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By Prof. A.V.Y.Mbelle With Dr. A. Mkenda Mr. W. Ngasa Mr. I. Pantaleo Data back up by Mr. N.Yabu

MKUKUTA AND MKUZA FINANCING AND STRATEGIC ALLOCATION OF RESOURCES INTO AREAS THAT SUPPORT PRO-POOR GROWTH Draft Final Presentation at CWG, Dar es Salaam, February, 25 th 2010. By Prof. A.V.Y.Mbelle With Dr. A. Mkenda Mr. W. Ngasa Mr. I. Pantaleo Data back up by Mr. N.Yabu.

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By Prof. A.V.Y.Mbelle With Dr. A. Mkenda Mr. W. Ngasa Mr. I. Pantaleo Data back up by Mr. N.Yabu

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  1. MKUKUTA AND MKUZA FINANCING AND STRATEGIC ALLOCATION OF RESOURCES INTO AREAS THAT SUPPORT PRO-POOR GROWTHDraft FinalPresentation at CWG,Dar es Salaam, February, 25th 2010 By Prof. A.V.Y.Mbelle With Dr. A. Mkenda Mr. W. Ngasa Mr. I. Pantaleo Data back up by Mr. N.Yabu

  2. STATUS OF REPORT DRAFT FINAL REPORT WHICH HAS INCORPORATED COMMENTS RECEIVED ON INTERIM REPORT: • DURING PRESENTATION OF INTERIM REPORT AT MOFEA, 25.01.2010 • WRITTEN SUBMISSIONS BY DPs COMMENT ON ZANZIBAR SECTIONS TO ENLARGE CONTENT NOT INCORPORATED PENDING DECISION BY CLIENT, WHETHER TO RETAIN OR HIVE-OFF [PARALLEL PROTOTYPE STUDY COMMISSIONED BY ZANZIBAR]

  3. LAY OUT OF PRESENTATION IN FIVE PARTS: I: PREAMBLE [CHAPTER I: INTRODUCTION AND BACKGROUND + CHAPTER II: OVERALL BUDGETARY ALLOCATION] II: POTENTIAL OPTIONS FOR FINANCING [CHAPTER III] III: CONTRIBUTION BY NON-STATE ACTORS [CHAPTER IV: PRIVATE SECTOR CONTRIBUTION + CHAPTER V: ROLE OF COMMUNITY CONTRIBUTION] IV: MACROECONOMIC FRAMEWORK AND OUTCOMES [CHAPTER VII: FRAMEWORK + CHAPTER VIII OUTCOME] V: CONCLUDING REMARKS [CHAPTER IX]

  4. PART I: PREAMBLE INTRODUCTION AND BACKGROUND KEY MESSAGES • THE MIGRATION FROM PRIORITY SECTOR APPROACH IN PRSP, TO OUTCOME-BASED APPROACH IN MKUKUTA AND MKUZA, BROUGHT MAIN EXPECTATION OF SUBSTANTIAL POVERTY REDUCTION OUT OF IMPROVED GROWTH PERFORMANCE • VARIOUS IMPLEMENTATION ASSESSMENTS AND HBS POINT TO A MISMATCH BETWEEN EFFORTS AND OUTCOMES.

  5. PART I CONT’D • THE STUDY WAS GUIDED BY THE GIVEN TORs, • METHODOLOGY • METHODS: DESK REVIEW (EXISTING INFORMATION) COMPLEMENTED WITH INTERVIEWS WITH KEY STAKEHOLDERS/EXPERTS • DATA TYPE: SECONDARY DATA/EXISTING INFORMATION, INFORMATION OBTAINED FROM INTERVIEWS WITH KEY STAKEHOLDERS/EXPERTS • DATA SOURCES: MOFEA (MAINLAND & ZANZIBAR), BANK OF TANZANIA, SECTOR MINISTRIES AS WELL AS IMF & WORLD BANK

