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 1 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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MKUKUTA AND MKUZA FINANCING AND STRATEGIC ALLOCATION OF RESOURCES INTO AREAS THAT SUPPORT PRO-POOR GROWTH Draft Final Presentation at CWG, Dar es Salaam,
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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, 25th 2010
1
ByProf. A.V.Y.Mbelle
With Dr. A. MkendaMr. W. Ngasa
Mr. I. PantaleoData back up by Mr. N.Yabu
STATUS OF REPORT
DRAFT FINAL REPORT WHICH HAS INCORPORATED COMMENTS RECEIVED ON INTERIM REPORT:
1. DURING PRESENTATION OF INTERIM REPORT AT MOFEA, 25.01.2010
2. WRITTEN SUBMISSIONS BY DPsCOMMENT ON ZANZIBAR SECTIONS TO ENLARGE CONTENT NOT
INCORPORATED PENDING DECISION BY CLIENT, WHETHER TO RETAIN OR HIVE-OFF [PARALLEL PROTOTYPE STUDY COMMISSIONED BY ZANZIBAR]
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LAY OUT OF PRESENTATIONIN FIVE PARTS:I: PREAMBLE [CHAPTER I: INTRODUCTION AND
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]3
PART I: PREAMBLE INTRODUCTION AND BACKGROUNDKEY MESSAGESTHE MIGRATION FROM PRIORITY SECTOR APPROACH IN
PRSP, TO OUTCOME-BASED APPROACH IN MKUKUTA AND MKUZA, BROUGHT MAIN EXPECTATIONOF SUBSTANTIAL POVERTY REDUCTION OUT OF IMPROVED GROWTH PERFORMANCE
VARIOUS IMPLEMENTATION ASSESSMENTS AND HBS POINT TO A MISMATCH BETWEEN EFFORTS AND OUTCOMES.
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PART I CONT’D• THE STUDY WAS GUIDED BY THE GIVEN TORs,• METHODOLOGYa. METHODS: DESK REVIEW (EXISTING
INFORMATION) COMPLEMENTED WITH INTERVIEWS WITH KEY STAKEHOLDERS/EXPERTS
b. DATA TYPE: SECONDARY DATA/EXISTING INFORMATION, INFORMATION OBTAINED FROM INTERVIEWS WITH KEY STAKEHOLDERS/EXPERTS
c. DATA SOURCES: MOFEA (MAINLAND & ZANZIBAR), BANK OF TANZANIA, SECTOR MINISTRIES AS WELL AS IMF & WORLD BANK
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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 ]
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PART I CONT’D• INTERVENTIONS FOR PRO-POOR GROWTH1.AGRICULTURE – INTERVENTIONS:
IMPROVEMENT OF PRODUCTIVITY AND MARKET ACCESS; PROMOTION OF DIVERSIFIED LIVELIHOODS; REDUCING RISK AND VULNERABILITY; EMPLOYMENT CREATION
PART I CONT’DPRO-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
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PART I CONT’DKEY LESSONS FROM PART I TO INFORM
MKUKUTA II AND MKUZA II:1.IMPROVE PREDICTIVE POWER OF TOOLS THAT
ARE USED TO FORECAST DOMESTIC REVENUE (REVISIT KEY ASSUMPTIONS ANNUALLY….)
2.ASCERTAIN RESOURCE REQUIREMENTS OF MKUKUTA II AND MKUZA II BEFORE FIRMING UP THE FINANCING FRAMEWORK
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Predictability of MACMOD with respect to GDP growth, tax revenue and tax effort
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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
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Mainland: Budget Allocation to MKUKUTA and non-MKUKUTA Activities, 2008/09
Mkukuta71%
Non-Mkukuta29%
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PART II CONT’DOBSERVATIONS:1. A STEADY INCREASE IN MKUKUTA & MKUZA
FINANCING2. THE RATE OF INCREASE HAS BEEN ERRATIC
WITHIN CLUSTERS3. RESOURCES WERE NOT SUFFICIENT TO COVER
ALL MKUKUTA & MKUZA INTERVENTIONS IN ANY GIVEN YEAR (EXCEPT FOR CLUSTER I IN MKUKUTA DURING LAST TWO YEARS)
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PART II CONT’DKEY LESSONS TO INFORM MKUKUTA II AND
MKUZA II:1. 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
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PART III: POTENTIAL OPTIONS FOR POTENTIAL OPTIONS FOR FINANCINGFINANCING
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.
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FINANCING CON’TD
KEY MESSAGES FOR MKUKUTA II AND MKUZA II
1.POTENTIALS EXIST BEYOND TRADITIONAL FUNDING MECHANISMS
2.LEGAL ISSUES SHOULD BE ADDRESSED FOR SOME POTENTIAL SOURCES
3.EFFICIENCY AND EFFECTIVENESS OF SPENDING SHOULD BE ADDRESSED TOO
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PART IV: PRIVATE SECTOR CONTRIBUTION AND ROLE OF COMMUNITY CONTRIBUTION
PRIVATE SECTOR CONTRIBUTIONKEY MESSAGES:1. PRIVATE SECTOR CONTRIBUTION HAS BEEN
EXPANDING DURING IMPLEMENTATION OF BOTH MKUKUTA AND MKUZA
2. 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)
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Mainland Tanzania: Private Provision of Education, 2005-2009
3. NEED TO RECOGNIZE THE LIMITATIONS OF COMMUNITY CONTRIBUTION ESPECIALLY LABOUR BY WOMEN
4. NEED TO SUSTAIN NSAs’ EFFORTS
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PART V: MACROECONOMIC FRAMEWORK AND OUTCOMES
ANALYSIS OF MACROECONOMIC FRAMEWORK: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
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PART IV CONT’D• LINKING RESOURCE ALLOCATION AND LINKING RESOURCE ALLOCATION AND
OUTCOMES SO AS TO ESTABLISH A GAPOUTCOMES SO AS TO ESTABLISH A GAPTHE 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]
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PART IV CONT’DOTHER CAUSES OF MISMATCH:1. RESOURCE ALLOCATION NOT WELL
TARGETED/PRIORITIZED2. EFFICIENCY AND EFFECTIVENESS OF SPENDING
NOT WELL ADDRESSED3. 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
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PART IV CONT’D
KEY LESSONS FOR MKUKUTA II AND MKUZA II:1.SUSTAINING A CREDIBLE MACROECONOMIC
AND FISCAL FRAMEWORK IS CRITICAL2.ADDRESSING EXPENDITURE SIDE IS AS
CRUCIAL AS REVENUE SIDE3.USE OF CREDIBLE FORECASTING TOOLS (FOR
DOMESTIC REVENUE AND GDP GROWTH IS IMPORTANT)
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NEVERTHERLESS….
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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.
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PART V: CONCLUSIONS AND CONCLUSIONS AND RECOMMENDATIONSRECOMMENDATIONS
KEY RECOMMENDATIONS FOR MKUKUTA II AND MKUZA II
1.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
2.SUSTAIN RESPONSE OF NON-STATE ACTORS
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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.