID, Denmark, Sweden, Switzerland, and Finland. This report presents the main outputs of the FY00 PER process in Tanzania in two volumes. Volume I consists of three major parts: Part I describes the main features of the PER process as implemented during FY00. Part 2 presents the main findings emerging from a review of fiscal performance and public expenditure management in Tanzania. In addition, part 2 contains a discussion of systemic fiscal issues that are critical to enhancing the efficiency and effectiveness of public expenditures in Tanzania. Part 3 contains summaries of the updates of sectoral expenditure reviews which were undertaken by the priority sector ministries with the support of local and international consultants. The sectors covered include education, health, water, agriculture, works, lands and justice. The volume also contains a data annex and the minutes of the consultative PER meeting held in May 2000. Volume 1I presents the Government's MTEF for FY01 - FY03, which was discussed at the consultative meeting in May 2000. The MTEF consists of a description of the macroeconomic context, a cross sectoral MTEF which provides the resource envelopes for individual sectors, and sector MTEFs of the priority sectors, i.e., education, health, water, works, agriculture, justice and lands. In addition, the MTEF also contains a detailed discussion of the public sector reform program and the HIV/AIDS pandemic, which is clearly identified as a key challenge for Tanzania's development efforts which requires a multi-sectoral approach to contain its spread. This report is a joint effort of the Government of Tanzania and a team consisting of a Working Group drawn from the World Bank, other UN agencies, bilateral donors, research/academic institutions and NGOs. The joint-donor mission in November/ December 1999 consisted of: Benno Ndulu (mission leader, AFMTZ), Philip Mpango, Ben Tarimo (AFMTZ); Sumana Dhar, Robert Utz (AFTM2); Hamisi Mwinyimvua (University of Dar es Salaam); Frans van Rijn (Netherlands Embassy), Charlotta Norrby (Swedish Embassy), Torben Lindqvist (Danish Embassy) and Stevan Lee (DFID). A follow-up mission in March-April, 2000 was launched to assist the Government to prepare the cross-sector MTEF and sector MTEFs. The report was written under the supervision of Frederick Kilby, Sector Manager, AFTM2 and Peniel Lyimo, Deputy Permanent Secretary, Ministry of Finance, Government of Tanzania. Allister Moon, Senior Economist, ECSPE, and Anand Rajaram, Senior Economist, PRMPS, provided valuable comments and direction as peer reviewers. The document was produced by Patrick Mamboleo under the guidance of Roboid Covington (AFTM2). 1. MACROECONOMIC CONTEXT OF THE MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) 1.1 INTRODUCTION 1.1 This chapter provides a brief review of the macroeconomic performance of the Tanzanian economy over the period 1994 - 1999. The review concentrates on economic growth, inflation, fiscal and monetary developments, the external sector, private sector development and ends with a note on the implementation of the National Vision 2025. The broad objective is to characterize the trends, drawing out specific emerging issues that have a bearing on the PER process. This is done taking into account the fact that structural reforms have been much more pronounced in their impact, making the Tanzania of 1999 very different to that of the pre- 1994 era. 1.2 ECONoMic GROWTH 1.2 The performance in terms of real GDP growth in recent years (Table 1.1), indicates Tanzania's economy to be stabilizing and poised for higher levels of growth in the long run. From a low growth rate of 1.4 percent in 1994, GDP has steadily risen to 4.8 percent recorded in 1999, notwithstanding shocks of adverse weather conditions to agriculture during the period. Output in agriculture continues to have the highest impact on the levels of overall economic growth, contributing around half of total GDP. With a low growth rate of 1.9 percent in 1998, agriculture registered significant growth of over 4.0 percent in 1999, the highest in recent years. The performance of other sectors, including mining, manufacturing, electricity and water has also been improving during the period. 1.3 The recovery of growth is mainly a result of the macroeconomic reforms that Tanzania has been implementing in recent years. The up-turn in GDP growth is, however, still too low to have significant impact on poverty reduction implying that the achievement of higher and sustained growth is imperative. Besides consolidating and sustaining macroeconomic reforms, the achievement of higher growth will require (i) improved performance of agriculture whose dominance on the national economy will continue to dictate overall economic performance (ii) strengthening the environment for private investments in the pacemakers for growth, in particular mining and tourism, given the vast unexploited mineral deposits and the huge and unique tourism potential (iii) further privatisation and restructuring of the industrial sector which has already started to pay off in terms of growth in manufacturing. Table 1.1: Trends in Selected macroeconomic indicators Indicator 1994 1995 1996 1997 1998 1999 Real GDP Growth 1.4 3.6 4.2 3.3 4.0 4.8 Inflation 35.5 27.1 21.0 16.1 12.9 7.8 Exchange Rate (Tshs/US $) -annual average 509.6 574.8 580.0 612.1 664.7 743.4 Export/Import ratio (Goods) 39.7 50.9 63.0 65.6 43.1 38.1 Balance of Payments (mil. US $) -461.3 -386.0 -245.0 -556.0 -615.7 -411.3 Current Account Balance (mil. US $) -711.1 -646.4 -461.3 -555.1 -946.6 -861.9 Foreign Reserves (Weeks of imports) 9.5 6.6 11.3 16.6 13.3 17.7 1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 Govt. Domestic Revenue (% of GDP,p) 12.5 13.2 13.5 12.6 12.5 12.4 Total Govt. Expenditure (% of GDPm.) 15.5 13.1 15.2 14.8 14.8 16.9 Fiscal Balance (before grants) - % of GDPmp -3.1 0.1 -1.7 -2.3 -2.3 -4.5 Growth of Money Supply (M3) - % 37.7 23.5 18.2 14.5 11.0 9.2 Average Deposit rate 15.0 12.0 11.0 10.0 9.2 9.0 Average Lending rate 31.0 28.0 26.5 24.0 22.0 18.0 1.3 INFLATION 1.4 Inflation which was at its highest peak in 1994 at 35.5 percent has steadily declined over time, reaching 7.0 percent by December 1999, the lowest level recorded in the past 22 years. Subsequently, inflation has continued to decline further to 5.9 percent by end June 2000, which is slightly above the target of 5.0 percent. This decline is mainly due to the tight monetary and fiscal stance pursued during the period as well as improved supplies of some food items. 1.5 Although the anti-inflation stance appears to have paid off there is need to maintain the tight monetary and fiscal policy stance as well as increased production of food so as to reduce inflation to below 5.0 percent, consistent with inflation levels in Tanzania's major trading partners. Stability of food prices is particularly crucial in maintaining low inflation levels because the significant weight of food in the NCPI (71.2 percent). Thus, food supplies, and prices, significantly influence the level of inflation in the country. 2 Chart 1: Trends in GDP Growth and Inflation 400 35.0 ---------- 30.D) 25.0 20.0 . . - -- 1 5 .0 - - - - - -- - - - . - -- - - -- -- - - - --- - 10.0 5.0 -- -- - - - - - O .0 1994 1995 1996 1997 1998 1999 4 Real GDP Growth - Inflaton 1.4 GOVERNMENT FINANCE 1.6 In recent years, Tanzania has made considerable progress in restoring fiscal discipline and channelling public resources towards defined priority areas. However, the extremely low domestic revenue base leads to low level of revenue mobilisation and severely limits the Government's capacity to provide the most basic services to its people. 1.7 While domestic revenue as a proportion of nominal GDP has declined from 13.5 percent in 1996/97 to 11.3 percent in 1999/2000, the reduction in the fiscal deficit (before grants) is almost entirely attributed to reductions in Government expenditures (excluding amortisation), which fell from 15.5 percent in 1994/95 to 14.8 percent in 1998/99. The domestic revenue position appears to have improved in 1996/97 following the establishment of the Tanzania Revenue Authority in July 1996, which enhanced revenue collection efforts. The introduction of the cash budget system during the year further reinforced discipline in Government expenditure. 1.8 The cash budget system has, however, some consequences. As a result of massive expenditure cuts made to match revenue availability most Government obligations, apart from the wage bill and debt service, have been cut substantially affecting service delivery in all sectors. Currently however, priority activities within priority social sectors (education, health, water, roads and agriculture) have been 3 protected to some extent and facilitated by the Multilateral Debt Fund facility and the prioritisation process built into the MTEF. 1.9 The government is committed to continue undertaking prudent fiscal measures to ensure macroeconomic stability. Further stabilization efforts will focus on enhancing revenue collections, expanding the tax base and rationalization of the tax system. Stringent budgetary measures will also continue to be exercised in order to ensure that expenditures match available resources. Similarly, the integrated financial management system will be strengthened to enhance efficiency, effectiveness and transparency in expenditure management. Chart 2: Fiscal Performance 20.0 15.0 - - 10.0 2 5.0 1.0 1994/95 9P/97 1997598 1998699 1999/2000 -10.0 - -. - - - .- --- - . -- .…… -- +-Govt. Domestic Revenue (% of GDPmp) ---Total Govt. Expenditure (% of GDPmp) -h-Fiscal Balance (before grants) - % of GDPmp 1.5 MONETARY DEVELOPMENTS 1.10 During the period under review, the main pre-occupation of the Bank of Tanzania has been the lowering of money supply growth to levels consistent with low and stable rates of inflation. Extended Broad Money (M3) declined from 37.7 percent in 1994/95 to 1 1.0 percent in 1998/99 but preliminary statistics for fiscal year 1999/2000 show that it grew by 21.7 percent by end-June 2000. The rapid decline in 4 money supply growth, led to a rapid decline in the rate of inflation from 35.5 percent in 1994 down to single digits by January 1999 leading to the stability of the exchange rate of the Tanzania shilling against the US Dollar. The exchange rate has steeply depreciated to levels consistent with market conditions with re-established external competitiveness. The recent growth in M3 was mainly driven by a sharp increase in net foreign assets of the banking system as a result of higher foreign exchange inflows from foreign investment activities, donor inflows and increased tourism. 1.11 The performance of credit growth, particularly credit to the productive sectors, has not been impressive after liberalisation. Commercial banks have shown increasing aversion in lending, preferring to holding risk free Government paper, such as Treasury Bills. This partly reflects high risks in lending, difficulties on the part of commercial banks to assess the credit worthiness of private borrowers and problems associated with the handling of commercial disputes. In order to improve bank lending, the Bank of Tanzania is undertaking measures to promote the establishment of a Credit Information Bureau aimed at providing information on credit worthiness to prospective borrowers from commercial banks. In an attempt to speed up the settlement of commercial disputes, the Government has established a Commercial Court in Dar es Salaam as a Division of the High Court. 1.12 The spread between lending and deposit rates continues to be unduly high. Both the concentration of new banks in major urban centres and the restructuring of the National Bank of Commerce has led to the closure of remote branches thereby depriving rural areas of financial services. A deliberate strategy for addressing the rural sector through provision of micro-finance services is thus needed. Fortunately some steps have already been taken in that direction. A national policy framework for Rural and Microfinance has been finalised, to be followed by the revision of the Banking and Financial Institutions Act later in the year, providing for a legal framework for regulation and supervision of microfinance institutions. 5 Chart 3: Growth of Money Supply (M3) 40.0 35.0 \ - -. 30.0\. 25.0- 20.0 15.0 10.0 - - --- -------- - 15. 0 - - - - - ---- - -- - 5 .0 . 0.0 1994195 1995/96 1996197 1997198 1998199 199912000* 6 1.6 EXTERNAL SECTOR 1.13 The bulk of Tanzania's export sector, remains traditional agricultural commodities, accounting for about two thirds of the total export value. Consequently, a large portion of the export bundle is vulnerable to vagaries of weather as experienced in 1998 following the destructive el nino rains and changing world commodity prices, accounting for the weak Balance of Payments position. This weak Balance of Payments position exerted pressure on the maintenance of the market- determnined exchange rate and high level of external reserves. There were some improvement in 1999, with foreign reserves rising to 17.7 weeks of imports from 13.3 weeks in 1998. 1.14 Liberalization of mineral trade, pursuit of macroeconomic stability and removal of foreign exchange restrictions have led to a rapid increase in overt mineral exports in recent years. There are prospects of increased export proceeds resulting from increased output in the mining sector but these are dependant on maintenance of the requisite enabling environment. The same applies to the tourism sector, given improvement of the basic infrastructure facilities and services. Chart 4: Trends in Balance of Payments 00 1. X 1994 1995 1996 1997 1996 1999 -100 -- --------- ------- -200.0 - - - - -I--------- - ---- ---- - - -- --- --- -300.0 -400.0 - - - - - - - - - - - - - - - - - - - - - - - - E - . - - -600.0 - - - - - -- -- -- -- - - - --- - - -700.0 --- . - -800.0 X - ------- -900.0 -1000.0 |-+ Balance of Payments (mii US $) A t Balance mi. US 7 1.7 PRIVATE SECTOR DEVELOPMENT 1.15 The ongoing reforms have influenced the re-definition of the core functions of Government to being that of maintenance of law and order, provision of basic social and economic infrastructure, and creation of an enabling environment for the private sector and other economic agents to invest in productive and commercial activities that will accelerate economic growth and development. In pursuit of those core functions, the Government is now focusing on policy formulation and economic management, investing in the core functions and providing legal and regulatory frameworks. 1.16 During the 1990s, the Government made several institutional changes with a bearing on private sector development such as the establishment of the National Investment Promotion Center, later transformed into the Tanzania Investment Center. Liberalization of the Current Account has reduced transfer risks to foreign investors and the institutionalization of capital markets operations has provided another potential avenue for enhancing private sector participation in investment operations. Further, the Government established a legal and institutional framework to support the privatization program through the Parastatal Sector Reform Commission (PSRC) and Loans and Advances Realization Trust (LART) that developed procedures for liquidation and divestiture of parastatals. Both local and foreign private investors are actively participating in the privatization process in the different sectors and activities earlier owned and managed by the Government. 1.17 In recognition of the role of the private sector in accelerating socio-economic development, the Government has developed modalities for institutionalizing the then ad-hoc consultative process with the private sector in evolving appropriate and effective macro and sectoral policies such as participation in the Government Tax Task Force and the Public Expenditure Review (PER) working group. Similarly, the private sector has also evolved institutional mechanisms of interactions and consultations with the Government through umbrella organizations, such as the Tanzania Chamber of Commerce Industry and Agriculture (TCCIA), Confederation of Tanzania Industries (CTI) and the Tanzania Private Sector Foundation (TPSF). 1.18 The private sector has responded cautiously to these changes as shown in the rise of its share in investment and output. Foreign direct investment has risen from US $ 50.0 million in 1994 to US $ 183.4 million in 1999. Public monopoly in the financial sector has been broken. There are now more than 20 private banks accounting for nearly 80 percent of total assets in the banking system. The insurance market has also been opened up to private and foreign participation and a stock exchange has been opened in Dar es Salaam. The infrastructure sector is increasingly coming under the private sector through privatization, concessioning of assets for private operation and new entry. The most robust response has been in the mining and tourism, currently forming the bulk of foreign investment. 8 1.8 IMPLEMENTATION OF THE DEVELOPMENT VISION 2025 Following the adoption of the Development Vision 2025 in May 1999, the Government initiated a framework for its implementation and operationalization which underpins a participatory approach in designing and formulating development programmes and activities. The Vision 2025 which provides the umbrella framework for guiding development policy formulation, prioritization of development programs and projects and setting development goals and targets in the medium term will be implemented in phases of three years starting from 2001/2002. Preparation of programs and projects will be undertaken during 2000/2001. Other processes, i.e. Poverty Reduction Strategy Paper (PRSP), Tanzania Assistance Strategy (TAS) and PER will be instruments of implementing the Vision. 9 2. CROSS-SECTOR MTEF 2000/01 - 2002/03 2.1 INTRODUCTION 2.1 The fiscal year 2000/2001 was the second year since the introduction of the MTEF approach to the Tanzania budget planning process linking policy, planning and budgeting in a medium term framework. This new approach helps to ensure improved budgetary outcomes at the macro, strategic and operational levels. This chapter highlights some important experiences gained in the formulation and implementation of the first MTEF and addresses the outstanding issues. It also gives an overview of budget performance for the three quarters of fiscal year 1999/2000 i.e. July 1999 to March 2000 and the fiscal trend forms an important basis for the MTEF. 2.2 Like the previous one, the MTEF for 2000/01-2002/03 is built on the foundation of the projected resource envelope and expenditure priorities consistent with the agreed macroeconomic objectives, economic infrastructure and social service improvements which is a step forward in the direction of achieving poverty reduction targets. The process of formulating this MTEF was guided by the Budget Guidelines document for 2000/01 - 2002/03. However, the figures in both resources and expenditure outlays shown in the Budget Guidelines document are subject to revision once the resource figures are finally firmed up. Unlike the previous MTEF, the current MTEF includes resources freed from debt service obligation under the HIPC debt relief initiative, following the decision point approval by the IMF and World Bank. The projected HIPC relief for year 2000/2001 covers the interim debt relief from World Bank and IMF. It also includes interim relief figures for Paris Club debt which are, however, quite tentative. 2.3 The presence of HIPC debt relief and the continued inflow of donor support, particularly of program nature at the current levels, has helped to enhance the predictability of the resource envelope for the budget. As a result of the enhanced resource level, the expenditure allocations in the MTEF particularly for priority sectors and activities, have increased significantly compared to allocations to other sectors and activities. For the first year of the MTEF (FY 2000/01) the Government plans to increase the share of total allocation to priority areas (basic education, primary health, water, rural roads, judiciary, agricultural research and extension, land services and, activities to combat HIV/AIDS) in total discretionary recurrent expenditures by at least two percentage points over the 1999/00 budget. Similarly, the Government envisages to increase the share of the allocation to 'Other Charges' for the priority areas in total discretionary recurrent expenditures also by two percentage 10 points over the FY 1999/00 budget. This is in line with the Government objective of improving social services and economic infrastructure both of which have a direct bearing on poverty reduction. 2.2 EXPERIENCE SINCE THE INTRODUCTION OF THE MTEF 2.4 The June 1998 PER consultative meeting underscored the need to link policy, planning and budgeting through a medium term expenditure framework (MTEF). It was agreed that the MTEF be adopted as an anchor to the budget process since it facilitates projection and hence predictability of domestic and foreign resources beyond a single year, and the prioritization of needs consistent with the resource framework. The MTEF was therefore introduced to facilitate line ministries and agencies in planning ahead by providing information on which to base strategic and operational decisions. The adoption of the MTEF was also intended to improve budgeting outcomes at the macro, strategic and operational levels and do away with short-term planning which often led to accumulated over-commitments, arrears and inefficiencies at the operational level. 2.5 The first MTEF for Tanzania was subsequently prepared during FY 1998/99 and covered FY 1999/00 - FY 2001/02. The preparation process had three principal features. First, it was confined only to five priority sectors (education, health, water, agriculture, and roads). Second, it involved learning by doing, with no specific prior training. However, the MTEF is not a completely new process but rather as a combination of the Rolling Plan and Forward Budget (RPFB), strategic plans prepared through the Civil Service Department (CSD) and performance budgets. The only major difference is that the MTEF integrates the recurrent and the development budget, covers three years, and also integrates donor funds into the budget. Furthermore, the sector MTEFs were put together by the same sector groups that had been preparing budgets for the ministries. The work was also done in consultation with other stakeholders whereby sub-groups of the PER Working Group provided inputs into the MTEF preparation exercise. The macro sub-group developed the cross sector MTEF while sector groups prepared the respective sector MTEFs. Third, the exercise was done parallel to the annual budget preparation exercise and therefore involved checking for consistency between the budget guidelines numbers and MTEF numbers. The proposals for the MTEF numbers were prepared by the PER working group in support to the budget guidelines Committee as part of the process to improve the framing of the resource envelope and prioritization in expenditure allocation. Ultimately the Government decided that the latter numbers be used in the preparation of the budget for FY 1999/00 and MTEF for FY 1999/00 - FY 2001/02. 2.6 During the PER FY 1998/99 consultative meeting it was felt that there was a need to sensitize and extend the coverage of the MTEF to other sectors so that the exercise is seen in the context of the broader public sector management reform involving all sectors of the government, including the Ministry of Finance and Planning Commission. Early formulation of the budget guidelines and the need to 11 integrate the BG and the MTEF were also emphasized. Concern was also raised that the sector MTEFs were of uneven quality, with some lacking clear intra-sector prioritization, thus pointing to the need for training of government staff involved in the budget preparation process in general and development of MTEF in particular. 