  6. PART I CONT’D • OVERVIEW OF FINANCING AND RESOURCE ALLOCATION KEY LESSONS FOR MKUKUTA II AND MKUZA II • FINANCING STRATEGY SHOULD INVIGORATE PARTICIPATION OF THE PRIVATE SECTOR. • RESOURCE REQUIREMENTS (BOTH PUBLIC AND NSA FOR IMPLEMENTING MKUKUTA II AND MKUZA II HAVE TO BE ASCERTAINED BEFORE HAND. [OTHERWISE, POTENTIAL FOR :1. BUSINESS AS USUAL ESTIMATION OF FINANCING FRAMEWORK- USING PAST MEDIUM TERM PLAN AND BUDGET FRAMEWORK ; 2: ASSUMPTIONS NOT REVISITED; 3. UNREALISTIC BUDGETING, LOSS OF ALLOCATIVE EFFICIENCY ]

  7. PART I CONT’D • INTERVENTIONS FOR PRO-POOR GROWTH • AGRICULTURE – INTERVENTIONS: IMPROVEMENT OF PRODUCTIVITY AND MARKET ACCESS; PROMOTION OF DIVERSIFIED LIVELIHOODS; REDUCING RISK AND VULNERABILITY; EMPLOYMENT CREATION • INFRASTRUCTURE – IMPORTANCE ENHANCES ECONOMIC ACTIVITIES; REMOVES BOTTLENECKS; GENERATES DISTRIBUTIONAL EFFECTS [INTERVENTIONS: CONSTRUCTING/ STRENGTHENING ROADS, PORTS, AIRPORTS, RURAL ROADS]

  8. I: CONT’D 3. MANUFACTURING, MINING, TOURISM PRODUCTIVE EMPLOYMENT AND DECENT WORK; SPECIFIC MEASURES FOR INFORMAL SECTOR; PARTICIPATION OF WOMEN AND YOUNG PEOPLE; LINKS WITH LOCAL ECONOMY 4. PRIVATE SECTOR DEVELOPMENT REMOVING BARRIERS TO FORMALIZATION; COMPETITION POLICY; SUPPLY SIDE RESPONSE; FINANCIAL SECTOR; WOMEN’S MARKET ACCESS; INCLUSIVE PUBLIC-PRIVATE DIALOGUE

  9. PART I CONT’D PRO-POOR ALLOCATION TO GROWTH SECTORS? DEFINITION: GROWTH THAT LEADS TO SIGNIFICANT POVERTY REDUCTION KEY MESSAGES TO INFORM MKUKUTA/MKUZA II • PRIORITIZATION OF INTERVENTIONS: FAVOUR DIRECT FIRST ROUND EFFECT VERSUS SECOND ROUND EFFECTS IN PRO-POOR GROWTH SECTORS • CREATE MORE EMPLOYMENT IN PRO-POOR GROWTH SECTORS

  10. PART I CONT’D KEY LESSONS FROM PART I TO INFORM MKUKUTA II AND MKUZA II: • IMPROVE PREDICTIVE POWER OF TOOLS THAT ARE USED TO FORECAST DOMESTIC REVENUE (REVISIT KEY ASSUMPTIONS ANNUALLY….) • ASCERTAIN RESOURCE REQUIREMENTS OF MKUKUTA II AND MKUZA II BEFORE FIRMING UP THE FINANCING FRAMEWORK

  11. Predictability of MACMOD with respect to GDP growth, tax revenue and tax effort

  12. PART II: OVERALL BUDGETARY ALLOCATION TO MKUKUTA AND MKUZA INTERVENTIONS • BOTH URT AND RGOZ SPECIFY BUDGET ALLOCATION BY MKUKUTA AND MKUZA AS OPPOSED TO NON- MKUKUTA AND MKUZA • SALARIES IN ONLY KEY SECTOR MINISTRIES AND CERTAIN ELEMENTS OF CONSOLIDATED FUND SERVICES ARE COUNTED AS MKUKUTA AND MKUZA SPENDING

  13. Mainland: Budget Allocation to MKUKUTA and non-MKUKUTA Activities, 2008/09

  14. PART II CONT’D OBSERVATIONS: 1. A STEADY INCREASE IN MKUKUTA & MKUZA FINANCING 2. THE RATE OF INCREASE HAS BEEN ERRATIC WITHIN CLUSTERS 3. RESOURCES WERE NOT SUFFICIENT TO COVER ALL MKUKUTA & MKUZA INTERVENTIONS IN ANY GIVEN YEAR (EXCEPT FOR CLUSTER I IN MKUKUTA DURING LAST TWO YEARS)

