Dar es Salaam. The World Bank has given the government at least 10 conditions the country should fulfil to enjoy support for its poverty reduction strategies.A statement issued in Dar es Salaam yesterday said World Bank executive directors had expressed their support for the National Strategy for Growth and Reduction of Poverty – known by its Kiswahili acronym Mkukuta II.
During a meeting held in Washington, DC, the directors also concurred with recommendations by the Joint IMF-World Bank Staff Advisory Note (JSAN), noting the importance of accelerating inclusive and sustained growth to reduce income poverty, especially in rural areas.
In one of the key recommendations by the WB directors, the government has been urged to urgently address infrastructure bottlenecks and improve the investment climate. “It (World Bank) particularly highlights the importance of reducing market distortions in the agriculture sector, given its importance for poverty alleviation,” reads part of the statement.
Speaking during the meeting, Ms Yue Li, the World Bank’s Task Team leader for the JSAN noted: “Mkukuta II is an ambitious strategy to reduce poverty and its success will require a greater sense of urgency to improve the business environment and the quality of public services.”
She added: “It will also be important to improve fiscal transparency, public financial management, and anti-corruption efforts to ensure that resources are utilized effectively.”In addition to better use of public resources, the JSAN emphasises the need to increase domestic revenues, by reducing tax exemptions and other measures to expand the tax base.
“The World Bank stands ready to support the government in strengthening Mkukuta II during its implementation to ensure an effective policy framework for poverty reduction,” said Mr John Murray McIntire, country director for Tanzania, Uganda, and Burundi. “The forthcoming World Bank Country Assistance Strategy for Tanzania will outline our strong support in selected areas to help implement Mkukuta II,” he added.
The statement also noted that the Country Assistance Strategy (CAS), which is under preparation and will be presented to the World Bank Executive Board for discussion in mid-2011, would provide a framework for WB assistance to Tanzania for the next four years.
The bank’s active country portfolio includes 23 projects, with a net commitment of $2.6 billion; supporting a range of sectors, including agriculture, transport, energy, urban infrastructure, environment, water and sanitation, public sector reform, financial and private sector development, health, education and community development.
In addition, the country benefits from 11 regional projects, in which Tanzania-specific financing amounts to over $230 million.Mkukuta II, which covers the period 2010/11 - 2014/15, focuses on accelerating economic growth to reduce poverty, improving the quality of life and standard of living, and improving governance and accountability.
It calls for a shift towards a greater role of the private sector in economic growth. It identifies “growth drivers,” such as agriculture, and outlines sectoral strategies to promote productivity and private sector activity in these areas. Mkukuta II was developed through a broad-based consultation led by the government of Tanzania and involving many stakeholders. The JSAN provides analysis and advice to strengthen Mkukuta II.
The World Bank conditions come at a time when the government is on the spot over its generous tax exemptions, which rob the economy of billions of much needed shillings.A survey conducted recently by Hivos/Twaweza East Africa indicates that in 2009/10 tax exemptions amounted to Sh695 billion, or more than half of Sh1.3 trillion the government is planning to borrow from commercial sources for infrastructure development.
Last year, the minister for Finance, Mr Mustafa Mkulo, said the government had formed a committee to review the tax exemption system. But a move by the government to scrap tax exemptions for religious and charity organisations backfired after the public opposed it on the grounds that the targeted organisations were providing essential services to wananchi.
Tanzania leads in tax exemptions in East Africa and the move by the government was aimed at reducing the gap and boosting revenue collection. However, the public was of the view that the scrapping of tax exemptions should target multinational investors.On the other hand, the government has been facing a problem of revenue collection from local sources. In the last financial year, the Tanzania Revenue Authority (TRA) missed its collection targets by about 10 per cent, hampering the execution of the budget.
The tax collector also missed the target for the first three months in this year’s fiscal budget by over 10 per cent, according to the Bank of Tanzania (BoT) Economic Review for October.BoT said in the report that the TRA missed September’s target of Sh562.2 billion and ended up collecting Sh502.5 billion. This represents about 12 per cent.On cumulative basis, revenue collection in the first quarter of 2010/11 amounted to Sh1.26 trillion.