2.7 Based on last year's experience as summarized above, the current MTlEF (FY 2000/01 - FY2002/03) covers only two additional priority sectors - Judiciary and Lands. The decision to follow a gradual approach to extending the MTEF exercise to cover other sectors is on account of ensuring the quality of the MTEFs. The preparation process was similar to that of the preceding MTEF except that there was prior hands-on-training of Government staff conducted in three phases. Phase 1 and 2 involved training of trainers and drew participants from the Ministry of Finance, Planning Commission, Civil Service Department and key sector ministries and was done with the help of an external consultant. The training focused on reviewing existing planning and budget processes and developing detailed steps to be followed in the preparation of MTEF based budgets. Phase 3 of the MTEF training was led by the Budget Division of the Ministry of Finance and focused on extending the training to budget officers in the remainder of the ministries. Another improvement to the MTEF exercise was an attempt to integrate the Government budget guidelines with the MTEF preparation processes. However, there were delays in the issuance of the budget guidelines for 2000/01-2002/03 partly because of slippage in the initiation of the process. Nevertheless, the Government started applying the MTEF approach in the budget preparation process for FY 2000/01 and for the first time the Ministry of Finance issued a common format to be followed by all priority sector ministries in preparing the next year's budget. 2.3 REVIEW OF SECTOR ALLOCATIONS FOR FY98 - FY00 2.8 In analyzing sectoral allocations, expenditure is divided into the following main sectors: Administration, Law and Order, Social Services, Economic Services, and Consolidated Fund Service (CFS). The analysis is carried out along two dimensions, i.e. sectoral allocation by shares, and deviations of actual sectoral expenditure from budgeted sectoral allocations. During the past two years (i.e. FY98 and FY99), actual spending on CFS has averaged 33.6% of the actual total sectoral recurrent expenditure and expenditure on Social Services averaged 28.5% (made up of education, health, water; community development, women and children; and labour and youth development). While actual recurrent expenditure on productive and economic services averaged 3.3% and 3.2% respectively, expenditure on administration averaged 14.4% and defense 17.0% over the same period. Productive sectors have increasingly come under the purview of the private sector. Using exchequer issues data for the first nine months of FY00, shares of actual recurrent expenditure by sectors were as follows: Administration (12.2%), Law and Order (18.1%), Social Services (32.7%), Economic Services (2.3%), Productive (2.0%), and CFS (32.6%) (Table 2.1). In comparing the two years one observes that shares of recurrent expenditure on Social Services, and Law and Order increased while shares 12 of the other four sectors decreased. Increase in expenditure shares on Social Services shows the Government's commitment toward improving social service delivery. Table 2.1. Actual Sectoral Recurrent allocations (in percentage) Sectors 1997/98 1998/99 1999/00 REC DEV REC DEV REC DEV Administration 12.3 24.2 16.5 1.4 12.2 100.0 Law and Order 17.0 0.2 17.0 0.0 18.1 0.0 Social Services 27.6 22.5 29.5 49.6 32.6 0.0 Economic Services 3.3 40.1 3.1 40.2 2.3 0.0 Productive Services 2.6 13.0 4.0 8.8 2.0 0.0 CFS 37.2 0.0 30.0 0.0 32.6 0.0 GRAND TOTAL 100.0 100.0 100.0 100.0 100.0 100.0 Note: REC = Recurrcnt Expenditure, DEV = Development Expenditure Source: Computations from Appropriations Accounts and Flash Reports. 2.9 The development expenditure side shows a different picture. Over the past two years average shares of actual development expenditure were Administration (12.7%), Law and Order (0.1%), Social Services (36.2%), Economic Service (40.1%), Productive Services (10.9%), and CFS (0.0%) (Table 2.1). The increase in the actual development expenditure on social services and economic services reflect the Government intention to develop the two key sectors. Furthermore, the two sectors contain most of the priority sub-sectors/activities such as education, health, water, roads, lands and energy. The total expenditure on priority sectors/activities as a percentage of total recurrent expenditure for FY98 and FY 99 were 28.0% and 31.4% respectively. Priority sectors/activities falling under Social Services and Economic Services consumed 25.7% and 28.4% of total expenditure on priority sectors/activities for the two years respectively. 2.10 The analysis of deviations (i.e. actual recurrent expenditure as the percentage of the budgeted recurrent expenditure) by sectors shows that most of the sectors under-spent. For the FY98 under-spending was as follows: Administration (-8.5%), Law and Order (-9.5%), Social Services (-0.7%), and Productive Services (-3.2%) (Table 2.2). The highest under-spending occurred in Economic Services (-30.6) while the highest and only over-spending occurred in CFS (+22.2%) for the same period. For the FY99 the picture was different where under-spending was Administration (-9.0%), Productive Services (-3.2%), and CFS (-2.4%). In the same year there was over-spending in Law and Order (+0.8%), Social Services (+3.6%), and Economic Services (+1.1%) (Table 2.2). Looking at the deviations for the two respective years it can be observed that deviations for FY98 range from -30.6% to +22.2% while for the FY99 the range is from -9.0% to +3.6%. This shows that actual sectoral recurrent expenditure for FY99 was more consistent with the budgeted allocations than the previous year. 13 Table 2.2. Actual Sectoral Expenditure to Budgeted Sectoral Allocations Ratio Sector 1997/98 1998/99 1999/00 REC DEV REC DEV REC DEV Administration 91.5 17.5 91.0 6.4 32.6 2.0 Law and Order 90.5 34.5 100.8 0.0 71.8 0.0 Social Services 99.3 24.6 103.6 54.2 83.6 0.0 Economic Services 69.4 34.0 101.1 52.7 22.5 0.0 Productive Services 90.0 91.4 96.8 31.1 44.5 0.0 CFS 122.2 0.0 97.6 0.0 70.4 0.0 GRAND TOTAL 101.9 27.6 98.7 45.9 61.5 0.4 Note: REC = Recurrent Expenditure, DEV = Development Expenditure Source: Computations from Appropriations Accounts and Flash Reports. 2.4 OUTSTANDING PRIORITY SECTOR ISSUES 2.11 Notwithstanding recent gains in some macroeconomic variables, there are outstanding problems in the sectors, which continue to compromise the pace of economic growth and development. Such problems are manifested in the following outcomes: * The continued downward trend in the status of human development indicators and quality of social services particularly in education, health, nutrition, water and sanitation. * Weak and low growth of agriculture sector relative to its potential despite the fact that over 80 percent of the population rely on it. * Inadequate investment in physical infrastructure notably transport, marketing and processing. * Vulnerable balance of payments position due to adverse developments in the international environment such as a decline in commodity prices, rising import prices and erratic recovery of the export sector. + Lack of micro-finance services. 2.12 Along with the broader objective of enhancing sustainable economic growth and poverty eradication, the Government will address those problems through the MTEF process. In the current MTEF, the Government has laid out strategic expenditure and resource allocations to specified priority activities in the following sectors/sub-sectors: Education, Health, Water, Agriculture, Energy, Roads, Land and Good Governance and a one time priority expenditure on General Elections and Population Census. A summary of requirements and proposed allocation of funds for the priority activities is presented in Table 2.3. What appear to be low allocations, when compared to actual requirements, is a reflection of the overall serious mismatch between resource requirements and availability. Nonetheless, consistent with the prioritisation process, the biggest share of public resources are directed to social 14 sectors (education, health and water) whereas the other sectors are availed even lesser amounts that are short of their respective requirements. 2.13 During the MTEF for 2000/01 - 2002/03, the overall objectives for the education will continue to be: * To increase enrolment of pupils in primary education by 10% annually up to the year 2002/03. * To increase transition rate of primary to secondary level from 15% to 21% by the year 2002/03. + To improve the quality of teachers through in-service and pre-service training at the rate of 30% annually up to the year 2002/03. * To increase enrolment in higher learning institutions, promote gender equity and improve training. + To increase the capacity and improve inspection services coverage from 50% to 70% by the year 2002/03. 2.14 Cognisant of the strategic link the education sector has in the development of Tanzania's economy and society, it has been accorded the highest priority in resource allocation drawing about 57 percent of the resources that are allocated to the social sectors. In addition, the Multilateral Debt Fund facility has significantly enhanced resource availability to the sector. 2.15 Tanzania has a well developed network of health facilities, with a fairly balanced distribution across the various levels of health care. However, efficiency in service delivery in the health sector, is compromised by limited supply of drugs, lack of maintenance of health facilities and low productivity of its large workforce. Thus, the main thrust of the MTEF for 2000/01 - 2002/03, is to improve primary health care by focusing on equity with emphasis on capacity building, improvement of service delivery and provision of drugs, medical supplies and HIV/AIDS educational contact. 2.16 The overall objective of the government for the water sector is to increase access to clean, safe and adequate water supply by at least 9.0 percentage points for the rural population and 7.0 percentage points for the urban population by the year 2003. In general terms, the performance of the water sector in both rural and urban areas is measured on the number of people served with adequate clean and safe water. The currently reported water supply coverage is only 46% in rural areas and about 68% in urban centres. Out of these figures, 52% of the urban water supply coverage is eroded by technical and commercial losses and 30% of the rural water supply shortfall is due to malfunctioning or completely inoperative systems. During 2000/01 - 2002/03 the main focus for the water sector will be to rehabilitate existing water and sanitation facilities and install efficient management to enhance service delivery levels in both the rural and urban areas. The latter includes leasing the Dar es Salaam water supply management to private operators. The targets are to increase water 15 supply coverage to 55 percent and 75 percent for rural and urban areas, respectively, in the next three years. 2.17 A redefinition of the Government's role in the agricultural sector within ongoing public sector reforms, has, over the recent years, resulted in declining resource availability to the sector. Nonetheless, in view of the importance of the sector to the development of the economy, the Government will continue to avail public resources to the sector's strategic priority activities, namely; extension services, research, regulatory services, promotion of functioning co-operative societies, marketing information and agricultural statistics, early warning systems and food security management. 2.18 The roads sub-sector has strategic importance to the Tanzanian economy, given the vastness of the country and the dispersed nature of the population, business and economic activities. The Government will, therefore, continue giving high priority to the following activities in the sector: + Road maintenance of an upgraded network; + Implementation of priority rehabilitation and upgrading projects; * Rehabilitation and maintenance of rural roads under the local government authorities' jurisdiction. 2.19 The completion of liberalization of the petroleum industry has removed the budgetary burden built into the subsidies to TIPER although it will continue to draw substantial public resources in maintaining and rehabilitating current facilities and programs. However, until the restructuring and privatization of the energy sub-sector, in particular power generation and distribution, is completed. Thus, in the current MTEF, priority has been given to supporting the expansion of power generation and distribution capacity, enhanced efficiency in the distribution of power, development of gas resources for production of electricity and for industrial use, development of new and renewable energies and rural electrification. 2.20 Land is an ultimate resource for both sustainable social and economic activities. Economic activities directly related to land resource utilisation account for the greatest proportion of the GDP. Economic policies on land resources utilization have in the past achieved little success due to lack of effective legal backing. In addition, rapid population increase has compounded the problem of security of tenure in urban areas giving rise to conflicts in land use and allocation. Legal backing to support ongoing reforms that will enhance security of tenure to the users has been instituted. However, the sector still faces a number of problems which include inadequate capacity in land surveys, mapping and developing land use plans for various uses such as investments, housing, settlements and infrastructural development. Thus during 2000/01 - 2002/03 priority will be given to the key areas directly related to the operationalization of the new Land Policy and Law which include: land resource management; land tenure security enhancement; and land 16 information management, and speeding up the processes for issuing land titles and resolution of land disputes. 2.21 Good governance, in the context of this MTEF includes the following: (i) Enforcing Law and Order (in particular the Judiciary) Currently, the Judiciary is highly under-funded, as seen from the number of pending court proceedings. The Government will thus enhance allocations to the Judiciary to alleviate this problem (ii) General Elections In 1999/2000, the government started to prepare for General Elections which will combine Presidential, Parliamentary and Civic Elections. Preliminary work for the preparations of these elections are underway and part of the civic elections have been completed. Other activities included registration of voters, workshops and seminars, preparation of polling stations and other related activities. Resource requirements for such activities have been provided for in the MTEF. (iii) The National Population Census During the years 2000/01 - 2002/3 the government will continue with preparation activities such as creation of Enumeration and conducting a pilot census to test the census questionnaire and census administration procedures in conducting the actual census leading to the National Population Census Day in August 2002. (iv) Implementation of the National Vision 2025 The implementation of the National Development Vision 2025 will be through three year Medium Term Plans the first of which will be done in 2000/01 and its implementation will start in 2001/02, including a popularly vetted Poverty Reduction Strategy. (v) The Anti-corruption Strategy The government policy is to seriously combat corruption in the country and has formulated an Anti-Corruption Strategy, which focuses on simplifying, demystifying and depersonalising government programmes procedure and systems so that the loopholes for corruption are reduced. Ministries, regions and local government authorities are the implementing agencies of the strategy. The support from civil society, media and the private sector is also recognised as essential to the successful implementation of the anti-corruption strategy. The planned activities in this area include drawing up plans and implementing these in the areas deemed most prone to corruption behaviour. (vi) Control and Audit The office of the Controller and Auditor General which seeks to strengthen accountability with regard to Government revenue collection and expenditure although it has been operating against the background of problems surrounding increases in audit tasks. Since 1999/2000, however, measures 17 have been taken aimed at increasing the funding for its core activities. For the MTEF of 2000/2001 - 2002/2003 the focus will be on improving the provision of core services through funding of the following priority activities: * In depth and timely auditing of Central and Local Government Authorities Accounts. * Facilitating attendance of PAC/LAAC sessions. * Capacity building. 18 Table 2.3: SUMMARY OF FUNDS REQUIREMENTS AND PROPOSED ALLOCATION OF OTHER CHARGES (OC) AND DEVELOPMENT FOR PRIORITY ACTIVITIES IN SOME SECTORS (In Millions of Tshs.) 1999/2000 2000/2001 2001/2002 2002/2003 Sector/Sub-sector Requirement Likely 0/turn % of Requirement Prop. % of Requirement Prop. % of Requirement Prop. % of Require- Allocation Require- Allocation Require- Allocation Require- ment ment ment ment Education 107,775.10 40.447.17 37.5% 111,172.75 56,558.68 50.9% 115,674.72 74,278.65 64.2% 120,301.71 96,116.32 79.9% O/w Primary 13691.1 8568.01 62.6% 13759.6 11894.10 86.4% 11447.60 15654.98 108.4% 15025.50 20687.60 137.7% Health 46,680.00 24,724.70 53.0% 55,760.00 39,5 17.56 70.9% 62,180.00 57,980.21 93.2% 64,667.20 75,048.04 116.1% O/w Primary Water 8,706.00 4,813.78 55.3% 11.260.00 8,677.70 77.1% 16,930.00 10,383.21 61.3% 17,607.20 13,186.12 74.9% Judiciary 6,852.90 3,412.65 49.8% 7,194.00 4,121.46 57.3% 7,503.70 4,553.92 60.7% 7,803.85 4,747.15 60.8% Election 16,174.00 13,800.00 85.3% 31,406.00 32,000.00 101.9% 0.00 4,062.93 * 0.00 4,100.00 * Agriculture 15,252.00 6,059.87 39.7% 12,443.00 6,901.41 55.5% 13,120.00 7,874.03 60.0% 13,644.80 8,617.85 63.2% Energy 5,382.00 2,580.12 47.9% 5,435.82 3408.43 62.7% 5,490.18 3,651.63 66.5% 5,709.79 4,042.42 70.8% Roads 46,000.00 46,955.61 102.1% 50,000.00 41,337.17 82.7% 52,000.00 43,554.65 83.8% 54,080.00 45,114.93 83.4% O/w Rural roads 14000.00 12142.80 86.7% 15000.00 12360.00 82.4% 16000.00 13080.00 81.8% 16640.00 13355.15 80.3% Lands 850.00 365.95 43.1% 1,050.00 1,024.17 97.5% 1,150.00 1,033.94 89.9% 1,196.00 1,040.52 87.0% ControllerandAuditorGen 1,085.40 730.06 67.3% 1,413.40 1,227.07 86.7% 1,597.90 1,335.44 83.6% 1,806.30 1,412.57 78.2% TOTAL 254,7s7.40 1143,889.89 156.5% 1287,134.97 1194,773.65 67.8% 1275,646.50 1208,708.60 175.7% 1286,816.84 j253,425.91 88.4% Source: Budget Guidelines 2000/01 - 2002/03 19 2.5 OVERVIEW OF BUDGET PERFORMANCE FOR JULY 1999 - MARCH 2000 2.22 This section presents an overview of government efforts towards implementing its budget for the fiscal year 1990/00 as at the end of March. The budget frame for the year indicates that the government intended to collect total resources of Tshs.1,204.7 billion out of which domestic revenue was Tshs.810.3 billion, foreign budgetary support of Tshs.177.5 billion, foreign projects resources of about Tshs.214.9 billion and income from privatization proceeds of Tshs.2 billion. Total recurrent expenditure was set at Tshs.933.8 billion and the rest was development expenditure. Further, a repayment of Tshs.24 billion to the banking system was projected. 2.23 During this period the government implemented various measures to ensure that the budget frame is observed and that it is in line with the agreed benchmarks under ESAF. The cash budget system was maintained to enforce expenditure discipline among spending agencies. On the revenue side the government employed various measures that aimed at increasing efficiency in revenue collection including the repeal of General Notice (GN) that allowed tax exemption on bonafide gifts to religious groups after being noted that there was increasing incidence of tax evasion through this window. However, tax exemption to the groups is still awarded for grants directed towards service equipment for social sector programs and groups. 2.24 The preliminary budgetary operations report for March showed that the Government realized a total resources of about Tshs.746.3 billion against an estimated 856 billion. The resources comprises of domestic revenue that reached Tshs.577.4 billion, which is in excess of about 10 billion above estimated revenue of Tshs.567.2 billion for three quarters of the year (Table 2.4) as a result of the good performance in the collection of income tax, which amounted to Tshs. 166.1 billion, and exceeding the estimates for the same period by Tshs.15.3 billion. Balance of payments support had a shortfall of about Tshs.60 billion after recording a total collection of Tshs.36.5 billion, well below target of Tshs.96.4 billion. The MDF source reached Tshs.38.9 billion which is Tshs.12.2 billion in excess of estimated amount of Tshs.26.7 billion. The project funds source recorded a collection of Tshs.130.5 billion, about 32 billion below target of 162.3 billion mainly due to failure to capture adequately donors resources that are directly channeled to projects. From the revenue earmarked from the privatization proceeds the government managed to get Tshs.1 billion against the targeted 2 billion. Given these trends, it was expected that by the end of the fiscal year the overall resource envelope will reach Tshs. 777.2 which is 4.1 percent below the estimates. 2.25 Government expenditure, during the period under review amounted to Tshs.746.3 billion (Table 2.4) with a recurrent expenditure of Tshs.599.6 and development expenditure of Tshs.125.4 billion. Recurrent expenditure had a shortfall of Tshs.75.4 billion mainly caused by failure of the government to fund other charges by about Tshs.60 billion as a result of unpredictability and shortfall in resource mobilization especially foreign ones. On top of this, other areas expended more than planned resources such as for Personal Emoluments (PE), which surpassed the estimated amount of Tshs.208.3 billion by Tshs.6.6 billion for government employees, and Tshs.8.1 billion for parastatals. 20 2.26 With respect to development expenditure, Tshs.6.4 billion and Tshs.1 19 billion were from local and foreign sources, respectively. Planned development expenditure for July-March 2000 were Tshs.18.2 billion for local and Tshs.162.3 billion for foreign funded projects. The shortfall is largely attributed to low disbursement of domestic component and failure to capture adequately donor resources that are directly channeled to projects. As a result of unpredictability of resources and the fact that the government had to allocate below targets, the government repaid to the Banking system about Tshs.18.6 billion as opposed to the planned repayment of Tshs.4.1 billion. Further, instead of the planned 'no change to non banking borrowing', the government repaid about Tshs.7.3 billion to the banking sector during the same period. Table 2.4: 1999/2000 BUDGET FRAME JULY/MARCH Estimates Actual A. TOTAL RESOURCES 855,513 746,294 -109,218 -13% 1. DOMESTIC REVENUE 567,194 577,416 10,221 2% 2. BOP SUPPORT 96,410 36,452 -59,959 -62% 3. MDF 26,749 38,934 12,184 46% 4. PROJECT LOANS AND GRANTS 162,282 130,490 -31,792 -20% 5. NON BANKING BORROWING 0 -7,300 -7300 6. BANK BORROWING -4,080 -18,600 -14,520 356% 7. PRIVATIZATION FUNDS 2,000 1,000 -1,000 -50% 8. HIPC INTERIM RELIEF 9. ADJUSTMENT 4,956 -1,830 -25,148 -507% B. TOTAL EXPENDITURE 855,513 746,294 -119,079 -14% 1. RECURRENT EXPENDITURE 675,030 599,581 -75,449 -11% i. Extemal Debt 102,571 91,414 -11,157 -11% ii. Domestic Debt 53,227 52,422 -804 -2% iii. Other CFS 41,874 44,421 2,547 6% iv. PE-Government 208,262 214,891 6,629 3% v. PE-Parastatal 30,198 38,251 8,053 27% vi. TRA/CMSA 16,299 16,220 -79 0% vii. Road Fund 32,067 28,739 -3,328 -10% viii. Retention 24,525 19,664 -4,861 -20% ix. Other 158,397 97,766 -60,630 -38% 2. DEVELOPMENT EXPENDITURE 180,483 125,358 -43,630 -24% i. Local 18,201 6,363 -11,838 -65% ii. Foreign 162,282 118,96 -31,792 -20% 3. EXPENDITURE FLOAT 0 20,010 20,010 2.6 MTEF FYO1-FY03 The MTEF Process and Resource Envelope Projection 2.27 The timing for the actual preparation work was set for the second half of September 1999 so as to dovetail with and support the preparation of the Budget Guidelines and also the combined World Bank - bilateral donors PER main mission during November - December 1999. The whole process of preparing the cross-sector 21 MTEF was guided by PER Working Group deliberations under the leadership of the Government as was the case in the previous year. However, the details of the macro MTEF were worked out by the macro sub-group of the PER Working Group, drawing members from the Ministry of Finance, Planning Commission, Bank of Tanzania, Vice President's Office, Tanzania Revenue Authority, The World Bank, IMF, Netherlands, Sweden, Denmark, SDC, DFID, UN/UNDAF and REPOA. 