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RETURN TOFILE COPYI REPORTS D
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DOCUMENT OF INTERNATIONA BAQNR RU ION AND DEVELOPMENT
Not For Public Use
Report No. P-1517a-TA
REPORT AND RECOMMENDATION
OF THE
PRESIDENT
TO THE
EXECUTIVE DIRECTORS
ON A
PROPOSED PROGRAM LOAN
TO THE
UNITED REPUBLIC OF TANZANIA
November 25, 1974
This report was prepared for official use only by the Bank Group. It may not be published, quotedor cited without Bank Group authorization. The Bank Group does not accept responsibility for theaccuracy or completeness of the report.
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CURRENCY EQUIVALENTS
USED IN THIS REPORT
Tanzanian Sh = US$0.14
US$1.00 = TSHs 7.14
ABBREVIATIONS USED
B.O.P. = Balance of Payments
TANU = Tanganyika African National Union
TANZANIA FISCAL YEAR
July 1st - June 30th
REPORT AND RECOMMENDATION OF THE PRESIDENTTO THE EXECUTIVE DIRECTORSON A PROPOSED PROGRAM LOAN
TO THE UNITED REPUBLIC OF TANZANIA
1. I submit the following report and recommendation on a proposedprogram loan for the equivalent of US$30.0 million to the United Republicof Tanzania. The loan would have a term of 30 years, including 10 yearsgrace, with interest at 8 percent per annum.
PART I - BANK GROUP OPERATIONS IN TANZANIA
2. Tanzania joined the Bank, IDA and IFC in 1962. Beginning withan IDA credit for education in 1963, 19 credits and six Bank loansamounting to $246.3 million have so far been approved for Tanzania. Inaddition, Tanzania has been a beneficiary of nine loans, totaling $229.8million, which have been extended for the development of common servicesoperated regionally by Tanzania, Kenya and Uganda through their associa-tion in the East African Community. The only IFC investments in Tanzaniato date, totaling $4.7 million, were made in the Kilombero Sugar Companyin 1960 and 1964. This Company encountered financial difficulties andin 1969 IFC and other investors sold their interest in the Company tothe Government. A discussion of present and future Bank operations inTanzania, summary statements of Bank loans and IDA credits to Tanzania andthe East African Community Organizations as of September 30, 1974 andnotes on the execution of ongoing projects are contained in Annex II.
3. The last full Economic Report on Tanzania (AE-26) was distributedto the Executive Directors on May 22 and June 22, 1972. This was followedby an Economic Updating Report (30-TA) which was distributed on December 11,1972 and which was especially prepared for the East African ConsultativeGroup meeting on Tanzania of January 1973. An agriculture rural develop-ment sector mission visited Tanzania during September/October 1973; itsreport will be distributed shortly. A mission to study the industrial andmining sectors visited Tanzania in August/September 1974.
4. Tanzania's overall debt service ratio is currently about six per-cent and is not expected to rise significantly in the medium term. Inview of this low ratio there is scope for a modest amount of lending toTanzania on conventional terms. In terms of outstanding commitments, theBank Group is Tanzania's largest creditor followed by Sweden, People's Republicof China, Canada, Denmark, the Netherlands and the Federal Republic of Germany.Including a notional one-third share of the debt of the East AfricanCommunity Corporations, the IBRD is presently holding 14 percent of Tanzania'soutstanding external debt and IDA 16 percent; the IBRD share is expected torise to about 20 percent in the next five years, and the IDA share to remainabout the same. The share of debt service payments to the Bank is at presentabout 10 percent of total debt service payments; the corresponding share for
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IDA is about 2 percent. These two figures are projected to rise toabout 20 percent and 3 percent, respectively, by 1980. Most capitalaid to Tanzania is made available on very favorable terms and a decliningshare of the total is tied to procurement in the donor country. Supplier'scredits have been kept to the minimum.
PART II - GOVERNMENT DEVELOPMENT GOALS, STRATEGIES ANDPROBLEMS OF IMPLEMENTATION
5. The goals and methods that characterize the Tanzania development effortare as important, or more important, for understanding the present economicproblem than the conventional economic statistical trends over the past 13years of its independence. Two paramount goals are equalizing standards ofliving and eradicating poverty. The objective of equalizing standards ofliving permeates Tanzania development policies. The tax structure is highlyprogressive; at present rates the maximum net of tax personal income is theequivalent of about $8,000 per year. Moreover, better off sections of thepopulation, such as coffee farmers, pay a steeply progressive export tax. Wagesand salaries of middle and upper income groups have been held back as lowerincome group wages were increased. Consumer prices for most basic consumergoods are uniform over the nation so that less well off regions, despite highersupply costs, pay no more than wealthier regions. The same reasoning appliesto uniform national agricultural producer prices. Finally, measures are takento ensure that the provision of social services such as water, schools andhealth clinics result in equal treatment; this means that less well off areasare favored so they will "catch up" to the better endowed areas. As a result,differentials in standards of living have been narrowed between the urban upperincome groups and the lowest, and to a lesser extent between urban and ruralgroups and between regions.
6. The complementary goal of poverty eradication has made rural develop-ment one of the primary goals of Tanzania in as much as over 90 percent ofthe population, most with per capita incomes of less than $70 per year,reside there. This has reinforced the policy of giving priority to thesupply of social services and infrastructure to rural areas, but with anequal emphasis on agricultural development to increase rural incomes. TheTanzanians have had difficulty in achieving a balance in implementing thesetwo components of rural development. On the one hand, it has proveninstitutionally and logistically easier to provide infrastructure andsocial services. On the other, it has been more difficult to mount effec-tive agriculture programs: staff is more scarce; some of the improvedtechnologies suitable for adaptation in Tanzania have not been proven; andthere are all the problems of organizing supply of inputs and marketing ofproducts for over 2.5 million farm families.