  15. PART II CONT’D KEY LESSONS TO INFORM MKUKUTA II AND MKUZA II: • INCLUDE, AS MKUKUTA AND MKUZA SPENDING, SALARIES IN ALL SECTOR MINISTRIES FOR RELEVANT INTERVENTIONS [HUMAN RESOURCES ARE KEY IN DELIVERY OF MKUKUTA II AND MKUZA II]; AND DEBT SERVICE AND PENSION IN CONSOLIDATED FUND SERVICES 2. SALARIES & WAGES NEEDS IN LGAs SHOULD BE SUBMITTED TO MOFEA EARLY SO THAT THEY ARE CAPTURED/LINKED AT STAGE I OF SBAS/ZBAS

  16. PART III: POTENTIAL OPTIONS FOR FINANCING KEY LESSONS: • THE MAIN PROBLEM OF THESE TRADITIONAL SOURCES HAS BEEN LOW PREDICTABILITY AND LESS RELIABILITY. • A NUMBER OF SCHEMES THAT HAVE PROVED SUCCESSFUL IN OTHER COUNTRIES AND SHOULD BE EXPLORED INCLUDE: DOMESTIC,- DOMESTIC: EXPLORING FULL RANGE OF PPPS, ROAD TOLL, PROPERTY TAX, CREDIT/LOAN GUARANTEES TO PRIVATE SECTOR; EXTERNAL: SOVEREIGN BORROWING, BILATERAL FINANCING AND REGIONAL ARRANGEMENTS.

  17. FINANCING CON’TD KEY MESSAGES FOR MKUKUTA II AND MKUZA II • POTENTIALS EXIST BEYOND TRADITIONAL FUNDING MECHANISMS • LEGAL ISSUES SHOULD BE ADDRESSED FOR SOME POTENTIAL SOURCES • EFFICIENCY AND EFFECTIVENESS OF SPENDING SHOULD BE ADDRESSED TOO

  18. PART IV: PRIVATE SECTOR CONTRIBUTION AND ROLE OF COMMUNITY CONTRIBUTION PRIVATE SECTOR CONTRIBUTION KEY MESSAGES: • PRIVATE SECTOR CONTRIBUTION HAS BEEN EXPANDING DURING IMPLEMENTATION OF BOTH MKUKUTA AND MKUZA • PRIVATE SECTOR IN TANZANIA IS PLAYING SIGNIFICANT ROLE IN SECTORS IN CLUSTER I (SUCH AS MANUFACTURING AND AGRICULTURE) AND CLUSTER II (ESPECIALLY IN EDUCATION AND HEALTH)

  19. Mainland Tanzania: Private Provision of Education, 2005-2009

  20. Zanzibar: Number of Private Schools by Category, 2006 – 2008

  21. PART IV CONT’D • ROLE OF COMMUNITY CONTRIBUTIONS AND SCOPE FOR SCALING-UP KEY MESSAGES • COMMUNITY CONTRIBUTIONS ARE IMPORTANT IN CLUSTERS I AND II • SCOPE FOR SCALING UP COMMUNITY CONTRIBUTION EXISTS.

  22. Mainland Cluster-wise Distribution of TASAF Projects 2006 -2009 (%)

  23. Zanzibar Cluster-wise Distribution of TASAF Projects 2006 -2009 (%)

  24. Mainland- TASAF Contribution vs Community Contribution, 2006-2009

  25. Zanzibar: TASAF Contribution vs Community Contribution, 2006-2009

  26. PART IV CONT’D KEY LESSONS FOR MKUKUTA II AND MKUZA II 1. NEED TO ESTIMATE CONTRIBUTION OF NSAs 2. NEED TO FOCUS NSAs’ INTERVENTIONS TO PRO-POOR INTERVENTIONS (SPECIAL INCENTIVES, STRATEGIC PPPs) 3. NEED TO RECOGNIZE THE LIMITATIONS OF COMMUNITY CONTRIBUTION ESPECIALLY LABOUR BY WOMEN 4. NEED TO SUSTAIN NSAs’ EFFORTS