2.28 The process of preparing the macro MTEF for FY 1999/00 was revisited to draw lessons and experiences and establish where the major gaps were; find out whether the MTEF process was consistent and credible compared to the final budget (this was done by major budget items of PE and OC), and the linkage with Budget Guidelines Committee and sectors. The macro group also revisited the definition of priorities so as to focus on poverty reduction and definition of social sectors as laid down under the HIPC initiative. The priority sectors identified by the Government were still too broad requiring refinement in order to get priority areas where public expenditure can best be expected to have the largest impact on poverty reduction. The narrower priority areas agreed upon were: basic education, primary health, water, rural roads, judiciary, and agricultural research and extension. For the key macroeconomic projections (GDP, inflation, money supply etc.) attention was given to what happened in 1998/99 compared to the likely turn out for 1999/00. In the case of revenue projections tax refunds were taken into account, a factor which was not done in the previous year's revenue projections. An additional consideration was the amount of resources projected to be freed-up from the various debt relief initiatives including HIPC, MDF, commercial debt buyback and other bilateral debt relief arrangements. Underlying Assumptions and Specific Considerations 2.29 Specific considerations that guided the framing up of the global numbers were as follows: (i) The draft budget frame prepared by the Ministry of Finance was adopted as the baseline scenario. Subsequently two scenarios - optimistic and pessimistic scenarios - were developed by the macro group through revisiting some of the underlying assumptions. The optimistic scenario took into account the inclusion in the resource envelope projections of the extra resources anticipated to be freed from the various debt relief initiatives with the aim of reducing poverty. (ii) The resource envelope as projected in the baseline scenario was re- examined to correct for the declining tax effort (tax/GDP ratio) over time. It was acknowledged that only little can be expected by way of a substantial increase in non-tax revenue because Central Bank dividends which constitute a significant portion of non-tax revenue could not be expected to increase given the further decline in government borrowing. However, the PER process emphasized the need to indicate an increasing revenue effort over time in the macro projections. At minimum the revenue to GDP ratio had to be kept constant at 12.8 percent to 12.9 percent and 13.0 percent for FY 2000/01, FY2001/02 and FY 2002/03 respectively. The basis for adjusting the revenue effort upwards included: first, measures taken by Tanzania Revenue Authority (TRA) to deal with the problem of revenue leakage especially from smuggling of petroleum products; second, the regulatory framework being put in place by 22 the Ministry of Energy; and third, investment in efficiency improvements in tax collection through GDP. Spending on priority sectors in particular needed to exhibit an increasing trend over time to show that absorptive capacity of the expected additional resources is not a problem in the Tanzania context. (iii) The upper case (optimistic) scenario included additional resource projections from the enhanced HIPC ($50m, $75m and $100m for the three years of the MTEF respectively) but taking into account possible offsets between resources expected under the MDF and those from the HIPC debt relief. The likely turn-out for MDF resources were projected as $50m, $45m and $30m for FY01, FY02 and FY03 respectively. (iv) Projections of external resources (loans and grants) were based on likely turn-out figures informed by indicative projections obtained through a questionnaire survey of all DAC donors. (v) The level of the fiscal deficit ought to be consistent with the government macroeconomic policies to ensure sustained macroeconomic stability. (vi) Other specific considerations were that first, the exchange rate of Tshs. 750 to the USD is an underestimate. A more realistic exchange rate was considered to be Tshs. 800 to the USD. Second, a higher ratio of the wage bill to GDP of 4.8 percent be used in the higher case scenario instead of 4.5 percent of GDP. Third, that inflation projections be revised to take into account the actual inflation rate recorded by the end of December 1999 and PRGF projections, and revision of real GDP growth projections to take into account the actual GDP growth of 4.0 percent for 1998. The assumptions finally adopted for the MTEF (FY00 - FY03) are summarized below and presented in detail as Attachment I (Table A2.1). Attachments A2.2 and A2.3 (Tables A2.2 and A2.3) summarize the budget frame for FY01 - FY03. Macroeconomic Policy Targets for the MTEF FY2000/2001 - FY2002/03 * Real economic growth of 5.8 percent in 2000, rising progressively to 6.9 percent by the year 2003. Economic growth for 1999 is estimated at nearly 5 percent. * Consumer price inflation of 5.0 percent by end June 2000, declining to below 5 percent by end June 2002, consistent with the inflation in the economies of trading partners. * Revenue collection targets at equivalent to 12.6 percent of Gross Domestic Product (GDP market prices) in 2000/01, 12.8 percent in 2001/02 and 13.0 percent in 2002/03. * Decline in broad money supply (M3) expansion consistent with growth expansion and inflation targets during the period. * Increase in foreign reserves to the equivalent of 4 months of imports of goods and services by end 2000. * An average exchange rate of between Tshs.800-850 to one United States Dollar is projected for 2000/01. 23 Resource Allocation Criteria 2.30 In terms of the criteria used to allocate additional resources the following principles were applied: (i) Priority areas should be the beneficiaries of additional resources after funding PE, general elections, national population census and build-up to the government pension fund (ii) Additional resources should fund non-wage expenditures - both OC (recurrent expenditure) and development expenditure (iii) Priority activities within priority sectors (primary education, primary health, agricultural research and extension, rural and urban water, judiciary and rural roads) should be targeted in allocating expenditures so as to have the maximum impact on poverty reduction (iv) Allocations to non-priority sectors were to be maintained at the same level in real terms. (v) The division between personnel emoluments (PE) and other charges (OC) be such that all additional resources allocated to the priority sectors were to go to OC.(vi) In deciding the allocations between sectors, the same proportions as in the Budget Guidelines were applied. (vii) The allocation within sectors made use of the sector development programs and studies/reports that were commissioned to update expenditure plans for the priority sectors covered by the PER FY99. The final allocations took into account the updated information and the within- sector allocations meant looking at the sector priorities and translating the sector's share of the resource envelope into the MTEF for that sector. A consistency check was also done with respect to resource envelope projections to ensure that resources distributed to various sectors were consistent with the overall resource envelope. Table 2.5 summarizes the likely outturn and proposed allocation of other charges (OC) for FY01 - FY03 to priority sectors and activities, while Table 2.6 indicates what these sectors and activities have been allocated in terms of development expenditure resources. Broader sectoral allocations for both PE and OC are shown in the attachment (Tables A2.4 and A2.5). 24 Table 2.5: Summary of Proposed Allocation for Other Charges (OC) for Priority Sectors, Priority Activities and Total OC Available for Distribution (Tsh. Million) Sector 1999//00 2000/01 2001/02 2002/03 Likely Out- Proposed Proposed Proposed turn Allocation Allocation Allocation A. Priority Sectors Education 37,146.53 59,350.24 79,846.38 102,785.23 o/w Primary 8,568.01 12,415.48 16,104.50 21,319.90 Secondary 4,784.56 69,931.75 8,992.04 11,905.27 Teachers 741.02 1,973.75 1,437.58 1,903.32 Inspectorate 560.41 811.94 1,053.27 1,394.51 Higher/Tech. Ed. 15,063.22 21,954.98 27,257.98 36,089.01 Other 7,429.31 10,854.47 14,022.61 18,556.17 Health 21,849.95 37,194.88 53,605.21 70,673.04 o0w Ministry 18,512.52 27,589.22 38,800.21 48,559.12 Regions 709.40 2,192.37 2,809.58 4,319.00 Local Government 2,628.03 7,413.29 11,995.41 17,794.93 Water 2,066.80 4,861.78 6,268.21 9,149.12 o/w Ministry 101.70 2,421.44 3,235.23 5,205.80 Regions 0.00 0.00 0.00 0.00 Local Government 1,065.10 1,440.34 3,033.00 3,943.32 - District 1,033.59 2,354.67 2,926.50 3,804.89 - Urban 31.51 85.67 106.47 138.43 Other Social Services 816.94 920.94 1,233.44 1,603.47 Sub-Total (Social Services) 61,880.22 102,327.84 140,953.24 184,210.86 Agriculture 4,275.88 4,346.08 4,925.32 5,417.85 o/w Extension and Research 906.89 1,088.72 1,199.21 3,640.00 Food Security 954.62 702.40 1,027.89 1,130.68 Agr. Input Trust Fund 1,113.72 1,053.60 1,027.89 1,130.68 Pests & Disease Control 190.92 263.40 274.10 301.52 Other# 254.56 368.76 411.16 452.28 Roads 42,682.46 45,605.56 47,588.79 51,414.21 o/w Ministry 42,148.39 45,033.11 46,928.25 50,674.41 [Road Fund3* 40,476.00 41,337.00 43,555.00 45,115.00 Regions 0.00 0.00 0.00 0.00 Local Government 534.07 572.44 660.53 739.80 Judiciary 3,412.65 3,712.15 4,053.92 4,297.15 Total (Prioritv Sectors) 112,251.21 155,991.63 197,521.27 245,340.07 B. Priority Activities Lands** Energy 1,303.89 1,730.21 1,991.38 2,330.35 Election 13,800.00 32,000.00 4,062.93 4,100.00 Controller & Auditor General 730.06 1,177.07 1,285.44 1,362.57 Total (Priority Activities) 15,833.95 34,907.28 7,339.75 7,792.92 TOTAL ALLOCATION (Prioriry 128,085.16 190,898.91 204,861.02 253,132.99 Sectors & Activities) TOTAL OC AVAILABLE FOR 372,750.80 459,033.5 527,900.50 592,217.23 DISTRIBUTION Source: Budget Guidelines 2000/01 - 2002/03 and Budget Frame 2000/01 - 2002/03 # Information Services and Cooperative promotion * Road Fund distribution formula is: 70% - Trunk and Regional Roads under MOW, and 30% Local Governments through MRALG. **Retention revenue caters for OC for Lands. No firm figures were made available for this source of revenue. 25 Table2.6: Summary of Proposed Allocation for Development Expenditure to Priority Sectors and Priority Activities and Total Development Expenditure (Tsh. Million) Sector 1999//00 2000/01 2001/02 2002/03 Likely Out- Proposed Proposed Proposed turn Allocation Allocation Allocation A. Priority Sectors Education 3,300.63 5,077.90 9,733.32 9,994.36 Health 2,874.75 4,422.68 5,625.00 5,625.00 Water 2,746.98 4,015.92 4,375.00 4,375.00 Sub-Total (Social Services) Agriculture 1,783.98 2,555.33 2,948.71 3,200.00 Roads* Judiciary 409.31 500.00 450.00 Sub-Total (Priority Sectors) 10,706.34 16,481.14 23,182.03 23,644.36 B. Priority Activities Lands 365.95 1,024.17 1,033.94 1,040.52 Energy 1,276.23 1,828.04 1,828.04 2,000.00 Election Controller & Auditor General 50.00 100.00 150 Sub-Total (Priority Activities) 1642.18 2,902.21 2,961.98 3,190.52 TOTAL ALLOCATION (Priority 12,348.52 19,383.35 26,144.01 26,834.88 Sectors & Activities)) TOTAL Dev. Exp. Resources 33,866.40 23,421.04 44,734.26 Source: Budget Guidelines 2000/01 - 2002/03 and Budget Frame 2000/01 - 2002/03 *Included in the Road Fund 26 Table A 2.7: MACRO ASSUMPTIONS 1999/2000 - 2002/03 FISCAL YEAR 1997/98 1998/99 1999/2000 1999/200 2000/01 2001/02 2002/03 0 CALENDER YEAR 1998 1999 2000 Likely 2001 2002 2003 Outturn REAL GDP GROWTH 1/ 4.5 5,4 5.4 6.1 6.6 6.8 -............................................................................................................. .. ....................... .... ........... ,,......... ..... ............ .... .......... ..................... ...... . ...................... .. .......... REAL.GDPGROWTH 1(CALENDER) 4 5 5.8 49 64 6.8 6.9 ........................ .......................................,. ,.......... , .., ..... ......... ............ .... .................. ....................... ...................... ............. ........................................ , , , ,; ,.................. ...................................................................... ........................................ REAL GDP GROWTH 2/ 3.4 4.3 5.6 6.1 6.6 7,2 k ' X ' b F k ' f 4.................. J ....... ......... ......... .,............. .,,........................... 3 ..- 9................... 6........... .............. ............ REA GDP GROT 2i(CL D.iR i 3.5. 33,' 5.2 5.9 6.7..76 INFiLATION RAT PR 1! 7.7 6.0 t5.4 INFLATioN RATE PROJ i/ 116 .3 5 .............. ............... 4. 5 4 (CALENDER) ........................... ............................................................-........... ...... ................., .. ... .........-.............. ....... ...................... ..........I........ ..................... .. ............. INFLATIONAT PROJ 2/ 12 7.5 5444 INFLATION RATE PROJ. 2/ (CALENDER) 9.75 6.25 4.5 4 4 O. GDP GRO WTH.12......................... ..... 6 ........... . . .. 4. 1 1' 2 GDP GROWTH 1 045 i 04 1.061 1. .06. 1 0,,,i68 INFLATi N.. . .....R .. .............................1 0 7 1 01. 05 1. 1 04 .......... ........................................................... ........................... .......... ..... .................... ..........,,........ ....................I...... .... ............ ,. ............ ............. .... ... .......... IMPORTS jj 13----------- .-.-. i. 95.6 1,64... .... I;6I 7.65 . .... .............. ........ 1516.40 858.00 1,758.0 1,6. 1 IMPORTS 1/ (CALENDER) 1,453 50 ,579.30 171600 80i 80 1,891.89 1,98648 >i,205i40 ,3059 13. A 1 I 564..80 1,666 IMPORTS 2/ *k*<*wu IMPORTS 2! (CALENDER) ..................................................................... ................................... ..... ... ................ ........................... ................................ .......................... ............ - ....... i p k ............................ .... ..... . ... .. ..... .......................... .....I ............. .... ......... .... ............... ... ............... ...... .................... EHXCHANGE RATE I /(CAI.SENDER) ...................................................................................................... .., ..... .................... . ........................ .. ......................... ......... ............... ............... ........ ........................................................................................... .............................................................................................................. L.XCHANGE RATE 1/ (FISCAL) 641 9 716 800 800 824 849 874 EXCHANGE RATE.2/ 641 9 683 9 715 800 936 1095 1281 EXCHANGE RATE 2/ (CALEN.DER) ............................................................................ .................................... ........................... .......................... ......I.......................... ........................ ............. .............. ... .......... I jPORTS GROWTH RATE . 1087. i. .. 0,52i .. 068 1 00 1 00 EXCHAN.GE RATE CHA 1065 1170 117 110717 NOIAL IMORS G.OWT 1.16 1.27 12.3 12 ................................................... .,.... .I9..........6--3.9..................................................... 36..............'. 9.............I2. Wages and Salaries (as % of GDP) 0.044 0.045 0.045 0.046 0.046 ~~~~~~~~~~~~~............... ........ ........................ - : 6 I ' .......... .....--............ ......... ' - 6........... 'j T 6........ T 6 .......... VT RiEiU.ND-- 0.075 0.075 0.1 0. 0. 27 Table A 2.8: SECTORAL EXPENDITURE GROWTH RATES 1999/2000 2000/01 2001/02 2002/03 Administration 1.05 1.06 1.06 1.06 Defence and Security 1.05 1.09 1.1 1.1 Social services 1.11 1.22 1.3 1.3 Economic services 1.11 1.12 1.12 1.12 Productive sectors 1.05 1.1 1.1 1.1 Resource Distribution in Priority Sectors Recurrent Priority activities 0.8 0.8 0.8 0.8 Non-Priority activities 0.2 0.2 0.2 0.2 Development Priority activities I I I 1 Non-Priority activites = _ Table A 2.9: BUDGET FRAME FOR 1999/2000 - 2002/03 (ANALYTICAL)" mill. shs. 1999/2000 2000/2001 2001/2002 2002/2003 Likely Outturm Proj. -Proj. Proj. Domestic revenue 777,200 881,953 993,923 1,120,707 O/W Road Toll 40,476 41,337 43,555 45,115 Retention Fund Total Expenditure 1, 060,343 1,278,822 1,402,951 1,389,811 Recurrent expenditure 822,000 957,846 1,051,213 1.175,422 Interest on external debt 36,500 67,500 46,000 62,200 Interest on domestic debt 70,000 57,000 57,000 57,000 Wages/salaries 287,287 315,851 356,813 396,505 Goods/services/transfers 428,213 517,496 591,400 659,717 o/w Road Fund 40,476 41,337 43,555 45,115 Special exp. 117,818 131,156 133,704 174,956 CFS (Others) 55,462 58,462 63,500 67,500 T'RA Parastatal Wages Retention Scheme 32,500 36,151 37,000 40,000 Election Costs 13,800 32,200 0 0 Census 40,000 Other Charges 168,157 218,189 273,642 332,146 Development expenditure 238,343 320,976 351,738 214,390 Projects 238,343 311,476 341,738 204,390 Local 23,400 36,000 45,000 45,000 Foreign 214,943 275,476 296,738 159,390 Other Programme Assistance 0 Energy Fund Songo songo Overall deficit (checks issued) - before grants -283,143 -396,869 -409,028 -269,104 Grants 266,603 350,929 368,828 254,529 28 Balance of Payment Surpport. 119,200 92,535 85,780 79,518 o/w MDF/PRBS 70,640 72,512 67,219 62,312 project grants 136,903 195,852 212,180 98,520 HIPC interim relief-Multilateral 10,500 46,062 53,894 59,007 HIPC interim relief-Paris Club 16,480 16,974 17,484 Overall deficit (checks issued) - after grants -16,540 -45,939 -40,200 -14,575 Adjustment 0 0 0 0 Overall deficit (checks cleared) -16,540 -45,939 -40,200 -14,575 Financing 16,540 45,939 40,200 14,575 Foreign 40,940 55,229 61,958 38,269 Program loans 54,500 72,306 76,500 76,500 project loan 78,040 79,623 84,558 60,869 amortization -91,600 -96,700 -99,100 -99,100 Local (net) -8,000 -2,000 0 0 Bank (net) -8,000 0 0 0 Non-bank 0 15,000 0 0 borrowing 0 0 0 0 amortization 0 0 0 0 Privatization Funds 0 15,000 0 0 Change in Arrears -16,400 -7,290 0 0 Contingency -17,000 -21,758 -23,694 Financing Gap 0 0 0 memo: GDPmp 6,280,400 6,996,680 7,756,799 8,619,665 OC for distribution 372,751 459,034 527,900 592,217 Primary Deficit(checks issued) -176,643 -272,369 -306,028 -149,904 Government Saving(checks issued) -44,800 -75,893 -57,290 -54,715 % of GDP -0.7% -1.1% -0.7% -0.6% Note: BOP/PRBS for 2000/2001 include contribution from former MDF US$ 88.Omill.(shs70,400 mill.) and EU, US$ 11.9 mill.(shs 9500 mill.) And US $ 12.4 mill.(shs. 10000 mill.) HIPC Relief for 2000/2001 consists of WB US$37.5 mill.(shs.30000 mill.) and IMF US$18.4 mill.(shs.14,720 mill.) HIPC interim relief-Multilateral 55.90 64 68 MDF/PRBS 88.0 79 71 BOP/PRBS 112.3 101 91 Program loans 88 90 88 (World Bank US $ 70 mill, ADB US $ 17.75 mill) IHIPC interim relief-Paris Club Development project - Loan 97 100 70 (50 percent of pledges) Development project - Grant 238 250 113 (50 percent of pledges) 29 Table A 2.10: BUDGET FRAME FOR 1999/2000 - 2002/03 (ANALYTICAL) % OF GDP ** 1999/2000 - 2000/01 2001/02 2002/2093 Likely Outturn Proj. Pro;. Proj. Domestic revenue 12.4% 12.6% 12.8% 13.0% O/W Road Fund 0.6% 0.6% 0.6% 0.5% Retention Fund Total Expenditure 16.9% 18.3% 18.1% 16.1% Recurrent expenditure 13.1% 13.7% 13.6% 13.6% Interest on external debt 0.6% 1.0% 0.6% 0.7% Interest on domestic debt 1.1% 0.8% 0.7% 0.7% Wages/salaries 4.6% 4.5% 4.6% 4.6% Goods/services/transfers 6.8% 7.4% 7.6% 7.7% o/w Road Fund 0.6% 0.6% 0.6% 0.5% Special exp. 1.9% 1.9% 1.7% 2.0% CFS (Others) 0.9% 0.8% 0.8% 0.8% TRA 0.0% 0.0% 0.0% 0.0% Parastatal Wages 0.0% 0.0% 0.0% 0.0% Retention Scheme 0.5% 0.5% 0.5% 0.5% Other Charges 2.7% 3.1% 3.5% 3.9% Development expenditure 3.88% 4.6% 4.5% 2.5% Projects 3.8% 4.5% .4% 2.4% Local 0.4% 0.5% 0.6% 0.5% Foreign 3.4% 3.9% 3.8% 1.8% Other Program Assistance 0.0% 0.0% 0.0% 0.0% Overall deficit (checks issued) - before grants -4.5% -5.7% -5.3% -3.1% Grants 4.2% 5.0% 4.8% 3.0% import support/OGL 1.9% 1.3% 1.1% 0.9% project grants 2.2% 2.8% 2.7% 1.1% HIPC interim relief 0.2% 0.7% 0.7% 0.7% Overall deficit (checks issued) - after grants -0.3% -0.7% -0.5% -0.2% Adjustment 0.0% 0.0% 0.0% 0.0% Overall deficit (checks cleared) -0.3% -0.7% -0.5% -0.2% Financing 0.3% 0.7% 0.5% 0.2% Foreign 0.7% 0.8% 0.8% 0.4% import support loans 0.9% 1.0% 1.0% 0.9% project loan 1.2% 1.1% 1.1% 0.7% amortization -1.5% -1.4% -1.3% -1.1% Local (net) -0.1% 0.0% 0.0% 0.0% Bank (net) -0.1% 0.0% 0.0% 0.0% Non-bank 0.0% 0.2% 0.0% 0.0% borrowing 0.0% 0.0% 0.0% 0.0% amortization 0.0% 0.0% 0.0% 0.0% Privatization Funds 0.0% 0.2% 0.0% 0.0% Change in Arrears -0.3% -0.1% 0.0% 0.0% Contingency 0.0% -0.2% -0.3% -0.3% Financing Gap 0.0% 0.0% 0.0% 0.0% memo. GDPm, 6,280,400 6,996,680 7,756,799 8,619,665 Primary Deficit(checks issued) -2.8% -3.9% -3.9% -1.7% Government Saving(checks issued) -0.7% -1.1% -0.7% -0.6% 30 Table A 2.11: SECTORAL RECURRENT ALLOCATION 1999/2000 - 2002/03** 1999/2000 2000/01 - PROJECTION 2001/02 - PROJECTION 2002/03 - PROJECTION PE OC Total PE OC Total PE OC Total PE OC Total ADMINISTRATION . inistries/Department 15,707,540,420 19 0,381,400 206,817,921,820 6492,91 7,44 230704,134,18' 7, i97,051,6' '16,'49 2'917','44 '2 52,7'29',8'7977 '69222,797.21 16,4 ,917,441 259,94460,89276,437478,3 9 ~~~ ~ ~ ~ ~ ~~~~30 1 3 4 0 egions 4,6'40... 04,549 49 4,886,704,777 4,616,208,969 ,2,13,746 4,886,704,777 4,731,985,058 9,618,689,83 . '"00' . ................... 4,87077,6 ,942 10,525,698,80''6............. Local Governm ent "';62366i"1'5' 35...............62,66';955 8,990,795,05 089 ,503 ,07 ,5 .......0.,90755.................. ,'0903 0,0755 i st i t 6' ;''i ;'g ' ;9' 8'"""""' io .............. '6;276;'9'64;9'6.................;..... ............ ' ................ ............ ................. District ~~~~~6,276,964,968 0 62 ,964,968 6,590,813,216 0.,9,i,I ,9,1,1 ,9,1,1 .,9.i,1 06,98326 Urban Councils 2,285.696,9.7 0 2.6 , 2,399981.3 . 0 2,2,399,981,836 0 2,399,981'"3' 2,399,981,836 0 2,399,981,836 TOTAL 28,924,206,924 194,140,448,400 223,064,655,324 30,370,417,271 235,320,343,15 265,690,760,4 30,3 70,417,27 257,461,864,83 287,832,282,10 30,370,417,271 265,583,554,91 295,953,972,190 ADMINISTRATION 9 29 1 1 1 9 ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.... . ... ..... .. . . . . ..... . . ...... . .... .. . . .. . ... . ... .... .. . ...... , ,,...........................,.. .................. .. '. . . .. . .. . . . DEFENCE AND SECURITY i stries/Department 85,151,077,816 56,562,006.400 141.713,084,216 88,989,096,807 58,120,049,710 147,109,146,5 88,989,096,80 65,827,849,470 154,816.946,27 88,989,096,807 72,410,634,417 161,399,731, 18 7 8 TOTAL DEFENCE 85,151,077,816 56,562,006,400 141,713,084,216 88,989,096,807 58,120,049,710 147,109,146,5 88,989,096,80 65,827,849,470 154,816,946,27 88,989,096,8t)7 72,410,634,417 161,399,731,225 AND SEC. Is18 7 8 SO C ..AL.SEC TO S . . ....... ................. ... .. . .. ................ . ... .. ...................... ..... . ................................. .............................. ..... ..................... .................... . .................................... . . ....... ..............I......... ... ,...................I ............... . . . .I .. . . . . . . . . . . . . . . . .. . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . Education Ministries/Department i3i'7;1 2i''3''' ; ;28i 1495'13,710,079,531 25,332,503,300 39,042,582,831 . 4,395,583,508"""''" ''332 '10,7'54'.825 47,606,338,33 14,395,583,50 43,855,207,231 58,250,90,738 14,395,83, tnistr. ............ . ................. ................ ........ ................. . ........................7......i. ... 4 ,58' 0 3 21 75 :25 '' 7''"'"" ... .. ........ ... .......S'... ... ...''"'''' 38 ' 14;3 32;3i5 8 "' '' ''' 580 1''6'''i;9'19'4'''''' 72';i ;34';"0''7; 352;7'8' ; ~~~~~~~~~~....................... .... ............- ..............I.... .. ...... ................. .... ... . , .. . .. . . ........... . ..,. . . . . . . . . ................... - . ......... ... . . . ....... ... .................. . . . . . . . . ~~~~~~~~~~~~~~~~~~~~~~~~~~~~..................... .. .......................... ....... ..................... ............................. ..........- ...... .............. ................... .... . ..........I...... ............... . - . . . . .. . . . . . . . . . . . . . . . . . .I . . . . . . . .... . . . .. . . . . . . . . . . . . . . . . . . . . ........... Regions 177,521,289''9;''""" '07',3;'40,i;60'0"'" 98,82,39'28''35''''' 18'956,3'897,9219 '''''' '2'1'9'2360'97''' 2,29,78,87 18,9,1i2694456',8,0242'8',496666 4,3 ,6 ocal Government 107,816,287,827 11,106,720,300 118,923,008,127 113,207,102,218 18,955,201,697 132,162,303,9 113,207,102,2 23,558,443,430 136,765,545,64 113,207,102,218 30,629,475,415 143,836,577,634 15 18 8 District 88,934,167,267 9,260,685.000 98,194,852,267 93,380,875,630 15,486,705,710 108,867,581,3 93,380,875,63 19,247,628,499 112,628,504,12 93,380,875,630 25,024,775,753 118,405,651,383 40 0 9 .ran Councils 18,882,120,560 1,846.03 5,300 20,728,1 55,860 19,826,226,588 3,468,495,987 23.294,722,5719262684,08493 24,137,041,519 19,826,226,588 5,604,699,663 25,430,926,25. 