Tanzania: 'Smart' Partnerships

• Author: Basil P. Mramba
• Position: Minister of Finance of Tanzania

Over the past decade, Tanzania has achieved commendable progress in economic development and in restoring macroeconomic stability from the crisis situation that prevailed in the early 1990s. Real economic growth averaged 5 percent per year during 1995-2003 and 6 percent during 2002-04, well above the average growth of less than 2 percent during the preceding decade. Inflation has been low and stable, averaging 4 percent since 2000, sharply down from more than 30 percent in the mid-1990s. Official international reserves have improved to over 8 months of imports of goods and services from less than 2 months in the early 1990s.

Nevertheless, with almost 36 percent of the population living below the national basic needs poverty line, Tanzania still has a long way to go to achieve the MDGs. It will need to maintain high growth, low inflation, and a steady pace of structural reforms for many years. Aid will play a crucial role by complementing domestic resource mobilization and capacity building. It now finances over 40 percent of budgetary spending, up from some 20 percent a decade earlier. With aid inflows to Tanzania expected to rise to 12 percent of GDP in 2005/06 from around 9 percent in 2003/04, it is essential that aid flows remain predictable and do not fluctuate too much.

Conditions for effective aid

Tanzania's experience has shown that, in order for a country to be able to effectively absorb and utilize aid, certain minimum conditions have to be in place. They include a clear national development vision upon which donor support can be anchored, coupled with an appropriate medium-term strategy for achieving it, strong government leadership and national ownership of the development process, and sustained reforms, including in aid delivery. Also critical are sound public expenditure and financial management systems, trust between the government and overseas development partners, and promotion of democracy and good governance.

Since the mid 1990s, Tanzania has taken the lead in designing and managing the development process. It has adopted a clearly articulated national development vision formulated through a broad participatory process in a national Poverty Reduction Strategy in 2000, followed in 2004 by the National Strategy for Growth and Reduction of Poverty (NSGRP), known by its Kiswahili acronym MKUKUTA.

The focus of this second generation strategy is on three areas: growth and reduction of...