  27. PART V: MACROECONOMIC FRAMEWORK AND OUTCOMES ANALYSIS OF MACROECONOMIC FRAMEWORK: • A NUMBER OF EFFORTS HAVE BEEN MADE IN THE MAINLAND TO ESTABLISH THE MACROECONOMIC FRAMEWORK USING SCIENTIFIC TOOLS SUCH AS MACROECONOMIC MODEL (MACMOD) • THERE IS NO DEFINITE TOOL USED TO MAKE MACROECONOMIC PROJECTIONS/FORECASTING IN ZANZIBAR. SIGNIFICANT VARIATIONS BETWEEN THE MTEF, BUDGET APPROPRIATIONS AND BUDGET OUT-TURNS. DEVELOPING A FORECASTING MODEL IN ZANZIBAR SHOULD BE A MATTER OF PRIORITY

  28. PART IV CONT’D • LINKING RESOURCE ALLOCATION AND OUTCOMES SO AS TO ESTABLISH A GAP THE MAIN EXPECTED OUTCOME OF MKUKUTA AND MKUZA WAS SUBSTANTIAL POVERTY REDUCTION. THIS WAS NOT REALIZED. THE MAIN CAUSE OF THE MISMATCH WAS: LARGE RESOURCE GAPS [REVEALED THROUGH RESPECTIVE COSTING]

  29. PART IV CONT’D OTHER CAUSES OF MISMATCH: • RESOURCE ALLOCATION NOT WELL TARGETED/PRIORITIZED • EFFICIENCY AND EFFECTIVENESS OF SPENDING NOT WELL ADDRESSED • PROBLEMS WITH EMPLOYMENT CREATION – (a) IN SECTORS WHERE THE POOR ARE LESS REPRESENTED; (b) DECENT JOBS NOT BOOMING (c) SECTOR INCOMES LOWEST IN AREAS WHERE THE POOR ARE MORE REPRESENTED/HAVE STRONGER LINKS

  30. PART IV CONT’D KEY LESSONS FOR MKUKUTA II AND MKUZA II: • SUSTAINING A CREDIBLE MACROECONOMIC AND FISCAL FRAMEWORK IS CRITICAL • ADDRESSING EXPENDITURE SIDE IS AS CRUCIAL AS REVENUE SIDE • USE OF CREDIBLE FORECASTING TOOLS (FOR DOMESTIC REVENUE AND GDP GROWTH IS IMPORTANT)

  31. NEVERTHERLESS….

  32. NEVERTHERLESS…. • HDI RANK 151/182; GDI, 125/182; GEM 69/182 ; LIFE EXPECTANCY AT BIRTH, 55 YEARS • DECOMPOSITION OF HDI: HIGHEST VALUE EDUCATION INDEX (0.673) FOLLOWED BY LIFE EXPECTANCY INDEX (0.500) AND GDP INDEX (0.416). CHALLENGE: TRANSLATE THE ACHIEVEMENTS IN HUMAN DEVELOPMENT TO IMPROVED INCOMES.

  33. PART V:CONCLUSIONS AND RECOMMENDATIONS KEY RECOMMENDATIONS FOR MKUKUTA II AND MKUZA II • ENHANCE DOMESTIC RESOURCE MOBILIZATION TO CLOSE THE RESOURCE GAP IN ORDER TO AVOID PHASING OUT SOME ACTIVITIES AS EXPERIENCED DURING IMPLEMENTATION OF MKUKUTA AND MKUZA • SUSTAIN RESPONSE OF NON-STATE ACTORS

  34. PART V CONT’D 3. IMPROVE BUDGET GUIDELINES IN TERMS OF ASSUMPTIONS – THIS CALLS FOR REENGINEERING OF THE FORECASTING TOOLS AND MODELS 4. IMPROVE MACROECONOMIC INDICATORS FORECASTING 5. CONTINUE PURSUING PRUDENT FISCAL AND MONETARY POLICIES [KEY TO MACROECONOMIC STABILITY 6. TRANSLATE ACHIEVEMENTS IN HUMAN DEVELOPMENT TO IMPROVED INCOMES.

  35. End of Presentation! Thank you for your kind attention

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