5 8 .. ,,. ... ... ... ... f, ..................... . .. , ....... ........................I . . . . . , .. , , . .. . . .. . . . ...................... .............. . . . . . . . ... . . . . . . . . . . . u-otal ,703,889,186 37,146,534,100 158,850,423,286 127,789,083,645 54,272,347,478 182,061,431,1 127,789,083,6 70,113,055,223 197,902,38,86 127,789,083,645 92,790,871,461 220,579,955,106 23 45 8 lealt Ministries/Departmnent 3,885,155,860 18,512,521,800 22,397,677,660 4,079,4 13,653 27,589,220,368 31,668,634,02 4,079,413,653 38.800,212,71 7 42,879,626,370 4,079,4l13,653 48,559,117,447 5638,531,i10. Regions 8,529,799,35 /9,0,0 9,239,200,955 8,56,289,323 2,192,366,09 11,148,655,42 8,956,289,323 2,809,584,341 11,765,873,663 8,956.289,323 4.318,999,162 13,275,281,. 0 .Lca. Government 19,605,298,979 2,628,028,800 22,233,327,779 20585,563,928 7,413,288,576 27,998,852,50 20,585,563,92 11,995,452 ,250 32,580,976,178 20,585,563,928 17,794,926,378 38,380,490,306 4 S .D.s. rict...........448 1,876,902,200 16,388,029,648 15.236,683,820 6.161,699,26 2 2138330 526, 6-8-3-, 82 04986362,7,6,0 5266380 1,7,9,2 0918 4 3 1 ... . .......................... .......... .. . . .... .......... . . . .- 1. . . ... . . . . . .. .. . .. . . . . . . . . . . .. . .. . . . . . ..". . . . . . . . . . . . .. . . . . . . . . . . .. . . . . . ' . . . . ... .. . . .I . . . .. . . . . . . . . . ... . . . . . . . . ' . . .. . . . I . . .. . . .. . . .. . . . - . . .. . . . . . . . .. . .. . . . . . . . .. . . .. .. .. .. .. .. .. .. .... .. . 2 0 ..................... ............ ,.......................... . . ............ .. .... . .. .........- . ........ .. ........... ... . . .... . . ...... ..... ..... . .. .. .... . . ... ... . ... .. .. ... .... ......... .. ... ...... .. .. . . . . . ... . .-..... ... . ... ................... an Councils 9 53 751.126. .... . ......6 ...8 ,298,1............. ,3.48,8 .08 1.251.589,314 6.600,469,421 5,348,880,108 1,555.535,864 6,904,41 5,971 5,348,880.108 2,022,427.655 7.371,307,762. Sub-Total . 32,020,254,194 21,849,952,200 53.870,206,394 33,62 1,266,904 37,194,875,041 70,81 6,141,94 33,621,266,90 53,605,209,308 87,226,476,212 33,621,266,904 70,673,042,987 104,294,~309,891 5 4 MW istri 1,952ment 1 2,037,840 1,001,704,400 2,93,742,240 2,049,639,732 2,421,435,143 4,471,074,875 2,049,639,732 3,235,232,222 5,284,871,954 2,049,639,732 5,205,801,888 7,255,441,620 a~gionsi 0 0 0 0 0 o 0 0 0 0 0 0 i . ..ov.rnment i,91i3,183' 35 1,065,097,700 2.978281,235 2,008,842,712 2,440,340,338 4'449'183,050 2,008,842,712 3,032,973.256 5.041,815.968 2,008,842.712 3,943,315,697 5,952,158,409 istrict 1,831,643,843 1,033,587,300 2'865.231,143 1,923,226,035 2.354,672,201 4,277,898,236 1.923,226,035 2,926,500.743 4,849.726.778 1,923.226,035 3,804,885,616 5.728.111,65. rba Councils 81,539,692 31,510,400 113,050,092 85,616,677 85,668,137 171i284,814 85,616,677 106,472,513 192,089,190 85,616,677 138.430,081 224.046,758 Su-T.ot . 3,865'.221,i;'7'5 ' 2',066.802,100o 5,9 32,023,475 4,08,4;' 8;'2,444 4 ,861,7 ; "i;75,481 '8'920.257,92s' 4,0,42446680548 036679240842449191756 32,602. ........................II................................... .........I....... ...................... . ............I. .... .. . .. . .. . ...........I............ ............ . ... . . ............................ .......... . . . .... ... .. . . . . .. . . . . . . . . . ... . . . . . Social Others 1,921,164.720 816,941.800 2.738.106.520 2.017;222,956 920.937;500 2,938.160,456 2,017.222,956 1,233,438;182 3250661138 2O07.222,956 .603.469.637 3,620.692,593 TOTAL SOCIAL 159,510,529,475 61,880,230,200 221,390,759,675 167,486,055,948 97,249,935,500 264,735,991,4 167,486,055,9 131,219,908,19 298,705,964,14 167,486,055,948 174,216,501,67 341,702,557,620 SECTORS , 49 48 1 0 2 f f N j .. .......... . ........... . . .. ........................ .... . .. ........ ...... ....... ........ ....... .. ............. ........ ...... .................. ... ... .......... ..... ..... ..... ... ......... ... ... ........... ...... ......... .. ........................... .. . .............. . ... . ........ ..... . .. . ..... .. .... . ECONOMIC INFRUSTRUCTURE .. . ... ..I .. .... I... . .. .... .. .. .. . .. ... . ..... . .. . .. .... .... .. ... . ... .... . . .. ... . .. . .. . .... . . . ........... j................ ......I................. ....................... .......... ... . . . .. ...... ..... .. .. . .. .... .. ................................... .. ..... . ................... ........................ .... . Ministries/Department 2,741,322.568 42.148.391,300 44,889,713,868 2,878,388,696 45,033,112,147 47,911,500,84 2,878.388,696 46,928,254,223 49,806,642.919 2.878.388.696 50,674,413,772 53,552,802,4. Regions 0 0 0 0 0 0 0 0 0 0 0 [ocal Government 1,583.865,293 534.067,100 '2,11i7932,393 -,'9 " 1,663,058,558 572,443.94 "2,235.502352 1,663,058,538 660.533.354 2,323,591,912 1.663085/9,797,356 2,402,855;914. District 1,196,867,441 360,686,300 1,557,553.741 1,256,710,813 463,693.686 1,720,404.499 1,256,710,813 535,048,417 1,791,759,230 1,256,710,813 599,254,227 1,855,965,040 Urbn Councils 386,997,852 173;380;800 560,378.652 406,347.745 108.750,108 515.097,852 406,347,745 125,484'937 531,832.682 406.347.745 140.543,129 546.890,874 Sub-T otal 4325,1 87,861 42.682.458.400 47.007,646.261 4'541,447;254 45,605,555,940 50,147,003,19 4.541,447.254 47,588,787,577 22130,234.831 4,541.447,254 51.414,211,129 55,955,658,383 ....... . . . . . . . .. . . . . . . . . . . . . . . ... . . . . . . . .. . . . . . .. . . . . . .. . . . . . . . . .. . . . . . . . . . . . . . . . ... . . . . . . .. . . . . . . .. . . . . . . . . . . . . . ......................... .............................. ....... .............. ........ ............................... .... ...... ................. ............. ....... ............. ... ...........I............ ....... ............... ........ d 6 ..... .... ... .. .... . . .... ... ... ... .. .. ...... .... ... ... . .. .. .. ... ... ... .. .. .. .... . . .. .. ... .. ... . .. .. .. ... . .............................. .............................. .......... ........... ........ ............................... ..... ........................... ......... ..... .............. ........ ................. ..... . ................................ Others Ministries/Department 2.822,628,780 8,139,936,900 i0,962,565,680 2,963,760,219 8,631,673,385 11,595,433.60 2,963,760,219 9,960.73428 12,924,494.747 2,963.760.219 11,156.022.671 14,119,782.890 ocalGovernment 0 0 0. 0 0 .0 . 0 0 0 0 0 District........................ .Urban Councils U bar our ci s .. . ... . ...... .... .. .............................. ..... .. ... ..... .. . . . ..~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~... .. .. .. .. .. . .. .. ... .. .. .. .. .. ...... Sub-Tota 2,822,628,780 81 39,936,900 10.962,565,680 2,963.760,219 8,631.673,385 1i,595,433,60 2,963,76019 9,960,734,528 4 ..................... ...........I..... . ... ........ ........ ............................... ...... ... .. . ................ .................... .... ............... ........... .............. ....... ... ............................... . ... . ... ... .. . . .... .. . .. . .. ... . .. .. .. . .. . . . . .... .. .. .. . . .. .. . ... .. . ..... . . .... . . .... . .. . . .. ... .... .. . TOTAL ECONOMIC 7,147,816,641 50,822,395,300 57,970,211,941 17,505,207,473 54,237,229,325 61,742,436,79 7,505,207,473 57,549,522,104 65,054,729,577 /,505,207,473 62,570,233,800 70,075,441,273 INFR. 8 s 32 PRODUCTIVE .. .... . .. ... .. .. .. . . .. . . . . ... .. . . .. .. .. . . iinistriestDepartment 6,553,569,144 9,345,719,700 15,899,288,844 6,881,247,60i 14,105,942,305 20,987,189,90 6;881i247,601 15,841,351,803 22,722,599,405 6,881,247,601 17,436,306,073 24,317,553,674 7 Regions 0 0 0 0 0 0 0 U 0 0 0 0 Loca Government 0 0 0 0 0 0 0 0 0 0 0 0 ..................... j I I . . .. . . . . . .. . . . . . . . . . . .. . . . .. .. . . .. . . . . . . .. ...................... .......... ............. ...... .............. ............... ............. ............ ..........I........... ...... ......................... ........... ................... ........... ............ ....................... District r n.onis.........- f ... .. .... ...... ............. .... . ............. ............... ....... . ................ ......... .rban Councils TOTAL PRODUCTIVE 6,553,569,144 9,345,719,700 15,899,288,844 6,881,247,601 14,105,942,305 20,987,189,90 6,881,247,601 15,841,351,803 22,722,599,405 6,881,247,601 17,436,306,073 24,387,553,674 7 SALARY INCREASE 0 0 29,649,993,02 29,649,993,020 55,741,986,878 55,741,986,878 0 RECRUITMENT 2,500,000,000 2,500,000,000 4,000,000,000 4,000,000,000 5,500,000,000 5,500,000,000 INSURANCE 9,475,518,000 9,475,518,000 20,179,900,62 20,879,900,620 32,075,038,320 32,075,038,320 10II GRAND 287,287,200,000 372,750,800,000 1660,03S,000,000 315,850,600,000 459,033,500,00 774,884,100,0 356,812,754,0 527,900,496,40 884,713,250,40 396,504,590,000 592,217,230,88 988,721,820,881 TOTAL L 0 00 00 0 0 NOTE: /I Road fund allocation to Ministry of Regional Administration and Local Government as well as Mnistry of Works is included in OC. /2 Assumptions for distribution of OC and PP for regions and local government are as follows Since then both the budget frame and allocations to priority items/activities within priority sectors have been revised in the Course of preparing the country's Poverty Reduction Strategy paper (PRSP). The revised Tables are presented below as Tables A6 - A8: 33 TABLE A2. 12: SECTORAL ALLOCATION 1 99912000-2002/03 (As percentage of total PE/OC expenditure)__________ ______ ___________ _________ 1998/99 1999/2000 2000101 2001/02 2002/03 PE ACT PE EST OC ACT OC EST Total Act. Total Est. PE OC Total FE iOC Total PE OC Total PE OC Total ADMINISTRATION Region 1.4~~~~~~%591.5 1.6% 0.9% 1.5% 1.2% 1.6% 0.8% 1.2% 1.%. 00/. 2% 14% 09% 1.%12% 1.0%N 1.1% oa.Govenrnment 2.2% 2.1 0.0% 0.0% 0.8% 0.9% 3.0% 0.0%1 1.3% 2.8% 0.0% 1.2% .5% .% 1.0% 2.3% 0.0% 0.9% Di'stric"t ..... .............. .5% 0.0% 0.0%1' 0.6% 0 6% 2 2% 0,0% 1.0% 2.1% 0.0% 0.9% 1.1% 0.0% 0.7% .1.7% 0.0% 0.7 % .bani Couincils 0.6% 0.6% 0 0%1 0.0% 10.2%,' 0.3% 10.8% -- ,11 0.0% 0.% 0.3% 0.8% 10.7% 0.0% 0.3% 0.6% 0.0% 10.2% TOTAL ADMINISTRATION 8.9% 9.3% 42.7% 43.90h 29.50/na 28.8% 10.1% 52.1%/ 33.8% 9.6% 51.3% 34.3%6 8.5% 48.8%/ 32.5% 7.7% 44.8% 29.9% TOTAL DEFENCE & SEC. 31.9% 32.6% 117.7%/ 16.0% 23.2% 23.3% 29.6% 15.20/n 21.5% 28.2% 12.7% 19.0% 24.9% 12.5% t17.5% 22.4% 12.2% 16.3% Eucation Reions 2.6% 2.8% 0.8% 0.3% 1.5% 1.4% 0.1%"l 0.2% 0.1% O.1% 0.5% 0.3% 0.1% 0.5% 0.3% 0.0% 0.7% 0.4% ocGoeniment 30.5% 29.1% 1.5% 1.~I1%1 12.8% 13.4% 37.5%_ 3.0% 18.0% 35.8%,1 4.1% 17.1% 3t.~7% 4.5% 1.55% 28 60/ 5.2% 14.5% .District 24.5% 23.5% I1.2% 0.9%/ 10.3% 10.8% 31.0% 2.5% 14.9% 29.6% /o 4 14.0% 26.2% 3.6% 12.7% 23.6% ..2%1.0% .Ubn Counicils 5.9% 5.7% 0 3% 0l.2 2.SO/ 2.6% 6.6%/ 0.5% 3.1% 6.3% 0 8% 3 0% 5.6% 0 8% 2 70/ 5.0% 0.9% 2.6% Region 0.6% 0.70/a 02% 0.1% 0.4% 0.3% 3.0% 0.2% 1.4% 2.8% 0.5% 1.40/0 2.5% 0.5% 1.3% 2.3% 0.7% 1.3%~~~~~~~~~- .15.7 22.3 .istnesDctlme 6 .1% 5.9% 03% 0.2% 2.6% 2.7% 514% 50.% 2.5% 4.%1 3% 6 2.8 4% 43% 7.0% 2.9% 3.8% 827% 53.% .Urban Councils 1.5~~% 3.% 01 1 0%07 % 0.2% 0.9% 2187% 0.5% 1.9% 1.50/ 0.3% 08%ol 1.3% 0.3% 1.7% Local GovenmiTent 4.2% 4 0% 0 2% 0.2%1 1.8% 1.9 6 % 0 7/ 0.% 0.5% 065%1 0L5% 0.6% 0.6% 0.60a .6 052% 30.% 0.6% Dstri ct 6.4% 3.3% 0.2% 0.10/a 2.4% 2.7% 0 6/% 0.3% 0.4% 0.6% 0.5% 0.6% 053% 0.% 2.9% 0. 0% 30.6% .Ubn oncils 0.8% 0.4% 00 0.0(% 0.3/ 0.% 0 0/a 00% . 10% 0% 0. 0% 0.0 0 % 0. 0% 0.0% 0.0% 0 .0% 0.0% 0 .30% Su-Total 9.% 5.0a 1.900.56 6% 57 7 7.0a 13a .% 09 1.3% 1.1% 12 1.% 1.% 2%.0 15%t3 SecialO.hers 0.7% 0,6% 0.6% 0.2% 0.6% 0.4% 07/a 0.2% 0.4% 0.6% 0.2% 0.4% 0.6% 0.2%5.9% 82% 10.4%90499% 0.3% 0.49 TO stALesOCIpar.SECtOR 05.7% 51.0% 17.0/a 35.7 0.9% 31.1% O 7% 16.6% 33.4% 53.6% 1.% 34.2% 46.% 24.6% 33.6/ 42.2% 29.% 34.% ECONOMIC~~~~~~~~~04 1 00/~ :%. .% 00 .0 .% 00 00. 00 % % 0ol 0/ .% 00 kIN F R U nsT......... E ................... 0_ _4_ __......_............_._.............._......_...... ........... ..._........_...... ....._.._..... .............. ......_......_.._......_............_.._....._._ _............ ........._.._.............._ _.... ......_._.............. ..... ... _... .... .. ... ............. ... :.. ...... 3 4 Roads Ministi es/Depiarment 0.8 i/ 0.8% 1 2.6%/ 16.3%/ 8.0% 9.5% 1.0 11.3% i.8 0.9 9.8 6.% 08 .0o 5.%07 .% Regions 0.0% 0.% 0.0% 0.0% 0i0 0.0 0.0 0.0 0.0 0.0 0.0 0.%0% 00.0.% 0.%00 Loi iGover nmeit 0.5 05 0.i 0.1 0.3% 0.30.6 1 0.3 0.5 0.% 0.3 0.5 0.° 0% 0.4 0.1 0.2% .'''''District' 0.4%'"''' 0.4 0.i% 0.' 0.2 0.2 0.4 0.1 0.2 0.4 0.1' 0.2 0.4o 0.% 0.2 0.% 0.%%.2 .Urban Councils 0.i i 0.1% 0.0% 0.0 o:b% 0.1 0../ 0.0 o:1 0% 1% 0.1. 01 0.1 0.% 0.%000%01 Sub-Ttal 1.3% 1.3% 12.8%i 16.4 8.3% 9.8% 1.5%M 115 7.1 1.% 99 .% 3 .% 59 11 .%57 .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~54 ............................................................... .......... .................... .. ............. , ,,., ,, ...................... ........ ........................................................................................................... ob'ii"'" '' '' '' ' "' ' '' ' .............. ........................ ..... ..................................................................................................-................................ Minilstries/Deparment 1.0%i 1.2% 3.9%/ 3.8%i 2.7% 2.7%/ 1.0% 2.2%i 1i7 0.% 19 .5 .% 19% 15 .% .%14 ions 0.0% 0.0% 0.0% 0.0% 0.0 0.0% 0.0% 0.0% 0.0% 0.0 .......... . ...... 00 .0% . ............. .......... 0. ' 'O0% .....0% L .........oc °'. ....al ' ' . Go ..........0.............. ................. 0. 0% 0.0% 0.0%.0.0%.0.0%.0.0% ' 0. 0.0% . . .0% 0.0' 0'.0 ..0% 0.% . . 0. 0:. ..0% .Uban Councils ot0.0% 0.0% 0.0% 0.% 0.0% 0.0% 0.0% 0.0% 0.0% 0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Sub-Total 1 i " ' ' .0. % 1.2%. 3.9%o j 3.. 138% 2.7%i , 2.7%i , 1.0% 2.2% 1.7% 0.9% 1.9% 1.5% 0.% 1.9% 1.5%0.7%1.9. ..42.2 % . . .... . ... . ...................................................... ........ ..................... . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . . I .. . . . . . . . I . . . . . . . . . . Councils 0.1% 0.1% 0 0% 0% 0.0% 00 .% 00 00 .% 00 % 00.0%0.0% 0.0% 0.0% TOTAL ECONOMIC INFR. 2.3%/ 2.6% 16.6%S 20.2%/ 11.0% 12.5%/ 1.5, t3.6% 8.8% 2.4%/ 11.8% 8.0% 2.1% 10.9% 7.4% 1.9% 10.6% 7.1% _ ~~~~~~~~~0.0% 0.0% z'RODUCTIVE 0.05'o 0.0% ~~~~~~~ :0.0% 0.0% 0.0% 0.05/ 0.0% 0.0% 0.0% 0.0% 0 1.0%00 .%00 .. . . . . ......... E .........I.......... ....................... .. ...... .. .... ........... ...... .... . . . .... ... .. .. . . .. . . . . . ... .. . . . . . .. . .. . .. . .. . .. .. . . . .. . . . .. . .. . . i o i ... . . .. ... . . . . M.iaistriiesfepa tment 4 1./. .6% 5.60% 4 2% 58.% 9.3% 2.3% 2.5% 2.4% 2.% . 9.7% 1.9% 3.0% 2.6% 1.7% 2.9% 5% . iegon 0.0 0.0% 0.0 0.0% 0.0 0.0 0.0% o.0 0.0% 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0%0.0 .eiG viiieiit 0.0% 0.0% 0.0 0.05o:. 0.0%, 0.0% 0.0 0.0 0.0 0.% 00°.% 00/.0 .%00 .%00 .District m0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0/ 2.0% 0.0% 09% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% Ui oa n iuncils 0 .00/O 050% 0 0% 0.00n 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.05" . .0% 0% 0.0% 0.0% 0.0% 0.0% 0.0% TOTAL PRODUCTIVE 4.2% 4.6% S.6% 4.2% S.1% 4.3% 2.3% 2.5% 2.4% 2.2% 3.1% 2.7% 1.9% 3.0% 2.6% 1.7% 2.9% 2.5% GRAND TO AL 100.0% [00.0% 100.0% 1100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Since then both the budget frame and allocations to priority items/activities within priority sectors have been revised in the course of preparing the country's Poverty Reduction Strategy paper (PRSP). The revised Tables are presented below as Tables A6 -AB: 35 Table A 2.13: REVISED BUDGET FRAME FOR POVERTY REDUCTION, 2000/01 - 2002/03 (ANALYTICAL) 1999/200 - 200012001 U2091/002 2002/203 Likely Out-turn Budget Proj. Pro;. In Million of Tsh. Domestic Revenue 768,700 861,402 952,500 1,059,300 Total Expenditure 1,089,500 1,265,997 1,438,238 1,384,102 Recurrent expenditure 822,900 952,521 1,048,400 1,124,502 Interest on external debt 36,200 36,000 37,800 40,570 Interest on domestic debt 73,700 75,000 72,800 70,560 Wages/salaries 287,300 315,851 384,698 423,476 Goods/services/transfers 425,700 525,670 553X102 589,896 Other Charges 134,300 194,322 202,165 267X642 Development expenditure 266,700 313,476 389.838 259,600 Projects 266,700 313,476 389,838 259,600 Local 23,400 38,000 93,100 100,200 Foreign 243,300 275,476 296,738 159,400 Overall deficit (checks issued) - before grants -320,800 -404,595 -485,738 -324,802 Grants 278,000 366,256 379,280 272,232 Balance of Payment Support. 116,400 124,342 113,900 116,012 o/w MDF/PRBS 70,640 86,520 80,204 74,349 Project grants 150,400 195,852 212,180 98,520 HIPC interim relief-Multilateral 11,200 46,062 53,200 57,700 Overall deficit (checks issued) - after grants -42,800 -38,339 -106,458 -52,570 Overall deficit (checks cleared) 42,800 -38,338 -106,458 -52,570 Financing 131,100 38,339 106,458 52,570 Foreign 56,200 27,629 106,458 52,570 Local (net) -8,000 0 0 0 As Percentage of GDP Domestic Revenue 11.2% 11.3% 11.4% 11.5% Total Expenditure 15.9% 16.7% 17.2% 15.0% Recurrent expenditure 12.0% 12.5% 12.5% 12.2% Interest on external debt 0.5% 0.5% 0.5% 0.4% Interest on domestic debt 1.1% 1.0% 0.9% 0.8% Wages/salaries 4.2% 4.2% 4.6% 4.6% Goods/services/transfers 6.2% 6.9% 6.6% 6.4% Other Charges 2.0% 2.6% 2.4% 2.9% Development expenditure 3.9% 4.1% 4.7% 2.8% Projects 3.9% 4.1% 4.7% 2.8% Local 0.3% 0.5% 1. 1% 1.1% Foreign 3.5% 3.6% 3.5% 1.7% Overall deficit (checks issued) - before grants -4.7% -5.3% -5.8% -3.5% Grants 4.0% 4.8% 4.5% 3.0% Import support/OGL 1.7% 1.6% 1.4% 1.3% Project grants 2.2% 2.6% 2.5% 1.1% HIPC interim relief 0.2% 0.6% 0.6% 0.6% Overall deficit (checks issued) - after grants -0.6% -0.5% -1.3% -0.6% Overall deficit (checks cleared) 0.6% -0.5% -1.3% -0.6% Financing 1.9% 0.5% 1.3% 0.6% Foreign 0.8% 0.4% 1.3% 0.6% Local (net) -0.1% 0.0% 0.0% 0.0% memo: GDPmp 6,872,557 7,596,181 8,363,000 9,206,000 Source: Ministry of Finance 36 Table A 2.14: Summary of Funds Requirements and Proposed Allocation for Priority Activities in Priority Sectors (OC and Development Expenditure.) - (in Millions of Tsh.) 1999/2000 2000/2001 2001/02 2002/03 Requirement (i) Likely (ii) Requi BUDGET % Requirement Prop. Requirement Prop. O/turn rement Requirement Allocation Allocation Education 107,775.10 40,447.17 111,172.75 87,808.70 79% 150,888.26 103,053.54 157,275.92 128,558.21 Recurrent (OC) 54,272.00 67,840.00 91,584.00 Development 33,536.70 35,213.54 36,974.21 Health 46,680.00 24,724.70 98,641.20 75,566.20 77% 107,205.26 85,881.51 111,943.72 102,432.46 Recurrent (OC) 32,685.00 40,856.25 55,155.94 Development 42,881.20 45,025.26 47,276.52 Water 8,706.00 4,813.78 44,004.00 37,606.00 85% 51,311.20 40,458.70 53,707.46 44,304.89 Recurrent (OC) 4,862.00 6,077.50 8,204.63 Development 32,744.00 34,381.20 36,100.26 Judiciary 6,852.90 3,412.65 7,594.00 6,100.00 80% 7,923.70 7,545.00 8,244.85 10,059.75 Recurrent (OC) 5,700.00 7,125.00 9,618.75 Development 400.00 420.00 441.00 Agriculture 15,252.00 6,059.87 39,387.40 33,475.80 85% 41,411.62 36,455.87 43,351.00 40,727.94 Recurrent (OC) 6,531.40 8,164.25 11,021.74 Development 26,944.40 28,291.62 29,706.20 Roads 46,955.61 46,955.61 86,838.00 86,838.00 100% 92,036.66 92,036.66 76,816.79 76,816.79 Recurrent (OC) 55,106.00 57,861.30 60,754.37 Development 31,732.00 34.175.36 16,062.42 TOTAL 232,221.61 126,413.77 387,637.35 327,394.70 84% 450,776.70 365,431.28 451,339.74 402,900.03 Source: Budget Guidelines 2000/01 - 2002/03 Budget estimates Vol. 11 and IV of 2000 37 Table A 2.15: Priority Items within Priority Sectors: FYOO - FY03 Sector/Item FYOO Prel. Actual FYOI Budget est. FY02 Proj. FY03 Proj. P.E. O.C. 1 OAL P.E. O.C. TOTAL P.E. O.C. TOTAL P.E. O.C. TOTAL In Millions of Tsh. Education 121704 37213 158917 127789 54272 182061 205402 67840 273242 265870 91584 357454 BasicEducation 82898 13421 96319 120316 20974 141290 139909 27935 167844 181096 36097 217193 Health / 32020 21850 53870 33621 32685 66306 39096 40856 79952 50605 55156 105761 Primary Health 15013 13768 28781 21510 20804 42314 25013 27708 52721 32376 35804 68180 Water 3229 2123 5352 2111 4862 6973 2455 6078 8533 3177 8205 11382 Roads 4325 37887 42212 4541 55106 59647 5279 57861 63140 6835 60754 67589 Rural Roads 1237 14357 15594 1851 26998 28849 2152 35959 38111 2786 46465 49251 Judiciary 4035 3913 7948 3955 5700 9655 4599 7125 11724 5953 9619 15572 Agriculture 8210 5475 13685 3867 6331 10198 4529 8164 12693 5863 11022 16885 Agr. Res. and Ext. 6913 4753 11666 2298 4595 6893 2672 6121 8793 3459 7909 11368 HIV/AIDS* 0 0 0 0 4800 4800 0 6393 6393 0 8261 8261 Total Priority Sectors 173523 108461 281984 175884 163756 339640 261360 194317 455677 338303 244600 582903 Total Priority ltems 113324 52335 165659 152041 88734 240775 176800 117318 294118 228847 152360 381207 Rec. Exp. ( excl. CFS) 668464 783059 874300 945872 As a % of Discretionary Rec. Exp. Education 5.6% 23.8% 16.3% 6.9% 23.2% 23.5% 7.8% 31.3% 28.1% 9.7% 37.8% 37.8% Basic Education 2.0% 14.4% 15.4% 2.7% 18.0%o 16.0% 3.2% 19.2% 19.1% 3.8% 23.0% 23.0% Health/I 3.3% 8.1% 4.3% 4.2% 8.5% 4.5% 4.7%/o 9.1% 5.4% 5.8% 11.2% 11.2% Primary Health 2.1% 4.3% 2.7% 2.7% 5.4% 2.9% 3.2% 6.0% 3.4% 3.8% 7.2% 7.2% Total Water 0.3% 0.8% 0.3% 0.6% 0.9°o 0.3% 0.7% 1.0% 0.3% 0.9% 1.2% 1.2% Roads 5.7% 6.3%o 0.6% 7.0% 7.6% 0.6% 6.6% 7.2% 0.7% 6.4% 7.1% 7.2% Rural Roads 2.1% 2.3% 0.2% 3.4% 3.7% 0.2% 4.1% 4.4% 0.3% 4.9% 5.2% 5.2% Judiciary 0.6% 1.2% 0.5% 0.7% 1.2°% 0.5% 0.8% 1.3% 0.6% 1.0% 1.6% 1.7% Agriculture 0.8% 2.0% 0.5% 0.8% 1.3% 0.5% 0.9% 1.5%o 0.6% 1.2% 1.8% 1.8% Agr. Res. and Ext. 0.7% 1.7% 0.3% 0.6% 0.9% 0.3% 0.7% 1 0% 0.4% 0.8% 1.2% 1.2% HIV/AIDS* 0.0% 0.0% 0.0% 0.6% 0.6% 0.0% 0.7% 0.7% 0.0% 0.9% 0.9% 0.9% TotalPrioritySectors 16.2% 42.2% 22.5% 20.9% 43.4% 29.9% 22.2% 52.1% 35.8% 25.9%, 61.6% 61.6% TotalPriorityltems 7.8% 24.8% 19.4% 11.3% 30.7% 20.2% 13.4% 33.6% 24.2% 16.1% 40.3% 40.3% I/Includes HIV/AIDS Expeniditure on HIV/AIDS will basically fund awareness camnpaigns, development of strategic plans for combatinig HIV/AIDS. preventive measures such as the provisioni of coidoms, anid carying out studies and monitoringnsurveillance of the incidence and immpact of the pandemic as well as actions taken to fight it. Source Ministry of Finance 38 3. PUBLIC SERVICE REFORM PROGRAM 3.1 RATIONALE FOR THE PUBLIC SERVICE REFORM PROGRAM - PURPOSE AND PHASING 3.1 The overall purpose of the Public Service Reform Program (PSRP) is to support the attainment of a high rate of economic growth and ensure that delivery of quality public services within priority sectors conforms to public expectations for value, satisfaction, and relevance by end 201 1. The aims of the program reflect the Government's vision of the future public service as stated in the National Vision 2025. The Public Service will be an institution of excellence playing a pivotal role in achieving sustained economic growth and prosperity, and eradication of poverty in the 21st Century. 3.2 The Government has adopted a multi-phased approach to public service reform as follows: Phase I of the program (2000-2004) will: (1) complete and sustain the comprehensive structural and institutional reforms implemented with considerable success in recent years; and (ii) launch a strategic process for progressively transforming the role, capacity and performance of the public service on a sustainable basis. Phase 2 (2005-2008) will institute a performance management culture in the public service, and Phase 3 (2009-201 1) will bring about quality improvement practices. Program development objectives Public Service Reform Program 3.3 The program development objective is to improve accountability, transparency and resource management for service delivery. The public service will deliver efficiently and effectively the Government's economic and social programs on a continuous and sustainable manner. In the medium-term (Phase 1), this development objective will be underpinned by the policy shift to outsource services to the private sector and to local authorities and the strategic theme to deliver quality public services under severe budgetary constraints. Distance Learning Centre 3.4 The main objective of the Global Distance Learning Network (GDLN) component is to test the effectiveness and sustainability of a distance learning centre (DLC) as part of a global knowledge-sharing network to strengthen the capacity of public and private decision-makers and implementers to design, plan and manage economic and social development policies. This component is an integral part of the public service reform program since one of its primary aims is to help strengthen performance capacity of government officials and private sector managers. 