1. Dar es Salaam, October 31, 2007 Poverty Reduction Budget Support for Tanzania PEFAR UPDATE: RAPID BUDGET ANALYSIS FOR THE 2007 ANNUAL REVIEW

2. Outline  The Aggregate view  Alignment of budget with MKUKUTA  Execution of expenditures  Local Government expenditures  Value for Money  Transparency of presentation

3. The Aggregate view: the trend The last few years have seen a major expansion of public expenditures

4. The Aggregate view: the question As public expenditures head towards 30% of GDP in Tanzania, and result in the government growing much faster than the rest of the economy Mkukuta is clear that the productive sectors in Tanzania should be private sector driven – the major public spending programmes are supposed to reinforce growth and poverty reduction, not smother it. A clear statement of government policy in as to the overall weight of public expenditures in the economy would be highly valuable in informing economic operators about the overall economic context for the next few years.

5. Budget alignment to MKUKUTA MKUKUTA sectors are receiving substantial share of the increase spending, with the social sectors benefiting most

6. Budget alignment to MKUKUTA These trends show the government’s commitment to implement MKUKUTA, and its ability to make good use of foreign aid

7. Budget alignment to MKUKUTA The SBAS systems does not seem to play a critical role in helping align the budget and the MKUKUTA strategies and goals: Inconsistent link across sectors to MKUKUTA objective and goals. Time consistency Large proportions of total resources allocated on a few general categories suggest that the classification may not be the most useful in directing resources in a detailed way towards MKUKUTA goals. Cross link to key programs is unclear (e.g. in transport, it is not possible to identify expenditure by trunk, regional and rural roads). Very limited consistency across MDAs (Except for HIV Aids)

8. Budget execution: FY06/07 overall Execution of the government budget remains weak for the development budget and in terms of within -year disbursement…

9. Budget execution: FY06/07 within-year Underspending in Q1 (on pro-rata basis) was significant for several votes Some (e.g. Water, Prime Minister) caught up in the following quarters, others – most notably PMO-RALG and to a lesser extent Health – executed the bulk of their budget in Q4.

10. Local Government expenditures More funding to LGAs over past 2 years.. New budget shows a 2% decline More funds are flowing directly…

11. Local Government expenditures In year spending still concentrated in last two quarters Under spending in both recurrent and development sectoral budgets 25% of LGA budget was not spent in 2006/07 compared with 13% for Central GoT

12. D by D Challenges LG Discretionary budget under pressure… Implementation of D By D policy… Sector reviews should address D by D compliance to advance implementation

13. Why Look at Value For Money? - Sustained rapid expansion of public spending usually create pressure on the quality & efficiency of expenditures ; - Theoretically, sector reviews are supposed to bring together work on value for money in key pillars of public expenditure, but this year; sector reviews largely fail to relate expenditures to results - the problem is not so much a lack of data as a failure to analyse it – rapid budget analysis in the education sector shows it’s feasible to combine some existing expenditure data with performance information.

14. Example of Education Spending on education is increasing fast, including spending per pupil – which is what we require to see increased quality as well as access. But… VFM; Spending per pupil seems to be rising faster than quality is improving EQUITY: Variation between districts is very large, questions re efficiency and equity ( variation in district PTR) QUALITY Capitation grant is 50% unfunded, despite being highest priority expenditure

15. Transparency For stakeholder to be able to debate and address some of the challenges: A more transparent and easily comprehensible budget. Clear presentation of: Money to the broad sectors (Ed, health, Infra, etc) Money to LGA, by district, per-capita Economic classification of expenditures (invest., wag Key government programs