40 Key performance indicators 3.5 Key performance indicators of progress towards the program goal will include the following: The Performance Improvement Model (PIM) will be successfully piloted in central government key social sector ministries, departments and agencies (MAs). Success will be reflccted in terms of measurable improvements in the MDAs' redefined roles, decentralized functions and enhanced private sector participation. These will translate into improved quality of services. On the basis of such outcomes, the MDAs will also receive a predictable (budget- based) flow of funds in key sectors; the "quick win"' service improvement program initiated under the past phase of the program will be continued; "Quick wins" are identified as reform measures that MDAs can effect to improve quality or to deliver services efficiently with zero or minimal requirement of new technical or financial resources. Improvements in real wage levels for professorial, technical and managerial staff towards levels consistent with incentives for performance and enabling the public service to hire and retain adequate numbers of staff in areas of critical skills, especially in policy and regulatory functions; Demonstrated improvement towards reinstating meritocracy in the public service, i.e., appointments and promotions to the public service carried out on a transparent and competitive basis; Progress in building institutions for safeguarding and sustaining meritocratic practices, as specifically reflected in a legal framework, and a new, independent Public Service Commission; Progress in building sustainable capacity for both change in management as well as service improvements. To this end, planning and policy units in MDAs will be properly equipped and staffed with competent policy analysts and in-service training programs will be readily accessible to public servants; and sustainability of the Distance Learning Centre (DLC) measured by demand for and utilization of the centre's services and ability to cover its operating expenses through fees. 3.2 STRATEGIC CONTEXT 3.6 The government's primary development goal is broad-based economic growth with poverty reduction. To realize this goal, it is planned to: (i) improve and stabilize fiscal performance; (ii) strengthen the base for economic growth by giving a high priority to the rural sector and facilitating private sector investments; (iii) improve environment management; (iv) liberalize prices and marketing; (v) improve market integration and access to productive assets and services; (vi) improve the efficiency of social services and target vulnerable groups; (vii) improve expenditure efficiency; (viii) eliminate redundancies and build capacity; (ix) enhance performance of regulatory functions; and (x) eliminate opportunities for corruption and enforce accountability. The PSRP will directly support a number of these objectives by 41 systematically introducing a strategic process that focuses public service managers on: (i) more efficient use of limited public resources through selected decentralization options and enhanced private sector participation in service delivery; and ii) sustainable improvements in capacity and overall performance. 3.7 The PSRP's objective is to "restart progress in poverty reduction by raising growth performance and extending access to basic social and economic services"'. Donors are supporting this objective mainly through sector development programs (SDPs) and other programs aiming at improving the performance of the NWAS. From a systems perspective, the PSRP's interventions are critical to effective implementation of the development processes initiated under various SDPS. While the SDPs will mainly provide physical, material and sector-specific inputs for the development processes that improve the supply, quality and access to basic social services, the PSRP, together with the other main institutional reform programs (e.g. Public Financial Management Reform Program and Local Government Reform Program), will provide the "systemic" inputs (systems, policies, rules and regulations, and others) to the development processes. Main Issues and Government Strategy Background 3.8 Soon after independence, Tanzania adopted a socialist development strategy. By the late 1 980s, after a decade of economic decline and pervasive deterioration in public services, it was clear that the strategy had to be changed. By then also, the public expenditure framework had expanded far beyond what the Government could afford. The public administration had become characterized by under-funding and overstaffing. Civil servants were increasingly de-motivated because, among other reasons, there was a downward spiral in their real incomes and political interference in appointments and pay decisions. Serious distortions and inequities in promotions and compensation took hold. Consequently, discipline, ethical standards and productivity deteriorated. Further, establishment and payroll controls fell into disuse. The public service wage bill was largely out of control, which significantly contributed to fiscal instability and deficits. Implications of Decentralization and Institutional Pluralism 3.9 The Government is launching the next phase of its reform program (PSRP) against the backdrop of ongoing decentralization and institutional pluralism to improve the delivery of services. In that context, the design of the PSRP strategy takes into account three key institutional changes launched under the Civil Service Reform Program (CSRP): Redefined role of the State; New programs for decentralization to local authorities and executive agencies; and Promotion and facilitation of private sector participation in the delivery of social services. 3.10 Redefined Role of the State. This process was started with the ministerial organization and efficiency (O&E) reviews under the CSRP. The Government adopted the policy that, if possible and cost-effective, the roles of the ministries and 42 central departments would be confined to policy and regulatory functions, and the delivery of essential social services. Significant progress has been made in this area. However, a more critical and in-depth rationalization of the ministerial functions is necessary since the public expenditure framework remains too broad to be affordable. 3.11 Decentralization.. In accordance with the GOT's new decentralization policy, operational responsibilities for service delivery of many public service will be shifted from central Ministries to district and urban councils in phases. A system of inter- governmental financial transfers will be put in place. Ministries will retain control for policy, regulatory and strategic functions and in certain cases, continue to provide some services. The end result will be institutional pluralism in the delivery of services which until now was the exclusive domain of ministries. 3.12 Promoting and Facilitating Private Sector Participation. The GOT has, in the 1 990s, adopted a private sector-led economic development strategy and also recognized the potential role of the private sector in the provision of social goods and services. Therefore, under the CSRP, measures were initiated to facilitate enhanced private sector participation in these areas. The CSRP also launched programs to inform and educate public servants, especially those in areas affecting private business investments and operations, to play a positive and facilitating role in their client relations. The program also laid out plans to solicit private sector support in the delivery of operational services through contracting-out and similar arrangements. 3.13 More significantly, through the CSRP's organizational and efficiency reviews, sector Ministries and departments are encouraged to foster partnerships with the NGOs, communities and private sector to expand supply, and enhance access to social services. Despite being relatively small, the private sector is already responding significantly to the opportunities arising in sectors such as education and health. This development will gain momentum as Tanzania's economic growth takes off to higher levels, as expected in the medium-term. 3.3 THE CIVIL SERVICE REFORM PROGRAM -- CSRP (1991-1999) 3.14 In 1991 the Government launched the CSRP with a series of studies financed by UNDP. Implementation started in 1993 with the World Bank support through the Parastatal and Public Sector Reformn Project (up to December 1999) support of other donors including DFID, SIDA, NORAD, FINNIDA, DANIDA, USAID, EU, UNDP, Switzerland and the Netherlands. It is hoped that there will be similar support for the next phase of the reforms, the PSRP. 3.15 The overall objective of the CSRP was to achieve a "smaller, affordable, well compensated, efficient and effectively performing civil service". The program has so far been implemented in two phases: (i) restoration of the structural preconditions to support fiscal stabilization measures, including: the removal of ghost workers, staff retrenchment, rationalization of the pay and grading system, and reinstatement of establishment and payroll controls expected to bring employment and the wage bill under control; and (ii) institutional improvements, including: a redefinition of the role of government, restructuring for organizational effectiveness and efficiency, outsourcing certain services, decentralization of service delivery, and managerial capacity building. 43 3.16 Specific achievements of the CSRP include: The role of the Government has been redefined. The GOT has progressively withdrawn from direct production of economic goods and services. The total number of public service employees has reduced by approximately 27% from about 355,000 in 1992 to approximately 260,000 by the end of 1999. This is a net reduction after selective additional recruitment into the key sectors of education, health and law and order. Effective controls on employment and the wage bill have been institutionalized. All recruitment and entries into the payroll are controlled. A reliable central personnel database has been established and a computerized payroll system (funded by DFID) is operational since December 1999. Distortions in the compensation system were solved by combining all ad-hoc and non-transparent allowances into a consolidated basic salary, and by rationalizing salary scales and grades. The civil service salary structure has been decompressed, from a ratio of about 9 to I in 1992 to about 21 to I in 1999. Future changes in pay will be guided by targets specified in a new Public Service Pay Policy that emphasizes a clear enhancement of pay for technical and professional staff for the medium-term. Programs for devolving non-core and executive functions to autonomous agencies, local authorities, communities, NGOs and the private sector are in place. A program to implement systematic decentralization to autonomous executive agencies, with seven such agencies established by December 1999, is in operation (being funded by DFID). Programs to improve the leadership, management and governance qualities of the public service are being implemented, including training in key areas of leadership and management development. A code of ethics and conduct for public servants has been promulgated. In collaboration with USAID, the training of public servants to adopt a more facilitating approach to private sector operators is underway (Investors Road Map). Gender issues are being mainstreamed into public service management with SIDA's support. A comprehensive decentralization and local government reform program (LGRP) has been launched. The first phase of the program involving the restructuring of regional administrations has been completed. The establishments in each of the 20 regional administration units were reduced from an average of about 700 posts to 83 posts. This program aims at making public services more responsive and increase citizen participation in decision-making. It is also anticipated that the LGRP will facilitate rationalization of recruitment and compensation of employees between central government and local authorities, resulting in reduced pressure on the public wage bill. The LGRP is strongly supported by Irish AID, DANIDA, FINNIDA, Netherlands, NORAD, SIDA, DFID, EU and UNDP. 3.17 The CSRP enjoyed strong support of both top political leadership and senior management of the civil service. Nevertheless, in active search of sustainable and better results, an in-depth, broad-based and critical assessment of the program has 44 been carried out during 1998/99, beginning with a National Symposium on Civil Service Reforms organized by the University of Dar Es Salaam at Government's request. It was followed by a series of inter-ministerial reviews, planning and consultative fora. The reviews, complemented by a logical framework process, concluded that despite the impressive achievements in structural and institutional reforms, much needs to be done to translate these results into improved service delivery to the people of Tanzania. The program strategy had thus to deal with these issues: (a) the vision and goals of the reform program appear remote from the public interest; (b) unaffordable levels of public expectations; (c) limited overt public support for the reforms in the past; (d) weak local ownership of reform goals and inadequate implementation responsibilities in MDAS; (c) significant levels of capacity deticiency in both technical functions and change management; (f) capacity and performance undermined to a certain extent by low pay of public servants; (g) ineffective co-ordination of all major reform initiatives; and (h) weak monitoring and evaluation for outputs, outcomes and impact. 3.18 In terms of impact, it was imperative to steer the future program towards consolidating the gains made under the CSPP. This meant that the next phase of the reforms would support the effort of MDAs to adapt to an evolving pluralistic environment for the delivery of public services. 3.4 THE PUBLIC SERVICE REFORM PROGRAM -- PSRP (2000-2001). Government has taken a long term perspective to reforms. In this context a Development Vision to the year 2025 was elaborated and goals were set for poverty reduction, through strengthening the competitiveness of Tanzania's economy. Against this background, the Government opted for a more comprehensive Public Service Reform Program (PSRP) with a longer-term (12 year) perspective. The program aims at transforming the public service into a service that has the capacity, systems and culture for client orientation and continuous improvement of services. This will require more than a decade of sustained reform efforts. Therefore, the program will be implemented in three phases. The Government envisages that the PSPP will: consolidate the institutional reforms started under the CSRP. support improvements in public services by facilitating public service managers to harness the opportunities arising from the decentralization and institutional pluralism developments. The program will support the MDAs through a strategic process that will: (i) engage participants in structural changes; and (ii) reinforce the changes in structure to redefined roles within that management process. This strategic process 45 will be installed through a model (Performance Improvement Model--PIM). Key features of the PIM (see Figure 1) include: strategic planning; annual planning and performance budgeting; systematic execution of plans and budget with focus on services improvements; and monitoring, evaluation and reporting. The Programme will also advance the process of good governance, particularly through the strengthening of CSD's Ethics Unit and providing it with the resources to proactively promote ethical behaviour of all public servants as well as advancing the opportunities of women especially in senior management roles. During the strategic planning phase of the PIM, a MDA will be challenged to: Redefine its role and mission within the policy framework of decentralization and institutional pluralism; Define the mechanisms by which it will strategically lead the other players in improving services delivery; and Set key result areas for performance that will be monitored through participatory approaches (service delivery surveys, benchmarking and others) during implementation as part of the triggers to move from the first phase of the program to the next. Figure 1: Tanzania's Performance Improvement Model ANNUAL PLANIN STR4TEGIC PLAING . 1 I'& PERJŹORLi\NCIE & Pn~~ BUDGEflNG LdioStAn _i ~~~~~~~~N F ,clcft /wCiZty b Z , J j j , , f .and rinonflc% ' r l Vk~t1ILk1 T.~r,y ~(eta~P-.f a I)d-.a Nr. API ,. Vletfium 7enTl rZaina&bk 1.xjeTiditure Frinnanrk EVALUA1ION'S OF z _ l ~~~~~~~~~~~~~~PL.NS . EVAL.l'A,C)N .VND ^ _, > Rel,Qniew and REPORTLNG(; _ t endoarsmenft of plars __ ---- ; _ _ ~~~~~~~~~~~and budgets, WRp&t Client S&u-'eS ' EXECuTION PLANS _ ,Audtiis< Xl)4aofy remus rra Pi'a'int Staff N'7 391.2 Equipment TOTAL 18,590.1 17,838.37| 18,974.32 19,898.65 19,497.021 22,811.88 l l ~~~~SECONDARY I 3 3|TACH-ER TRAINING__ ~ 50-01 ~Salaries-| 3,168.44| 3,168.44 3,168.441 3,168.44| 3,168.44 3,168.44 C ~~~~~~~~~~~~~~Instructional materials l 489.4 1 441.52 | 513.9 [ 572.781 534.461 758.35 1 - ~~~~~~~~~~~~~etbooks 20 185.85 t 216.31 241.08| 224.951 319.19 t t t~~~~~~~~~~~~Rehabilitation & |247.3 22._3 259 289.45| 270.09 383.23 l l | ~~~~~~~~~Maintenance I I C v _ |~~~~~~~~~~~Block Teaching 2475 223,281 299.9 334.26 ' 3 191 442.55~ - 111 99 TOTALTEACHER TRAINING 4.358.64 4,242.19 4,458.24 4,606.01 4,509.84 5,071.76 4INSPECTORATE 2001 Salaries 880.82 880.82 880.82 880.82 880.82 880.82 Domestic Travelling 599.8 541.12 629.8 701.96 654.99 929.38 -_ _ _ ~~~~~~~~~~~Running of Vehicles 300.2 270.83 315.2 351.31 327.81 465.13 TOTAL INSPEC TORATE 1780.82 1692.77 1825.82 1934.09 1863.62 2275.33 RECURRENT 5OTHERS > Salaries 3659.61 3659.61 3659.61 3659.610 696 696 _ ~~~~~~~~TOTAL 3659.611 3659.61 -36-59.61 369.1 36~59.61 ~365~9.61 __ ~~~~OTHERS __ 6HIGHER AND TECIHNICA L EDUCATION Salaries for HQ., 967.59 967.59 967.59 967.59 967.59 967.59 i _ ~~~~~~~~MTC,and TCA___ _ ~~~~~~~~~~~~~ ~~Staff salaries 14.600.00 14,600.00 14,600.00 14,600.00 14,600.00 14,600.00 _ _ _ .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 31 _ _ ~~~~~ ~ ~ ~~~~~~Others -4---- ----- 88.52 488.52 488.52 488.52 _ 488.52 488.52 _ _ _ _ _ ~~~~~~~~~~~Rationalization of 6,734.00 6,075.15 6,768.00 ~ 7,543.43 7,038.72 9,987.34 Institutionis Improving Distant 5,050.00 4,555.91 5,075.00 5,656.45 5,278.00 7,489.03 Education _ ~~~~~~~~~~~~~Improving of equality 5,050.00 4,555.91 5,075.00 5,656.45 5278.00 7,489.03 in Edu-cation 0 t _ _ __ ~~~~~~~~~~~Students Loan 3,430.00 3,94.41 | 3,447.00 3,841,931 3,584.88 5,086.69| i i ~~~~~~~~~Scheme iii 1 - ~~~~~~~~~~~~~~Provision of Industrial 1,755.00i 1,583.291 1,763.00 1,964.9 9 1833.52 2,601.61 i i i~~~~~~~~~~TrainingI i ,, |Tcnical Edu-ca-tion _ 061,06 1.0051 1,066.00 1,188.13| 1,0 8.64 15 7 3.07| i t |~~~~~~~~Improvement _ ___ j j f |~~~~~~~~~~~~~Foreign students 1,256.00j 1,133.11| 1,262.00| 1,406.591 1,312.48 1,862.30| T fALH GHERAND TE CHI-N ICAL L 410,392.11 1 34,916.67 40,512.11l 399472.1141,490.35 52,176.185 j g s~~~~~~~~GRAND 210,329.985 20,55.6 21,667 211,279.141 213,835.0 235,103.745 l T ~~~~TOTAL < < < ~~~~~~~ ~~TbTAL 162,460.68| 162,460.681 162,460.68^ 162,4C0.681 162,460.68; 162,460.68| I I t ~~~SALARE l Ii|i X t~~~~NON SALARY EXPENDITURE 47,869.30 40,093.4 49,206. 10| _48-,818.46j 51,374.341 72,6430 100 - jTOTAL - = _ = XL _ = Source: Budget Guidelines for the __ll_ year 2000. l I NB: Staff sclaries: These are salar-iesfjr SUA, UDSM, UCLAS, MUCHS - r - - and OUT _ -l _ Others: These are sariesforNRCetc ______ ______ _ _ _ PERFORMANCE INDICATORS IN HIGHER AND TECHNICAL EDUCATION SUB SECTOR 5 years average 1993/1997 Performance in 1998 Universities Colleges Universities Colleges No. of students 3017 1788 4131 1758 First year students 405 219 429 227 Percentage of lst year 13 12.2 10 12.9 Students per staff member 6.07 7 8.4 9 Staff 646 241 578 207.9 Number of Universities 3 3 3 3 Technical Colleges have experienced stagnant growth due to unavailability of resources to expand their infrastructure. The Arusha Technical college had an enrolment ot 485 studenits in 1994/95 and it fe 101 6. MTEF FOR THE HEALTH SECTOR 2000/01 - 2002/03 6.1 INTRODUCTION 6.1 The Tanzania Health Sector has made remarkable progress since the 1967 Arusha Declaration. There were deliberate and concerted efforts directed towards investing in the health sector where emphasis was on rural health development. This was a strategy for equitable distribution of health services in the country. The impact of fair health facilities distribution can be explained by looking at health and population indicators that showed improvement in the health and family status for the country. Despite this improvement, progress changed particularly in the early 1980s when the country's economy was not performing well. This situation resulted in the overall decline in the quality of and access to health services reflected by the high infant and maternal mortality and morbidity rates. The Health System Network 6.2 The Tanzanian health network consists of about 4844 facilities that are well distributed across the country. Of these facilities, 2877 belong to the government. Out of the government owned facilities, 284 are health centers and 2512 dispensaries providing primary care services. These are in turn linked to 81 hospitals that include district and regional hospitals as well as Muhimbili National referral and teaching hospital. Where government district hospitals do not exist, the areas are served by voluntary agency hospitals that are supported financially by the government through subventions. 6.3 Analysis of disease (1995 Study) patterns and trends show that the burden of disease is mainly concentrated on communicable and preventable diseases that can be controlled through effective preventive and promotive health programs at District and primary level. 6.4 It was found that over 70 percent of life years lost in Tanzania are caused by the Top Ten major diseases such as Malaria, Diarrhoea, prenatal/Maternal conditions and HIV/AIDS related diseases. Malaria and prenatal/maternal conditions account for more than 40 percent (MoH, 1999). 6.2 HEALTH SECTOR REFORMS 6.5 Against this background, the ministry initiated and proposed major reforms in the sector to rationalize the roles and responsibilities in the provision and financing of the health services. The intention of reforms is to restore the lost credibility and ensure cost effective use of existing and future resources through emphasis in priorities on outcomes rather than outputs. Within a longer-term perspective, it is anticipated that the health services through these initiatives will be improved and deliver the expected services. This can only be achieved through having motivated staff, adequate supply of drugs and other medical supplies, dynamic and highly qualified professionals and sustainable resources made available from different sources. Within the context of health sector reforms, the government 102 redefines its role in the health care system from one of dominant provider to facilitator. The reform will focus on ensuring more transparent, cost-effective use of resources, and on improving delivery, quality and have impact of essential health care to the poor. However, it should be noted that, the health sector reform is embedded in the wider context of civil service and local government reforms. 6.6 Other areas of concern are the disproportionate amount of resources spent on personal emoluments (over 70%), at the expense of resources allocated towards the actual delivery of health services. In addition, the effectiveness, quality and sustainability of public health services, availability of financial resources to run the health services, the poor physical state of the public health facilities and equipment and the overall poor utilization of government health services are also of concern. Despite the government's emphasis on equitable distribution of health services, available evidence indicates that the personnel distribution, heavily favors the urban areas consisting of about 20% of the population and yet served by about 70% of the total workforce. The Government of Tanzania has been exploring various options to address the critical issues affecting delivery of services in the health sector including rationalization of human resources. 6.3 HEALTH POLICY OBJECTIVES 6.7 The overall objective of the Government of Tanzania's health policy is to improve the health and well-being of all Tanzanians with a focus on those most at risk and to encourage the health system to be more responsive to the needs of the people. Success in achieving this objective has required adequate solutions to the systemic problems that affect the delivery of health care. In the medium term, therefore a firm foundation will be built for the improvement in the quality of health care as well as for increasing access to health facilities. There is also a critical need for the effective implementation of measures that will help establish a broad enabling environment for improved health services. These measures must take into account factors that are external to the health system, such as cultural attitudes, values and the physical environment in which the population lives, which have an important bearing on health outcomes. 6.8 To achieve its overall objective, the Government of Tanzania aims to: Reduce infant and maternal mortality, morbidity and increase life expectancy through the provision of adequate and equitable maternal and child health services, promotion of adequate nutrition, control of communicable diseases and treatment of common conditions (For details read PER 1999 document). Ensure that quality health services are available and accessible to all in urban and rural areas within reachable distances; Move towards self sufficiency and equitable distribution of human resources by training all cadres required at all levels; Sensitize the community on common preventable health problems and improve capacity at all levels of society to assess and analyze problems and design appropriate action through genuine community involvement; Promote awareness in government and community at large that health problems can only be adequately addressed through multi-sectoral co-operation and sector wide approaches, Create awareness through family health promotion that responsibility for one's 103 health rests squarely with the able-bodied individually as an integrated part of the family; Public/Private mix will be promoted in the delivery of health services. 6.9 The Ministry of Health, following the thrust of the on-going health reforms, will take the process forward in the plan of work with the following underlying immediate objectives: Priority attention to improved access, equality and efficiency of primary health (district level) services, Strengthen and reorient secondary and tertiary services delivery to support primary health care services, Improve the capacity for policy development and analysis, development of guidelines for national implementation, performance monitoring and evaluation, legislation and regulation of service delivery and health professionals. Implement a human resource programme to train adequate numbers of health staff to manage the services (primary, secondary and tertiary). Strengthen the national support systems for personnel management, drugs and supplies, medical equipment and physical infrastructure management, transport management and communication. Increased and varied financing sources for health care delivery and improved financial management. Increased private sector involvement in the delivery of public health services. Within the sector -wide approach, improve the relationship between all partners, and institute mechanisms to ensure that support to the health sector is addressed in its totality with sharing of information and actions (i.e. transparent and accountability). 6.4 IMPLEMENTATION STRATEGIES 6.10 In order to meet the challenges of providing health services within the Health Sector Reform agenda, EIGHT inter-linked strategies have been developed to address the above mentioned immediate objectives. The ideas behind these strategies are that: More resources will be injected into the health system and existing resources will be used efficiently; Resources will be distributed more equitably; Priorities, objectives and standards will be clearly defined and monitored; Managers at all institutional levels will have greater authority in the planning, allocation and use of available resources; Staff will be better motivated through improvements in the working environment; Drugs and essential supplies to be made available as required. 6.11 In order to implement these strategies, a phased three-year development program of work has been developed. The 1999-2000 Financial Year Action Plan was estimated to cost US$ 60 million. Through this plan GOT aims to: 104 Increasing its own resources to the health sector and protecting this commitment in spite of the pressure of structural adjustments. Through a number of mechanisms, develop and strengthen approaches to mobilize resources from the private sector and the population at large through user charges, community health fund and phased implementation of the National Health Insurance System. Introduce mechanisms of enhancing donor funding to the health sector through the Sector Wide Approach Program (SWAP); The implementation of the 1999-2000 Financial Year Action Plan has not been done effectively due the following reasons: the systems to operationalize and manage the funds were not ready in place as planned; The flow of funds from the Treasury has been erratic, particularly with regard to Other Charges (OC) and Development expenditures. The Ministry of Health by the end of February has received only Tshs.8.48 Billion out of Tshs.29.26 Billion allocated as Other Charges and only Tshs.1.0 Billion for development programs (Table6. 3). 6.12 These factors have adversely affected the implementation of planned activities in the first three-quarters under the health sector reform agenda. Likewise, sector-wide approach entails that all participating parties develop and fund one Plan of Work, within the Medium Term Expenditure Framework, which covers all national, regional and district health requirements. The Ministry of Health and donors are expected to meet the following conditions: Development and funding of one Program of Work and one annual Plan of Action; Adherence to one set of common administrative arrangements such as financial management and procurement; Management of funds and implementation of program activities by Government; Strict adherence to signed agreements and conditions; Government and donors to be more transparent and show openness regarding their governing policies and views on implementation; Government and donors to show flexibility when implementing the plans. 6.5 PRIORITY AREAS WITHIN THE SECTOR 6.13 The adoption of a sector-wide approach to implement the Health Sector Reform and the above conditions for a successful implementation of the Plan of Work, call for a progressive shift in donor assistance towards budget support for the health sector. In this context, and in line with the Government's performance budgeting concept, the Ministry of Health has identified a number of priority areas which shall serve as a frame for the definition of performance monitoring indicators. It will also be a basis for budget process oriented towards outputs rather than inputs. Table 6.1 shows total requirement and allocations for the priority activities to be implemented in the health sector. 105 6.14 The priority areas focus on facilitating and strengthening the delivery of health services to comply with the essential district health package as well as to arrest the further deterioration of the physical facilities. Provision of drugs will continue to be a protected item in the budget. The following priority areas are therefore recommended: .Drugs and essential medical supplies; .Kerosene for storage of vaccines in rural areas; .Essential hospital equipment and supplies; .Strengthening of the referral system; .Equipment for safe motherhood for all levels (vaccines, delivery beds and kits etc); .Conditional survey of physical facilities and equipment and prioritization for urgent rehabilitation of the most critical ones; .Mechanisms for the introduction of CIl-F and cost sharing to lower level facilities; .Mechanisms for the implementation of the National Insurance Fund. 6.15 Apart from the above items, other areas of priority that are required for developing institutional infrastructure for sustainability in health care delivery are; Improved health education strategies; Development and institutionalization of the health sector reform strategies. 6.16 The following are the key components pertaining to the above priority areas and which need to be strengthened: Sector Financing: with focus on the sector overall resource envelope; Sector Monitoring and Evaluation: with focus on both technical and systemic monitoring; Sector Financial Management: with focus on unified systems for merging internal and external resources at central and district levels; District Health Management: with focus on Essential Health Packages and synergies between MoH and MoRALG; Health Network Rationalization: with focus on rationale and affordable rehabilitation of the facilities' network. 106 Table 6.1: Medium Term Recurrent and Development Financing Framework (Priority Areas) FY00 - FY03 for the health sector (Millions of Tshs.). Development and Other Charges Priority Area/Activity Estimates 2 Projections 2000/0 1 _____ 2001/02 2000/03 1999/2000 Requirement Proposed Requirement Proposed Requirement Proposed Alloc. Allocation. Allocation DRUGS 9,500.00 17,600.00 11,610.36 19,360.00 18,178.86 20,134.40 25,474.52 Essential Medical Supplies 2,664.63 5,500.00 3,627.07 6,000.00 5,634.43 6,240.00 7,894.53 Essential hospital equipment and reagents 6,500.0 4,286.54 7,000.00 6,573.50 7,280.00 9,210.29 (diagnostic equipment X-ray inclusive) 3,197.55 EPI - Kerosene 266.46 600.00 395.68 700.00 657.35 728.00 921.03 Utilities for hospital and Training 53.29 120.00 79.14 150.00 140.86 156.00 197.36 Institutions Strengthening referral Hospitals -provide 2,500.00 1,648.67 3,000.00 2,817.22 3,120.00 3,947.27 PHC units with drugs, equipment and 1,065.85 trained staff Define the referral functions of secondary 1,500.00 989.20 2,000.00 1,878.14 2,080.00 2,631.51 and tertiary curative services (referral facilities no longer attend health centers 639.51 cases Counterpart funds for the introductions of 400.00 263.79 200.00 187.81 208.00 263.15 CHF and cost sharing to lower level health 266.46 facilities Start up cost and counter part funds for 200.00 131.89 100.00 93.91 104.00 131.58 introduction of National Health Insurance 266.46 Immunization of 2 years kids for 71% to 0.00 1,874.40 1,079.60 1,187.20 75% HIV/AIDS awareness campaign 0.00 4,846 4,731.00 4,680.00 Total recurrent 15,973.84 34,920.00 29,752.75 38,510.00 41,972.68 40,050.40 56,538.43 Total Development 2,874.75 20,840.00 4,422.68 23,670.00 4,375.00 24,616.80 4,375.00 Total Resources Priority areas 18,848.59 55,760.00 34,175.43 62,180.00 46,347.68 64,667.20 60,913.43 Sources: Budget Guidelines March 2000 Public Expenditure Review, Report No. 19898.Vol. 1, November 1999 107 6.6 HEALTH SECTOR OVERALL EXPENDITURE PERFORMANCE FY1997- 2000. 6.17 Table 6.2 shows the amount of resources that the health sector has received in the past 2 years and half of the current fiscal year. The amount of funds released was more than what was budgeted for the sector. This was due to the shortage of drugs in most of health facilities, which forced the government to allocate extra funds to the sector. The increases were around 23.75 percent in FY 1997/98 and FY 1998/99, while the actual expenditures in the same financial years were over and above the budget. In FY 1997/98 actual expenditure was about 9.08 percent and in 1998/99, it was 14.04 percent over the budget. 6.18 However, expenditure trends in the health sector represent a great challenge, especially at the lower levels. The expenditure figures are desegregated between those spent at ministerial level and public health expenditures spent at regional and district levels. Health expenditures at the regional and district levels are aggregated with other sectors' expenditures. Desegregation at national level using ministry of Finance's supply vote volumes is not possible on actual expenditures on regional and district levels. However, several public expenditure reviews have pointed out that ministry of Ilealth expenditure alone accounts between the range of 40-50% of all public Health expenditures. Table 6.2: Government Budgets and Actual Expenditures for Health Sector in billion Tanzania Shillings 1997/98 1998/99 1999/00 Actual a %of budget Budget Actual Budget ctual Budget Actual 1997/98 1998/99 (Febr.2000) l Recurrent MOH 22.03 25.86 28.9 37.15 31.6 18.59 117 128.55 Regions 7.25 7.25 -8.4 8.4 9.24 4.8 100 100 Local 12.9 12.90 14.9 13.98 16.39 8.13 100 93.8 government _____20 59_53 523 152140 42.18 46.01 52.20 59.53 57.23 31.52 109.08 114.04 Tot. Recurrent Development MOH Local 1.97 1.97 2.0 1.992 3.375 1.00 100.0 99.61 Foreign 23.99 3.248 19.487 9.603 20.00 1.375 13.54 49.28 Regions/Local 1.38 1.38 1.36 1.26 0.4 0.20 100 92.64 Government Total 27.34 6.598 22.847 12.855 23.775 2.575 24.13 56.26 development. Total Health 69.52 52.608 75.047 72.385 81.31 33.895 75.67 96.45 Source:- Ministry of Finance, (extracted from various books for each respective year) 108 Table 6.3: Sub-Services/Functions breakdown of government recurrent budget for Health-1998/99 PE* OC* Total. Bn. Shs. % Bn.Shs. % Bn. Shs. % MOH ADMIN/CENTRAL** 2.4 18.6 13.4 83.6 15.8 54.9 Muhimbili Medical Center 4.2 32.6 0.8 5.0 5.0 17.4 KCMC hospital 0.9 7.0 0.4 2.5 1.3 4.5 District Designated hospitals (DDH) 2.03 15.8 0.6 4.0 2.63 9.1 Bugando hospital 0.52 4.04 0.4 2.5 0.92 3.2 Muhimbili Orthopaedic Institute (MO[) 0.31 2.41 0.1 0.6 0.41 1.4 Ocean Road Cancer Institute 0.21 1.63 0.1 0.6 0.31 1.1 Voluntary Agency (VA) hospitals 1.1 8.5 0.05 0.3 1.15 4.0 National Institute for Medical Research 0.8 6.22 0.09 0.6 0.85 2.9 (NIMR) Tanzania Food and Nutrition Center 0.4 3.II 0.05 0.3 0.45 1.6 (TFNC) TOTAL 12.87 100% 16.03 100% 28.82 100% *PE are personal emoluments, OC are other charges Drug costs have been allocated to various levels of health care based on infornation supplied by Medical Stores Department "*MOH/Admin/Central includes MOH administration, accounts, planning and nursing sections, the Government Chemist service and Tanzania Food Commission DDHs are Designated District Hospitals-these are hospitals run by voluntary agencies in 19 districts where no government owned hospital exist. They receive subventions and drugs from the government. Other voluntary Agency owned hospitals (about 46) are supported by government through secondment of staff 109 6.7 FINANCIAL RESOURCES AND MEDIUM TERM FRAMEWORK FOR THE 2000 - 2003 6.19 The government, donors and contributions from members of the community fund the health sector. Donors mainly support vertical programs like EPI, control of STDs and HIV/AIDS and the TB and Leprosy programs among others. There have been failures by some of the donors to release all their financial commitment to the health sector on several occasions. Trends in government expenditure on health therefore indicate a notable under- funding at all levels of the sector. The capacity of the government to substantially increase funding to the health sector is severely limited by a badly performing economy and a heavy external debt. However, the Government of Tanzania is in the process of identifying and strengthening other sources of revenue that include cost sharing, community health funds, revolving drugs funds and the phased implementation of a National Health Insurance Scheme. 6.20 The Annual Health Sector Plan of Action for July 1999 - June 2000 planned to get resources from: The government of Tanzania; partners; multilateral and bilateral (donor funds); other sources e.g. community health funds, National Health Insurance and Cost sharing funds. 6.21 It was expected that US$ 198,44,072 would be available to support plan of action in the first year. The Government was to contribute 47% of the funds while donors were to contribute 51% and the private sector 2%. Although funds to be contributed by donors were substantial, the MOH had no access to some of the funds, because they are to be sent directly towards supporting vertical programs as well as support to district and NGOs. 6.22 From the Government the MOH central has received Tshs.18.59 billion out of which Tshs.10.11 billion PE and Tshs.8.48 billion. OC. Whereas Tshs.2.375 billion has been received for the development budget out of which Tshs.1.0 billion is from GOT 1.375 billion is from Donors (DANIDA Tshs.690 million and Tshs.681 million from partners) Areas of priority 6.23 The priority areas intended to assist the MOH to attain its mission of improving health and wellbeing of all Tanzanians with a focus on those most at risk, and put in place a system more responsive to the needs of the people is shown in table 6.1 for three years 2000 - 2003. Way forward (2000 - 2003) 6.24 Planned activities in year one shall be budgeted within the existing resources envelope (Government and donor input) The Government has estimated 70.81/= billion for 2000/ 2001 recurrent expenditure and Tshs.3.54 billion for development. 6.25 New reform activities based on the on-going reform process in the local government as well as within the health sector will continue to be funded over and above committed and tied funding by donors and Government of Tanzania, Partners and other donors. 6.26 This year, most of the reform activities will be integrated into the annual development and recurrent expenditure books. 6.27 The MOH will continue with the introduction of policy objectives and targets that will allow the identification of scarce resources and the need for greater inputs over time (i.e. per capital expenditure through district block grants and per capita drug expenditure). This is to be integrated into the performance budgeting process under the ministry. 110 6.28 The MOH will continue to emphasize on the need to integrate vertical programs into sectoral and district plans and budgets so that most of the vertical program funds are reflected in government budget books in order to develop comprehensive health plans at all levels. 6.29 The MOH will continue with its efforts to assist the Regions and Districts to build their capacity in planing, management and supervision 6.30 The Medium Term Expenditure Framework (MTEF) will eventually show an integrated budget frame for all activities. Table 6.3 shows the MTEF proposals for year 2000 - 2003 from all sources. 111 Table 6.4: Recurrent and Development projections for Medium Term Expenditure Framework (2000/01 - 2002/03) in Billion Tshs SOURCES 2000 -2001 2001 -2002 2002 -2003 PE OC PE OC Total PE OC Total Ministry of Finance 33.62 37.19 70.81 33.62 52.46 86.08 33.62 70.67 104.29 External Donor 36.44 38.74 42.00* o/w Pool funds 16.70 28.20 40.00 User fees 3.30 -S 3.50 __3.80 Community Health Fund (CHF) 0.21 0.25 0.25 National Health Insurance (NHI) 0.89 0.89 0.89 Total available for MTEF - Recurrent 107.25 124.82 1 146.29 Grand Total of Financing- Recurrent 111.65 129.46 151.23 EXPENDITURE AND PROJECTIONS 1999/2000 (Budget 1999/2000 (Actual up to 2000- 2001 2001- 2002 2002 -2003 Febr.2000 PE OC Total PE OC Total PE OC Total PE OC Total PE OC Total MOH 2.32 29.26 31.58 10.11 8.48 18.59 4.079 27.585 31.664 4.079 37.660 41.740 4.079 48.559 52.638 Regions 8.53 0.71 9.24 9.023 0.772 9.795 8.956 2.192 11.148 8.956 2.809 11.765 8.956 4.318 13.275 D/ Council 19.61 2.628 22.233 10.16 0.62 10.76 20.585 7.413 27.998 20.585 11.995 32.580 20.585 17.794 38.380 Municipalities 5.09 0.75 5.85 NA NA NA. 5.35 1.25 6.60 5.35 1.56 6.90 5.35 2.02 7.37 Total Recurrent 30.45 32.60 63.05 29.29 9.872 39.145 38.97 38.44 77.41 38.97 54.024 92.994 38.97 72.691 111.661 MOH 3.375 1.00 3.54 3.50 3.50 Regions/Local Govt. 0.40 0.2 0.88 0.88 0.88 Sub Total 3.415 1.00 4.42 4.38 4.38 Donor Projects 20.00 1.375 17.54 9.88 3.14* Total Development 23.415 2.375 21.96 14.26 7.52 Total Exp. and 30.45 32.60 86.465 31.65 9.872 41.52 38.97 38.44 99.37 38.97 54.024 107.254 38.97 Projections lI l__ l I __._l_l 72.691 119.181 Note: Applicable Exchange Rate US$ =Tsh.800/=,N/A: Not available, *Figures 112 7. MEDIUM TERM EXPENDITURE FRAMEWORK (MTEF) 2000/01 - 2002/03 FOR THE MINISTRY OF WORKS 7.1 INTRODUCTION 7.1 This Medium Term Expenditure Framework (MTEF) of the Ministry of Works (MOW) provides an overview of the expenditure strategies the Government wishes to pursue over the next three years, in order to guarantee the sustainability of the trunk and regional road network. It is an update of the 1999/00-2001/02 MTEF. In updating this report we have taken into consideration: (i) Institutional changes in the road sector, specifically the creation of TANROADS. The new organization is a semi-autonomous executive agency dedicated to the management and execution of future maintenance and rehabilitation of the road network. (ii) Lessons learnt from the review of the past expenditure performance and its effects to the future plan particularly the accumulated backlog of maintenance and rehabilitation work. (iii) The budget guidelines that provide indicative budget frame for 2000/2001-2003/2004. The report covers an overview of the road network; organization of the road sector; review of the past expenditure performance; the Medium Term Expenditure Framework; and summary of the budget strategy for the road sector. 7.2 OVERVIEW OF THE ROAD NETWORK The Road Network 7.2 The road network in Tanzania comprises approximately 85,000 km of roads, classified into three overall categories: trunk roads; regional roads including essential district and feeder roads; and district and feeder roads. Trunk Roads 7.3 Trunk roads are defined as the main transport arteries, and together comprise the strategic road network. The trunk road network is divided into 9 main corridors, which in turn are ranked according to their national economic significance. The prioritization is based on population served, agricultural output, mining, tourism and impact on regional co-operation, and resulted in following order: TANZAM CORRIDOR km 1,328 CENTRAL CORRIDOR km 1,584 LAKE CIRCUIT CORRIDOR km 1,019 NORTH-EAST CORRIDOR km 950 GREAT NORTH CORRIDOR km 1,024 SOUTHERN CORRIDOR km 1,326 WESTERN CORRIDOR km 1,286 113 SOUTHERN COASTAL CORRIDOR km 508 MID-WEST CORRIDOR km 1,201 7.4 The total length of the trunk road network, according to the MOW estimates is 10,300 km of which 3,800 km are paved and 6,500 km are unpaved. There have been several studies that have suggested different estimates of the road length. Figures from regional engineers suggest that the corridors mentioned above have a total road length of 9,877 km, of which 3,896 km are paved and 5,981 km are unpaved. The discrepancy is yet to be clarified and the present report makes use of the MOW figures to make it compatible with previous studies. A study is underway to determine the actual road length for the corridors. With the exception of the TANZAM highway, where approaches to Dar es Salaam have an AADT in excess of 7,000 vehicles per day, the traffic volume on the rest of the trunk roads range from 200 to 3000 vehicles per day. Regional Roads 7.5 Regional (or rural) roads typically bridge gaps between regional communities and activity centers and the trunk road network, and serve as "collectors" for district roads. 7.6 The information submitted by the Regional Engineers indicate that Regional Roads total 18,820 km, of which only 241 km are paved and 18,579 are unpaved. The corresponding figures commonly used by MOW are 24,700 km in total, of which only 100 km is paved. As for the trunk roads, the discrepancy is yet to be clarified, and the present report will therefore make use of the MOW figures to enable comparison with previous studies. District Roads 7.7 District roads comprise all other roads not included in the above categories, and are of a more local nature, i.e. serving communities within a district. MOW figures indicate that district roads are estimated to total 50,000 km, comprising of 27,550 km of feeder roads, 20,000 km of district roads and 2,450 km of urban roads. Condition Of The Road Network 7.8 Condition surveys have in the past not been carried out on a regular basis, and the only available historic data within the MOW is from a survey carried out in 1997, and the latest in 1999. The findings are presented in tables 7.1 and 7.2 below. 114 Table 7.1 - Condition Survey 1997 (Source MOW) Trunk Roads - Paved 2,019 (53%) 15267 (33%) 544 (14%) 3,830 (100%) - Unpaved 1,362 (21%) 34036 (47%) 2,072 (35%) 6,470 (100%) Total Truink Roads 3,381 (33%) 4,303 (42%) 2,616 (25%) 10,300 (100°/%) Regional Roads - Paved 17 (17%) SB (59%/) 23 (23%) 98 (100%/) - tJnpaved 4,507 (18%) 7,458 (300%) 12,6337 (51%) 24.602 (100%) Total Regional Roads 4,524 (18%) 7,516 (30%) 12,660 (51%) 24,700 (100%) Total District Roads 3,995 (8%) 9,755 (20%) 36,250 (73%) 50,000 (100%) Total Roads 11,900 (14%) 21,574 (25%) 51,526 (61%) ] 85,000 (100°%) Note: Figures indicate km of road and percentage of total Table 7.2 - Condition Survey 1999 (Source MOW) Trunk Roads - Paved 2.317 (59%) 1,163 (30%) 441 (11%) 3,921 (100%) - tJnpaved 776 (12%) 2,858 (45%) 2,675 (42%) 6,309 (100%) Total Trunk Roads 3,093 (30%) 4,021 (39%) 3,116 (30%) 10,230 (100%) Regional Roads* - Paved 22 (10%) 156 (70%) 45 (20%) 223 (100%) - Unpaved 3,730 (15%) 6.871 (28%) 13.876 (57%) 24,477 (100%) Total Regional Roads 3,752 (15%) 7,027 (28%) 13,921 (56%) 24,700 (100%) Total District Roads 3,995 (8%) 9,755 (20%) 36,250 (73%) 50,000 (100%) Total Roads 10,840 (13%) 20,803 (24%) 53,287 (63%) 84,930 (100%) Note: Figures indicate kim of road and percentage of total * Survey in May 98. ** Survey from 97 7.9 According to the MOW estimates, only 15% of the trunk and 10% of regional roads were in good condition prior to the commencement of Integrated Road Project (IRP) in 1990. Although progress has been achieved on the paved trunk roads, the following deficiencies have occurred: - While the number of km paved trunk road in good condition has increased, the overall percentage of trunk roads in good condition has decreased by 3% from 1997 to 1999. 115 - There has been a significant decrease in the number of km of trunk road in fair condition, with a corresponding increase of those in poor condition. - The number of km of regional roads in good condition has been reduced from 18% in 1997 to 15% in 1999. - There has been a 2% decrease in the number of km of regional roads in fair condition. - There has been a 5% increase in the number of km of regional roads in poor condition. 7.10 When viewed on their own, the above data paint a rather negative picture of the achievements in the road sector. It could be argued that heavy investments by donors in the rehabilitation and reconstruction of paved trunk roads has significantly facilitated the increase of this road network, while on the other hand, insufficient maintenance has further deteriorated the remainder of the trunk and regional road network. However, it is difficult to draw any conclusions as to the effectiveness of the road maintenance carried out, since: The condition surveys also depict the consequences of the El-Nino weather phenomenon, which occurred in 1997/98, and left one third of Tanzania flooded, with resultant heavy damage to road network. The survey method is solely by way of visual inspection, and therefore prone to subjective interpretations which may differ from district to district and from survey to survey, depending on the surveyor. Government Vision for Roads Development 7.11 The road sector is one of the central sectors in the Tanzania economy and is crucial for the sustainability of the country's economic development. Road transport contributes about 5 percent to overall GDP while transport equipment comprises about 37 percent of the gross fixed capital formation. Road transport handles about 70 percent of internal freight traffic, 64 percent of transit cargo and is a major mode of passenger transport. In addition, road transport dominates other modes of transport in terms of employment creation. The vastness of the country and the dispersed nature of the population, business and economic activities add to the strategic importance of the roads sector to the economy. 7.12 The Tanzania development vision 2025 accords very high priority to investment in infrastructure. In particular, the development of the road network is judged to be absolutely essential for promoting rural development. Consequentlv, the Government's mission and vision for the development of the sector is focused at improving the national road network. The Government considers that no sustainable and meaningful socio-economic development can take place in the regions and villages while the condition of roads is bad. Poor roads will not allow for the full exploitation of the national human and natural resources that would warrant a higher rate of growth of the economy. 7.13 The improved national road network envisaged would consist of roads that are good for vehicles under all weather conditions. Also it would offer the shortest possible road link between different geographical locations, both in urban and rural areas, to facilitate production, distribution and marketing of all kinds of goods and services. 116 7.3 ORGANIZATION AND MANAGEMENT OF THE ROAD SECTOR Current Situation 7.14 The responsibility of administration and management of the road network is currently shared between MOW and MRALG. However, from 1It July 2000, the new semi-autonomous road agency "TANROADS" will start taking over the MOW responsibilities, initially starting with road maintenance and later road development activities. Ministry of Works (MOW) 7.15 MOW solely manages the trunk and regional road network, and is mandated to plan, design, construct, improve and maintain these road networks, the strategy being to contract out to the private sector as many of these tasks as feasible. MOW is also responsible for the formulation of sectoral policies, strategic planning and management of the road network. This includes co-ordination of donor activities in the trunk and regional roads sector through CODAP (Co-ordination Office for Donor Assisted Projects). 7.16 The MOW is represented by a regional office headed by a regional engineer in each of the 20 regions of Tanzania mainland. The decentralized regional offices are responsible for the implementation of road maintenance, through grants allocated to them by MOW from the Road Fund. 7.17 The operating budget for MOW is allocated directly from the Central Government, since resources from the Road Fund are earmarked for maintenance, rehabilitation and upgrading of the road network. Ministry of Regional Administration and Local Government (MRALG) 7.18 The responsibility for maintenance and development of district roads which was previously under the Prime Ministers Office (PMO), was in FY 1999 transferred to MRALG. District roads include urban and feeder roads. The MRALG is responsible for allocating and distributing resources from the Road Fund to the local councils which implement road maintenance and development. The Road Fund 7.19 The government has adopted a new institutional structure for the roads sector. Under the new set up, the government has amended the Roads Toll Act in order to create a dedicated Roads Fund to be managed by a Road Fund Board. 7.20 The amended Roads Toll Act provides for ring fencing of revenues from the road toll so that they are used primarily for road maintenance works for trunk, regional, district and feeder roads. The Road Fund will be managed by the Road Fund Board, which will include private sector representatives to ensure that the interests of the stakeholders are addressed in the maintenance of roads. 7.21 The Road Fund is a special fund dedicated to the maintenance and upgrading of trunk, regional and district roads. Revenue for this fund is obtained from a user charge on fuel consumers. Under this system, the road users are charged a fuel levy of Tshs.70 per liter of fuel. The funds are collected by the oil companies at the time that the fuel leaves the bonded warehouse. TRA collects these funds from oil companies and deposit them in the Treasury account with the Bank of Tanzania. The Treasury then issues instructions to deposits these funds in the Road Fund Account of the Ministry of Works (70%) and the MRALG (30%) for 117 trunk and regional, and district roads respectively. Of the MOW allocations, only 10% may be used for development of the road network, while 90% is earmarked for maintenance operations. The responsibility of managing the Road Fund will be taken over by the Road Fund Board in the next financial year. 7.22 The Government has also established a semi-autonomous road agency TANROADS under the Executive Agencies Act. The road agency will be responsible for road maintenance and development of the road network currently handled by the department of roads of the MOW. Tanroads 7.23 TANROADS is made up of a Chief Executive (CE) who is in charge of four departments: Maintenance, Development, Technical, and Finance and Administration. The Chief Executive (CE) has been identified and has been in office since mid February 2000. The other four departmental positions will be filled in time for establishment of TANROADS in July 2000. The bulk of the staff to be employed by TANROADS will be recruited from within the MOW, where adequate skills are readily available. The "New" Ministry of Works 7.24 The ongoing institutional reforms have a bearing on the future role of MOW in the road sub-sector. The Road Fund Board will replace the Ministry of Works role of managing the resources from the Road Fund. Establishment of TANROADS on the other hand takes away the MOW responsibilities of maintaining, rehabilitating and upgrading the trunk and regional roads. 7.25 In view of these changes, the future role of MOW will be limited to policy formulation, strategic planning including donor co-ordination, and management of its agencies. The ongoing Local Government reforms will also change the nature of resource flows from the Central Government to local authorities. Under the new structure the funds for road maintenance will flow in the form of block grants to the Local Authorities. This will replace the current practice of allocating the funds through MRALG. 7.4 REVIEW OF EXPENDITURE PERFORMANCE FY 1997/98-FY 1999/2000 7.26 Tables 7.3 and 7.4 show the level of expenditure by the Ministry of Works in real and nominal terms over the last three years. The level of expenditure has fluctuated in both nominal and real terms. Table 7.3: MOW Actual PE and OC expenditures (Nominal prices, Tshs million) 1919 1989 199/000: X, : ?007'0 .a: Ld' : Personal Emoluments 2,384 1,858 2,032 (PE) Other Charges (OC) 15,395 36,233 35,970 Total 17,779 38,091 42,002 Note: Other Charges include Road Fund releases to the Ministry of Works Figures for 1999/2000 are based on the approved budget Source: Ministry of Finance, Annual Recurrent Expenditure (Supply Votes) 118 Table 7.4: MOW Actual PE and OC expenditures (Real prices, Tshs million) '1 I99719&., 199812-9K 00 Personal Emoluments (PE) 2,384 1,728 2,197 Other Charges (OC) 15,395 33,705 26,583 Total 17,779 35,433 28,780 Notc: 1997198=100 Source: PwC calculations based on budget estimates 7.27 Comparison of actual releases with budgeted funds shows that actual released funds have in most cases been far less than the budgeted amounts. This has also been the case for both the development and recurrent budget as shown in table 7.5. In 1999/2000 however, recurrent costs surpassed the budget by 2% due to the fact that the development funds were dedicated to the maintenance of road infrastructure that was destroyed by EL-NINO rains. Table 7.5: Government allocation of resources to the Ministry of Works (Tshs million) 1997/98 1998/1999 1999X2000 Budget Actual, Actual Budget -Actua, Actual Approved .___ as % of budget as % of budget Budget Allocation to MOW Development 3,952 2,500 (63%) - - 4,000 Recurrent (of which) 23,046 17,779 (77%) 37,189 38,091 (102%) 38,002 PE 1,568 2,384 (152%) 1,932 1,858 (96%) 2,032 OC 21,478 15,395 (72%) 35,257 36,233 (103%Yo) 35,970 Total 26,998 20,279 (75%) 37,189 38,091 (102%) 42,002 Source: Ministry of Works Appropriation Accounts for respective years and PwC calculations 7.28 In FY 1997/98, budgeted resources actual releases. As seen in Table 7.6, there are shortfalls in the non-salary expenditures (Other Charges). The ratio of actual PE allocations to budget was close to or above 100% except for sub-vote 103 (Policy & Planning). Sub- votes which typically require casual laborers (such as electrical and mechanics, roads, buildings) tended to exceed their budgeted PE. 7.29 The analysis of the resources for the FY 1998/99 shows a different picture: Overall, expenditure on non-salary expenditures (Other Charges); The shortfall is due to inclusion in PE for vote 701 in Vote 601. There were many cases of over-expenditure in most sub-votes, the largcst being in Sub-vote 102 (Finance and Accounts). The over-expenditure is due to huge purchases of equipment and other fixed assets. 7.30 Table 7.6 shows the actual against budgeted resources across the sub-votes of the Ministry of Works. The concentration of resources to these departments reflect the priorities of the ministry. As seen from Table 7.7 the road sub-vote is given a top priority since it is the core function of the ministry. In all cases it received more than 90% of total resources. Prioritization across other sub-votes has tended to differ at the budgeting and the execution stage. The least priority was accorded to sub-votes 103 (Policy & Planning) and 102 (Finance & accounts), which received less than 2 percent of MOW resources. 119 Table 7.6: Allocation of Recurrent Budget to Various Sub-votes .4 Mg Mma 101 83.74% 193.10% 111.50% 102 77.58% 1823.80% 486.8 103 51.79% 92.20% 70.40% 201 112.74% - 57-30% 301 104.74% - 52.60% 401 134.40% 4.30% 132.00% 501 121.89% - 45.90% 601 123.33% 74.87% 76.16% Total 115.63% 73.16% 76.78% 101 178% 148% 162% 102 167% 13429% 5072% 103 51% 161% 127% 201 148% 22% 51% 301 47% 19% 41% 401 5% 148% 125% 501 117% 79% 85% 601 136% 78% 122% 701 0% 138% 128% Total 96% 142% 1133% ;199912000 101 86% 84% 78% 102 56% 81% 63% 103 109% 2% 5% 201 80% 44% 52% 301 89% 0% 35% 401 53% 75% 74% 501 60% 67% 65% 601 185% 0% 3% 701 0% 14% 0% Total 89% 5% 9% Note: PE figures include subventions, most of which go to capital transfer (CDA). Other sub-votes that receive subventions are the National Construction Council (NCC) under Trunk Roads and National Board of Materials Management (NBMM) under administration and general. Actual figures for 1999/2000 are for the period I"s July 1999 to 12th April 2000 Source: Ministry of Finance: Annual Recurrent Expenditure (Supply Votes - Ministries) 120 Table 7.7: Share of Resources to Various Sub-votes of MOW - Budgeted versus Actual Allocation (%) 1997/98 - 1998/99 --_ _ _ _ _ _ _ _ _ _ _ _ _ _ $ - 71 9 81 ^_ _ _ - _ _ - _ _ - _ _ _ _ _ _ - _ _- PE - . TOTAL Sub-Vote Budget Actual Budget Actual Budget Actual 101 8.53% 6.18% 0.29% 0.75% 1.03% 1.48% 102 2.22% 1.49% 0.70% 1.67% 0.26% 1.64% 103 0.98% 0.44% 0.80% 0.10% 0.16% 0.15% 201 20.60% 20.09% 1.96% 0.00% 3.64% 2.70% 301 10.52% 9.53% 1.03% 0.00% 1.88% 1.28% 401 14.59% 16.96% 0.39% 0.02% 1.35% 2.30% 501 5.93% 6.25% 0.97% 0.00% - 1.42% 0.84% 601 36.62% 39.06% 95.22% 97.45% 90.26% 89.60% Total 100% 100% 100% 100% 1100% 100% 1998/99 Sub-Vote PE OC TOTAL Budget Actual Budget Actual Budget Actual 101 5.96% 11.00% 1.76% 1.84% 2.62% 3.19% 102 1.71% 1.84% 0.26% 24.17% 0.55% 21.04% 103 0.79% 0.42% 0.46% 0.52% 0.53% 0.50% 201 23.58% 36.36% 20.00% 3.09% 20.73% 7.99% 301 14.17% 6.94% 0.92% 0.12% 3.61% 1.13% 401 4.14% 0.20% 5.32% 5.55% 5.08% 4.76% 501 6.61% 8.05% 9.07% 5.05% 8.57% 5.50% 601 24.19% 34.07% 1.81% 0.99% 6.36% 5.86% 701 18.86% 0.00% 60.41% 58.67% 51.95% 50.02% Total 100% 100% 100% 100% 100% 100% 1999/2000 Sub-Vote PE OC TOTAL Budget Actual Budget Actual Budget Actual 101 6.06% 5.88% 0.40% 6.33%O 0.70% 6.10% 102 2.64% 6.33% 0.06% 1.06% 0.20% 1.38% 103 0.56% 0.69% 1,05% 0.49% 1.03% 0.60% 201 21.71% 19.60% 4.04%/o 39.40% 4.98% 29.04% 301 12.16% 12.18% 1.06% 0.10% 1.65% 6.43% 401 1.11% 0.66% 1.40% 23.36% 1.39% 11.47% 501 11.89% 8.04% 1.70% 125.09% 2.24% 16.16% 601 24.63% 51.26% 90.25% 4.10% 86.78% 28.79% 701 19.25% 0.01% 0.02% 0.06% 1.04% 0.04% Total 100% 100% 100% 100% 100% 100% PE figures include subventions, most of which go to capital transfer (CDA). Other sub-votes that receive subventions are the National Construction Council (NCC) under Trunk Roads and National Board of Materials Management (NBMM) under administration and general. Actual figures for 1999/2000 are for the period 1It July 1999 to 12th April 2000 Source: Ministry of Finance: Annual Recurrent Expenditure (Supply Votes - Ministries) MOW Expenditure on Roads 7.31 Over the past three years, government expenditure in the roads sector has focused mainly on three main areas: (i) Emergency maintenance of roads such as those damaged by 121 El-Nino rains during 1997/98; (ii) Roads maintenance of rehabilitated/upgraded network; and (iii) Implementation of priority rehabilitation and upgrading projects (ongoing projects under IRP). Table 7.8 compares resources budgeted for road maintenance and rehabilitation with actual disbursements. Table 7.8: Resources allocation for road maintenance and rehabilitation in Tshs BudgetL Acul Ata ugtAtAl tua1, Aprvd Budget Road maintenance I< Bug I Budget Trunk Roads 11,057 7,391 67% 12,250 15,627 128% 37,251 Regional Roads 8,914 4,028 45% 15,310 8,982 59% 10,151 Total Maintenance 19,971 11,419 57% 27,560 24,609 89% 47,402 Road rehabilitation Trunk Roads 25,493 17,388 68% 42,622 29,264 69% 30,716 Regional Roads 1,937 2,010 1,805 Total Rehabilitation 25,493 19,325 76% 42,622 31,274 73% 32,521 GRAND TOTAL 45,464 30,744 68% 70,182 55,883 80% 79,923 Maintenance as % of total 37% 44% Rehabilitation as % of total 63% 56% Source: Ministry of Works 7.32 Table 7.8 shows that for the period 1997/98 and 1998/99 actual allocation of funds for road maintenance activities averaged about 57% and 89% of the road maintenance budget respectively. As a proportion of the total maintenance and rehabilitation budget, actual expenditure on road maintenance averaged 37% and 44% respectively during the same period. Actual allocation of funds for road rehabilitation was 76% and 73% of the budget in 1997/98 and 1998/99. As a proportion of the total budget, funds allocated for rehabilitation averaged 63% and 56% during the same period. Expenditure on Roads by Local Authorities 7.33 Information on expenditure on roads by local authorities is scanty. Records of the PMO/MRALG only show budgeted data. Very little is available by way of actual allocations to the roads sector. This is partly explained by (i) the infrequent changes in the parent ministry responsible for local governments. (ii) the fact that resources for road maintenance are in form of Road Fund allocations to local authorities through PMO/MRALG. Local authorities further provide negligible amounts out of own resources for road works. 7.34 During FY97 and FY98 the Government allocated to the PMO shillings 3.5 billion and 13.6 billion respectively for the purposes of maintaining the district roads network. This was equivalent to 14 and 30 percent of the total Road Fund collected for the two years respectively. The allocation for FY 97 was below the intended share of 20 percent. Beginning FY98 the Government decided to raise this share to 30 percent so as to increase the capacity of the local authorities to carry out maintenance work and rehabilitation/upgrading of district roads. 122 7.5 THE MTEF FOR THE ROADS SECTOR 7.35 This section presents the medium term expenditure framework (MTEF) for the Government's activities in the Trunk and Regional roads. It presents the Road Fund revenue projections and the distribution of these between maintenance and development activities. The projected financial resources are then compared with the proposed allocations in the budget guidelines followed by an overview of the Ministry of Works rehabilitation and maintenance programs over the period of this MTEF. Available resources are compared with the proposed programs with a view to identifying the financing gap. Options for meeting future financial requirements are discussed followed by a summary of budget strategy for the road sector over the next three years. Projections of Road Fund revenues 7.36 In order to determine the level of maintenance that could be carried out for FY 2000/2001-2002/2003 the revenues are estimated under two scenarios: 7.37 Base case scenario: where consumption figures contained in the budget guidelines are used. Low case scenario: is based on actual road toll collections for the period between 1" July 1999 to 315t January 2000. These figures are based on TRA Road Toll reconciliation. The results of these estimates are shown in Table 7.9 overleaf. 7.38 The budget guidelines assumed a taxable fuel consumption of 831 million liters in 1999/2000. Analysis of these figures suggests that the consumption levels are projected to increase by 5% per annum over the three-year period. 7.39 In the low case scenario a total of Tshs.22,443 million2 was collected as Road Fund revenues up to 315t January 2000. These figures reflect a fuel consumption level of 546 million liters in 1999/2000. The corresponding figures for the remainder of the budget period have been projected using the rate of growth of fuel consumption derived from budget guidelines. Under this scenario the level of fuel consumption is between 62% and 66% of the projected consumption in the budget guidelines scenario. This trend illustrates a significantly reduced resource envelope for the roads sector, assuming identical growth rates as those used in the budget guidelines. 7.40 The above analysis indicates that Road Toll collection will be significantly below the projected values of the budget guidelines. For this reason, measures will have to be taken to either: enhance revenue collection, or readjust expenditure plans downward in accordance with the revenue shortfall. 2 Source. Sources from MOW indicates that total releases were 11,738, million up to the third quarter of 1999/2000. We have used TRA figures for the projections. 123 Table 7.9: Road Toll revenue estimates MSP consumption (metric tons) 166,965 192,000 201,000 201,000 Conversion factor 1,359 1,359 1,359 1,359 MSP consumption (million liters) 227 261 273 273 Expected revenue from MSP (Tshs million) 15,883 18,265 19,121 19,121 AGO Consumption (metric tons) 503,790 554,000 581,000 581,000 Convertion factor 1,200 1,200 1,200 1,200 AGO Consumption (million liters) 605 665 697 697 Expected revenue from AGO (Tshs million) ________________________________________________ 42,318 46,536 48,804 48,804 Total consumption ( million liters) 831 926 970 970 Total Revenue from Road Toll (Tshs million) _ _ _ _ __ _ 58,202 64,801 67,925 67,925 Total collections (Tshs million)** 38,186 40,096 42,100 44,205 Implied Consumption (.million liters) 546 573 601 632 Low case estimates of consumed liters as % of budget 66% 62% 62% 65% guidelines Note: Collections up to 3 1 January 2000 Source: Ministry of Finance & PwC calculations from TRA Flush reports 7.41 There are three options for implementing the above measures: - Controlling fuel smuggling and dumping - Changing the tax structure on fuel products to raise the fuel levy - .Limiting Road Fund resources to the maintenance of a strategic road network 7.42 Option 1: Controlling fuel smuggling and dumping. One of the main reasons for not getting the projected revenues from the fuel levy are illegal imports and dumping of petroleum products. In recent years there has been an increase in illegal imports and trading of fuel in western and northern parts of the country. Recent estimates by Oil companies show that illegal trade represents 25% to 30% of the total market, which translates directly into an equivalent loss of revenue from the fuel levy. This is partly due to liberalization of importation of petroleum products. 7.43 The government intends to introduce a bio-coding mechanism as a way of controlling fuel smuggling and dumping. Consultation with industry experts shows that the proposed measure will provide 20% additional revenue to the current collections. Based on this estimate, the likely revenue yield of the fuel levy is shown in table7.10. The level of funds generated with the proposed measures to stop the illegal trade in fuel would be sufficient to increase Road Toll revenue to the projected levels in the budget guidelines. Table 7.10: Projected revised revenue from control of fuel smuggling and dumping (ss mill1ion)00 0 FY 99/OG FY 00/a FYO1/0Z iM; ; FY 02030E0if0 p0~~~B Roy.^ BC0 5^. R0e,3i.v:.30F0 9) ,5 B0 Rev^,$0. v.C ..3 . Total Road Toll 40,476 48571 41,337 9604 43,555 52,266 45,115 54,138 collections 49,6 Allocation to Ministry 28,333 34,000 28,936 34,723 30,489 36,586 31,581 37,897 of Works Source: PwC calculations from figures obtained from budget guidelines 124 7.44 However this measure is not enough on its own to bridge the financing gap in the recurrent budget. The government will need to adopt other measures. The proposed measures include changing the tax structure of the petroleum products. 7.45 Option 2: Changing the tax structure of petroleum products. An increase in the price of fuel may lead to increased incentives for smuggling and dumping of fuel products. The current price of fuel products in Tanzania is higher than in neighboring countries which is a major cause of illegal fuel imports and fuel dumping. Thus an increase in the price of fuel will worsen the situation. 7.46 In order to raise the fuel levy, a likely option is to change the tax structure of fuel products that currently contribute to the Road Fund. The fuel levy is charged on petroleum super (MSP), petroleum regular (MSR) and diesel (AGO). In addition to the fuel levy and excise duty, these products are charged the following taxes: - Windfall profit tax: Based on the price difference between import and locally refined petroleum. The refinery is currently not operational and is being privatized. - TPDC/TIPER margin: A subsidy to the oil refinery. With the liberalization of oil importation subsidies to the refinery and TPDC have been stopped. - Energy fund: Established to raise funds for the development of the Songosongo gas project which was completed in December 1999. 7.47 These taxes are no longer used for the purpose they were intended, but are currently part of the general government revenues. These revenue sources can be used to raise the fuel levy in order to meet the road maintenance requirements for trunk and regional roads. The level of tax revenue generated from these sources is shown in table 7.1 1 Table 7.11: Projected revenue from petroleum products (Tshs million) 2000/01 2001102 2002/03- - Product iype Msp MSR AGO MSP MSR AGO MSP MSR AGO TPDC/TIPER Margins 7,102 0 1 8,095 7,435 0 18,977 7,435 0 18,977 Energy Fund 5,219 0 13,296 5,463 0 13.944 5,463 0 13,944 Windfall Profit Tax 25,707 0 79,909 26,912 0 83,803 26,912 0 83,803 Total Yield by Product 38,027 - 111,300 39,810 - 116,725 39,810 - 116,725 Total Yield 149,327 156,535 156,535 Source: Ministry of Finance, Oil companies & PwC calculations 7.48 Given the large revenue yield from these sources, the Road Fund should be allocated the amount of funds that are required to meet the maintenance and counterpart development budgets. 7.49 Option 3: Dedication of Road Fund to a strategic road network. The Road Fund is currently financing trunk, regional, district and feeder roads. This is a very long list for the Road Fund given the current revenue yields. Given that the funds for road maintenance are inadequate to cover the whole road network, it is unlikely that spreading the resources thinly will be effective. The on going rehabilitation work will bring on stream additional maintainable roads that will increase the burden on the Road Fund. 7.50 This option looks into the possibility of dedicating 100% of Road Fund resources to a strategic road network as opposed to the current 70/30 split between MOW and MRALG. 125 This implies reducing the scope of IRP II and devoting all resources to the strategic road network. 7.51 The strategic road network is defined in terms of the priorities of the traffic corridors that have been ranked in order of importance as shown under the Trunk Road section. 7.52 The ideal situation is obviously to increase Road Fund revenues to cover required maintenance costs. However, if this proves impossible, it may be relevant to consider dedicating the available Road Fund revenues to a strategic road network, and let maintenance of the remaining road network be financed from the national budget. This would ensure the protection of the heavy investment in these roads to date. The Road Fund revenues under this option would barely cover the paved road network in maintainable condition without including TANROADS operating costs. 7.53 Distribution of Road Fund resources between maintenance and development of roads. Table 7.12 and 7.13 show the distribution of the Road Fund resources between maintenance and development for the base case and the lower case scenarios, respectively. The funds are allocated according to the proposed distribution of Road Fund resources between maintenance and development expenditures set out in the Road Fund Act as well as the distribution between Trunk/Regional roads and District/Urban/Feeder Roads which is determined by the GOT. Relative proportions of these split are shown below. Maintenance of Trunk and Regional Roads: 63% Development of Trunk and Regional Roads: 7% Maintenance of District, Rural, Feeder Roads: 27% Development of District, Rural Feeder Roads: 3% Table 7.12 Funding from Road Fund according to budget guidelines estimates (TSh million) 1999/2000 2000/2001 2001/2002 -'2002/2003 Trunk/Regional Roads Maintenance 36,667 40,825 42,793 42,793 Rehabilitation 4,074 4,536 4,755 4,755 Total 40,741 45,361 47,548 47,548 District/Urban/Feeder Roads Maintenance 15,714 17,496 18,340 18,340 Rehabilitation 1,746 1,944 2,038 2,038 Total 17,461 19,440 20,378 20,378 Grand Total 58,202 64,801 67,925 67,925 Table 7.13 Funding from Road Fund according to low case estimates (TSh million) 11999/2000 2000/2001 2001/2002 2002/2003 Trunk/Regional Roads Maintenance 24,238 25,450 26,723 28,059 Rehabilitation 2,693 2,828 2,969 3,118 Total 26,931 28,278 29,692 31,177 District/Urban/Feeder Roads Maintenance 10,388 10,907 11,453 12,025 Rehabilitation 1,154 1,212 1,273 1,336 Total 11,542 112,119 12,725 13,361 Grand Total 38,473 _140,397 42,417 44,538 Source: PwC calculations from TRA Flush Reports 126 7.54 The budget guidelines give a higher estimate of revenue yield from fuel levy but the actual collections up to January 2000 show that the likely yield may not meet the targeted yield. Taking this shortfall as a realistic scenario, table 7.13 suggests that the level of funding for road maintenance is likely to meet approximately 60% of the maintenance requirements. Ministry of Works Medium Term Expenditure Framework Objectives and Priorities 7.55 According to the budget guidelines for the period 2000/2001-2002/2003 the roads sector will continue giving high priority to the following areas: -Road maintenance of upgraded network; -Implementation of priority rehabilitation and upgrading projects; -Rehabilitation and maintenance of rural roads under local Government authorities jurisdiction under MRALG. Administration, Sector Management, and Non-road Activities 7.56 The management and regulation of the road sector and non-road related activities, are funded from the general budget. The budget guidelines provide the following projections for allocations to MOW for the FY 2000/01 - FY2002/03 as shown in Table7.14. Table 7.14 MOW Recurrent and Development allocations (TSh million) 2000/2001 2001X2002 2002/2003 Development allocations 5,000 6,000 6,000 Recurrent allocations 27,122 27,982 28,766 Total 32,122 33,982 34,766 Source: Budget Guidelines 7.57 Appendix A.7.2.1 - 7.2.4 shows the detailed breakdown of Ministerial Activities by sub-vote for the FYI999/2000 through 2001/02. The recurrent estimates take into account the re-organization of the Ministry and establishment of TANROADS, which will carry over the responsibility of managing the road network and implement road maintenance and rehabilitation activities. These changes have been incorporated in the FY 2002/02 and 2002/03 by reducing the PE for 601 and 701 sub-votes, based on their relative proportions in the overall ministry PE. As a result budgetary requirements of the MOW have declined by the amount of savings resulting from the establishment of TANROADS. Total savings are Tshs.1,368 million in FY 2001/02 and Tshs.1,423 million for FY2002/03. 7.58 In addition to the allocations from general budget IRP II funds have also been made available for the institutional strengthening and re-organization of the road sector management. With the establishment of TANROADS, MOW responsibilities will be limited to that of policy decisions, regulatory services and co-ordination of donor assistance. The latter is presently handled by the Co-ordination Office for Donor Assisted Projects (CODAP), which also is in serious need of institutional strengthening. IRP-II includes provisions for technical assistance to CODAP, but the procurement for this component has experienced considerable delays, and is now only envisaged to be in place at the end of Y2000. It is expected that performance, in respect of project implementation, will be substantially improved once TANROADS takes over the responsibility. 7.59 One of the major issues constraining road sector activities is the MOW debt to private sector contractors. This has threatened the execution of road works. The EU through the Structural Adjustment Facility IV has agreed to settle the accumulated outstanding debt up to 127 June 1998, which is Tshs.8,864 million (US$ 11,080,000). Since July 1998, there has been a further increase in the domestic debt from road sector activities. This is likely to add to the costs of road maintenance in future. Since this falls outside the EU structural adjustment grant, this debt requires additional financing measures. Rehabilitation and Upgrading 7.60 Table 7.15 shows a summary of the planned rehabilitation and upgrading activities by the MOW for the period of the Medium Term Expenditure Framework (Details are contained in Appendix A.7.2). Table 7.15: MOW Rehabilitation and Upgrading Program WW~~~~~~b ; |tt , _ :g jg T X4$W ' '$ 1 0 : Trunk Roads Rehabilitation 3,919 3,504 63,325 56,612 2,917 2,914 54,507 54,452 2,217 2,474 35,413 39,521 Upgrading 16,331 14,600 62,642 56,002 15,575 15,559 84,478 84,394 10,282 11,475 65,673 73,291 Emergency 365 326 -8,881 7,940 __ _ _ _ 0 0 0 _- _ 0 0 Regional Roads Rehabilitation 4,808 4,298 13,060 11,676 3,160 3,157 6,985 6,978 2,911 3,249 5,129 5,724 Total 25,422 22,727 147,909 132,231 21,651 21,629 145,970 145,824 15,410 17,198 106,216 118,537 Source: Ministry of works 7.61 Most of the Ministry's rehabilitation and upgrading activities of trunk and regional roads takes place within the framework of the second Integrated Roads (IRP-II), which started in 1995, with the objective of rehabilitating and upgrading about 7,500 km of trunk roads and 7,400 km of regional and rural roads. Delays in implementation of the program has led to the restructuring in August 1998, incorporating some of the projects not realized under IRP-I and to include emergency rehabilitation of roads and bridges affected by the El-NINO rainfall. With the restructuring of the IRP TI the project is now expected to be completed in 2004. The estimated cost of IRP-II is US$780 million of which GOT contribution is estimated at US$78 million. 7.62 Implementation of IRP-II has experienced substantial delays in the progress of physical works. One of the main obstacles has been the lack of capacity in MOW to procure and launch both consultancy services and actual works. The latest World Bank Aide Memoire (Nov. 99) shows that of the total IDA Credit of approximately US$170 million, only US$37 million has been committed of which only US$18 million was actually disbursed. A similar picture is applicable to the EU funded projects. The EU and IDA are the main financiers of IRP-II, contributing in aggregate more than 50% of the overall IRP-II budget envelope. 7.63 In addition, implementation of IRP has also been severely hampered by the lack of counterpart funds. Although there have been large commitments of funds to the road sector from donors mainly the World Bank and EU, actual disbursements have, however, differed widely from the budget, reflecting the inability of the MOW to access the funds. The key reason is the Government's failure to provide down payment of the full amount of counterpart funds. The World Bank in particular, requires a down payment of the full amount of counterpart funds related to a project component as a precondition to releasing their funds. Other donors require the government to complete compensation payments for road projects 128 that encroach on private property. However, the government has in many cases not fulfilled this obligation. This has caused considerable delay in implementing roads projects. 7.64 The government counterpart funds are estimated based on the donor financed projects that will be implemented in the next three years. The level of counterpart funds are then compared to the level shown in the budget guidelines and the low case estimate. These results are shown in table 7.16. Table 7.16 Comparison of required funds with available counterpart funds Requirements: 2000/2001 2001/2002 2002/2003 Donor funds (US$ 000) 147,900 146,000 106,200 Counterpart Funds (Tshs million) 22,727 21,629 17,198 Total 170,627 167,629 123,398 Available counterpart funds: Budget Guidelines (Tshs million) Budget Guidelines estimates 10% of Road Fund (base case) 2,894 3,049 3,158 General Development Budget 5,000 6,000 6,000 Total 7,894 9,049 9,158 Available counterpart funds: Low case estimates (Tshs million) 10% of Road Fund from (low case) 2,357 2,474 2,598 General Development Budget 5,000 6,000 6,000 Total 7,357 8,474 8,598 Deficit Budget Guidelines estimates (14,834) (12,580) (8,040) Low case estimates (15,371) (13,155) (8,600) Implementation capacity Budget Guidelines estimates 35% 42% 53% Low case estimates 32% 39% 50% 7.65 As seen in Table 7.16 the observed shortfalls in counterpart funds will constrain the implementation of the proposed development program. On the basis of projections from the budget guidelines, available counterpart funds will allow the implementation of 3 5% of the planned activities for FY 2000/01, 42% for FY 2001/02 and 53% for FY 2002/03. 7.66 In order for MOW to be able to implement the planned development program it will be necessary to increase the levels of counterpart funding. Available options are: - Change in the tax structure of fuel products that contribute to the Road Fund and temporary relaxation of Road Fund statute that only 10% may be used for development activities. This will allow absorption of funds generated from changing the tax structure of petroleum products. - Increase in the development expenditure from the national budget. - Reduction of the scope of IRP II or extension of the period of implementation, to align available counterpart funding with actual requirements. - An alternative to government raising the counterpart funding is to request donors to finance 100% of physical road works, hence leaving the government to concentrate on road maintenance. 129 Maintenance 7.67 It is quite clear that GOT is not, at present, in a position to avail to MOW the budget required to maintain the entire network in a good condition. As a consequence, MOW is forced to make the best of what is allocated, and the present approach dictates that: - In recognition of the enormous investment made in the paved road network, these roads that are in a maintainable condition (i.e. rated good or fair), should receive full maintenance in accordance with good engineering practice. - Unpaved roads in good condition must likewise receive full maintenance, with unpaved roads in fair condition will receiving only a portion of the required maintenance funds. - Roads in poor condition will as a general rule not receive maintenance, except emergency cases. 7.68 The unit rates to be applied to the maintainable road network are of the utmost importance, for budgeting purposes, but also to ensure that the maintenance done is according to the standards prescribed. The Unit costs used for deriving MTEF maintenance are shown below: Table: 7.17 Unit Rates for Maintenance Operations Good Trunk Paved Routine 1,600 Unpaved Routine 1,000 Regional Paved Routine 1,600 Unpaved Routine 600 Fair Trunk Paved Periodic 60,000 Unpaved Periodic 22,000 Regional Paved Periodic 60,000 Unpaved Periodic 18,700 Poor Both Both Emergency 160 7.69 Assumptions used to calculate the average annual costs for maintenance operations together with the corresponding average annual maintenance costs are shown in Appendix A.7.1. These were used to estimate the overall annual budget requirement for the next three years as shown in table 7.18 (details are shown in Appendix A 7.4). 7.70 Required maintenance cost will increase from US$ 62.1million 1999/00 to US$ 69.7 million in FY 2002/03. The calculation is based on the currently envisaged implementation schedule for IRP-II. 7.71 Table 7.19 compares the financial requirements for the full implementation of MOW maintenance policy with projected Road Fund revenue allocated to MOW for maintenance purposes. In all scenarios there are shortfall between maintenance requirements and available funds. The observed shortfalls in allocated resources from the Road Fund will constrain the implementation of the proposed maintenance program. On the basis of projections from the budget guidelines, available resources will only allow the implementation of 46% of the planned activities for FY 2000/01, forty percent for FY 2001/02 and thirty seven percent for FY 2002/03. 130 Table7.18: MOW maintenance program ___________ ___________ .-- -FY99.00 0201 - - 0 103. Road t Conditioni S.rnce y-e (M USS) 7 USS) (M USS) (M SS) Trunk Good Paved 23.6 25.9 29.1 30.8 Good Unpaved 4.2 4.5 6.5 6.8 Fair Paved 11.9 10.4 8.9 7.1 Fair Unpaved 15.4 14.9 16.7 16.4 Poor Both 0.5 0.5 0.4 0.4 Sub-Total Trunk Roads 55.6 56.3 61.4 61.4 Regional Good Paved 0.2 0.3 0.3 0.3 Good Unpaved 1.3 2.2 2.6 2.9 Fair Paved 1.6 1.6 1.6 1.6 Fair Unpaved 3.4 3.0 3.4 3.5 Poor Both - - - Sub-Total Regional Roads 6.5 7,2 7.9 8.3 Grand Total US$ million 62.1 63.4 69.3 69.7 Grand Total Tshs million 49,704.0 56,697.5 69,230.7 77,829.8 Source: Ministry of works Table 7.19 Comparison of maintenance costs with resource estimates Y;,. < RI 2 ,. .4 ...00'12Q93 Maintenance requirement 56,697 69,23 i 77,830 Budget guidelines resource estimate 90% of Road Fund (base case) 26,042 27,440 28,422 Low case resource estimate 90% of Road Fund (low case) 21,209 22,269 23,382 Budget guidelines shortfall (30,655) (41,791) (49,408) Low case resource shortfall (35,488) (46,962) (54,448) Implementation capacity Budget Guidelines estimates 46%1 40% 37% Low case estimates 37% 32% 30% Source: Ministry of Works Allocations to Regional Authorities 7.72 Table 7.20 show the proposed allocations of the Road Fund for the maintenance and rehabilitation projects for the roads under the jurisdiction of the local authorities. Comparison between the proposed allocation with the budget guidelines projections indicate that the proposed fund can implement over 90% of the proposed activities. Table 7.20 Proposed Road Fund Resources for the maintenance of District, Urban & Feeder Roads 1999/2000 2000/01 2001/02 2002/23 Maintenance requirement 9,888 10,628 10,851 9,541 Rehabilitation projects 1,648 1,635 1,669 1,735 Total 11,276 11,536 12,263 12,520 Resources from the Road fund 12,143 12,401 13,067 13,535 Implementation capacity 93% 93% 94% 93% Source: Budget Guidelines 131 7.73 Much as these figures appear to be adequate, they only represent the government contribution to the maintenance and rehabilitation of the local roads. There are three other sources of funding for maintenance and rehabilitation of district, urban and feeder roads. These are: Development funds from the MRALG; Donor funds for maintenance and development; and Own resources of the local authorities. 7.74 Due to unclear disbursement mechanisms and lack of proper records at MRALG and the local authorities it is difficult to assemble correct budget inputs for district roads. Local authorities own resources are estimated to be extremely limited. Records on donor funding for development/investment projects concerning district roads are scant. In view of this it is unlikely that the 30% contribution from the Road Fund is sufficient to cover the 50,000- kilometer road network under local authorities. Summary of the Budget Strategy for the Road Sector 7.75 In order for Ministry of Works to achieve its strategic objectives in the road sector for the coming three years with the resources available, the following actions need to be taken. Dedication of Road Fund to Maintenance and Development of the strategic network 7.76 The government will need to make a decision on dedicating the whole available Road Fund revenues to a strategic road network, and let maintenance of the remaining network be financed from the national budget. This is because the ongoing rehabilitation work will bring on stream additional maintainable roads that will increase the burden on the Road Fund. Conducting detailed annual road condition and traffic survey 7.77 It is necessary to have detailed annual road condition and traffic surveys to monitor the impact of road maintenance operations, and create a basis for selecting and prioritizing a strategic road network needing maintenance. Condition surveys should include visual inspection based on agreed to avoid subjective opinions. Putting in place measures to control fuel dumping and smuggling 7.78 These proposed measures to curb the malpractice of tax evasion and fuel smuggling should be strengthened and implemented as soon as possible. Assessment of impact of past maintenance efforts 7.79 In order for the government to make informed decisions on future maintenance and development policy there should be an impact assessment of past road maintenance operations, with particular emphasis on establishing whether all expenditure has created the desired benefits. Currently it would appear that the unpaved road network is deteriorating despite increased maintenance funding. Other measures 7.80 In order to go beyond the current resource framework and additional resources the following measures are proposed: 132 (i) Change in tax structure for petroleum products: The government will need to consider the possibility of changing the current tax structure for petroleum products so as to reduce the financing gap of recurrent expenditure and allow for a more flexible allocation of surplus fund to the development expenditure. (ii) Increase the level of counterpart funding through: Temporary relaxation of Road Fund statute that only 10% may be used for development activities; making substantial increase of the development expenditure from the national budget; reduction of the scope of IRP II or extension of the period of implementation and to align available counterpart funding with actual requirements Appendix A.7.1: Unit Cost Estimates for Road Maintenance 7.81 The following assumptions have been used to calculate the annual average costs for maintenance operations, and thus estimate the overall budget requirement. - For paved roads it is assumed that periodic maintenance will be required every 7 years - For unpaved trunk roads it is assumed that periodic maintenance is required every 5 years - For unpaved regional roads it is assumed that periodic maintenance is also required every 5 years. - For roads in poor condition (both paved and unpaved), a minimal amount of 160 US$ per km is required to keep open the communication along the road. On the basis of the above assumptions, the annual average maintenance cost for each type of road is calculated as follows: Average Annual Maintenance Costs Trunk Paved 10,200 Routine + 1/7* Periodic Unpaved 5,400 |Routine + 1/5* Periodic Regional Paved 10,200 pRoutine + 177* Periodic Unpaved 5,400 Routine + 1/5* Periodic 133 APPENDIX A 7.2.1: ALLOCATION OF RECURRENT BUDGET TO VARIOUS SUB- VOTES 1999/2000 101 ADMINISTRATION 123,027,300 100,304,500 44,500,000 267,831,800 102 FINANCE & ACCOUNTS 53,591,700 21,446,900 - 75,038,600 103 POLICY & PLANNING 11,478,200 37,844,400 - 49,322,600 201 ELECTRICAI & 441,021,400 1,527,202,200 - 1,968,223,600 MECHANICS 301 SUPPLIES & SERVICES 247,082,200 372,500,000 - 619,582,200 401 CAPITAL TRANSFER 22,527,000 27,884,800 482,249,200 532,661,000 50] BUILDINGS 241,479,800 617,980,000 - 859,459,800 601 TRUNK ROADS 500,435,300 12,098,300 120,000,000 632,533,600 701 RURAL ROADS 391,166,200 4,729,900 - 395,896,100 TOTAL 2,031,809,100 2,721,991,000 646,749,200 5,400,549,300 ALLOCATION FROM ROAD FUND 601 1TRUNK ROADS 15,583,150,000 15,583,150.000 701 RURAL ROADS 12,749,850,000 12,749,850,000 TOALRA:D FUNDj 283330O0:f,;.0O0 283300;0 \:,.S.:0000iE: GRAND-TOTAL 2,93~~~~1,809,100 ~31,5,91,OQ_______- 33,49,300 Source: Ministry of Works, Ministry of Finance APPENDIX A. 7.2.2: ALLOCATION OF RECURRENT BUDGET TO VARIOUS SUB-VOTES 2000/01 :t00U;:t f t 7WiSUB-VOTE R; i :;020d : 0S0 ;:- ]?El : Vq.C; TOTAL: SJ-Vte PrprSbetos SBVOTE~ 101 ADMINISTRATION 157,474,940 180,087,720 30,000,000 367,562,660 102 FINANCE & ACCOUNTS 68,597,376 34,446,600 103,043,976 103 POLICY & PLANNING 14,692,096 59,844,500 74,536,596 201 ELECTRICAL & 613,442,050 1,497,000,200 2,110,442,250 MECHANICS 301 SUPPLIES & SERVICES 308,852,750 445,759,955 754,612,705 401 CAPITAL TRANSFER 501 BUILDINGS 359,094,140 908,981,400 1,268,075,540 601 TRUNK ROADS 600,557,180 15,398,500 140,000,000 755,955,680 701 RURAL ROADS 480,531,296 7,329,880 487,861,176 TOTAL 2,603,241,828 3,148,848,755 170,000,000 5,922,090,583 ALLOCATION FROM ROAD FUND 601 TRUNK ROADS 15,937,443,500 15,937,443,500 701 RURAL ROADS 13,039,726,500 13,039,726,500 w 02US;.TOTALA D 28,977, 000 u 28,7,7,5000 GRAND-TOTAL 2,03,4,2 32426,018, ' 7 .............