7. A major method of rural development is ujamaa. Most of the ruralpopulation is dispersed in individual homesteads, and most of the populationis stretched out along the perimeters of the country. If the rural popula-tion's methods of production and manner of life are to be transformed and
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modernized, relatively cheap and efficient means must be found for deliveryof services such as extension, credit, input supply, marketing, roads,water, schools, health, etc. Collecting the scattered population intovillages is seen as the principal method to facilitate these objectives,and "villagization" is therefore the major characteristic of the firstphase of ujamaa. Villagization was first recommended to the Tanzaniansby a Bank Economic Survey Report in 1961. But the Tanzanians have evolvedand adopted their own features. Whereas the resettlement schemes recommended(1961) by the Bank evolved into a capital intensive program provided bythe Government, the Tanzanians now stress less capital intensity and volun-tary contribution of labor in creating housing and village infrastructure.About one third of the rural population are now in ujamaa villages. Thesecond stage of ujamaa is to create multi-purpose cooperatives for supplies,credit and marketing. This stage is taking longer to achieve. The longterm goal is to have ujamaa farmers practice collective farming. However,initial efforts in this regard had very mixed results in respect of outputand farmer responsiveness. Hence, the present policy is to support indivi-dual farming on individual plots in the block of land allocated to theujamaa village.
8. Another goal is mass participation of the population in definingthe priorities of development and their implementation. This is facilitatedby the political party organization (Tanganyika African National Union, TANU)which starts with the ten family cell and is linked successively to village,division, ward, district, region and national central committee and congresslevels. Party representatives at each level are expected to and do participatein organizing the development effort. Recently (1972), the central govern-ment administration was systematically decentralized and substantial budgetand program powers were given to the 20 regions and 78 districts. Each districtand region is expected to have its own development plan and budget subjectto central government guidelines, control and finance, and to direct andcoordinate all development staff and activities within its jurisdiction.However, they have no taxing powers. It is too early to assess the impactof this substantial reorganization, but one fact and one tendency areevident. The fact is that the scarce high and middle level managerialstaff of the government have been spread even thinner as the areas ofresponsibility broadened. The tendency is that with grass roots interestsgiven greater scope, the demand for the popular services such as watersupply, health clinics, schools and roads has grown rapidly. As alreadynoted, these services are institutionally easier to implement thanagricultural programs, and this tendency threatens to unbalance the develop-ment effort. To counter this tendency, current policy is to insist thatat least 40 percent of district and regional development budgets be spenton directly productive activities. But at present this is more of a goalthan a practice.
9. Another goal is self reliance which operates at many levels. First,it is the country wide voluntary contribution of labor as described abovein ujamaa. Second, it is the pricing of state enterprise products toensure that state enterprise savings make a substantial contribution to
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financing investment. State enterprise savings were estimated atabout $100 million in 1973 or 6 percent of GDP. Thirdly, it means aserious tax effort where combined tax revenues now (1973) are 19 percentof GDP, one of the highest ratios for a country with a per capitaincome level of $110.
10. A final goal is Tanzania's desire to develop a socialist economicsystem. In furtherance of this objective a series of nationalizationmeasures have been taken since 1967 when the Arusha Declaration (Tanzania'sblue print for socialism) was announced. There is also growing stateintervention in market pricing. The prices of capital, labor, land, imports,industrial and agricultural products and consumer goods are all controlledboth by direct price controls and indirect methods such as import licensing.There have been implementational problems and in some cases conflict ofgoals. For example, the goal of keeping basic industrial and food priceslow to benefit lower income groups, all part of equalizing standards ofliving, conflicts with the goals of maximizing state enterprise savings orwith providing adequate producer prices for farmers. The decentralizationof government machinery and the creation of state agencies have placed heavypressure on scarce skilled manpower; they are not only spread thin, butthere has been a very rapid turnover of top and middle level staff. Onemight say that these conflicts are the inevitable consequences of a "frontal"approach to development and poverty eradication.
PART III - THE BALANCE OF PAYMENTS PROBLEM
Background
11. Between 1968 and 1973, GDP increased 4.8 percent per year in realterms. Exports of goods and services in constant prices grew 2.8 percentper year during the same period. Domestic savings increased from 17percent of GDP to 18 percent. Investment increased from 19 percent ofGDP to 23 percent with public sector investment rising to 80 percent ofthe total investment in 1973. Annual price increases were moderate tolow. Current government receipts more than doubled, but current expen-ditures increased at similar rates so that budgetary savings stagnated.While imports, especially of capital and intermediate goods grew rapidly,export earnings grew very slowly and the increasing current accountdeficits were financed by a rapid increase of public capital inflow,largely on concessional terms, and external reserves were maintained atprudent levels.
12. Several features emerge from these trends. The increase in domesticsavings and investment rates was substantial, and is evidence of a seriouscommitment to development. The growth of GDP is probably not commensuratewith the investment effort. This is largely due to the large amount ofinvestment that went into slow gestation infrastructure and social services.
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This was exemplified by the investment of about $400 million in theTan-Zam railway, the largest single project undertaken in Tanzania, andby the difficulties encountered in mounting investment in agriculture.The stagnation of agricultural export volumes and the apparent growthof food production at the same rate as the population were the most worrisomeproblems. Despite the heavy pressure on domestic and external resources,the absence of unduly high domestic price increases, the maintenance ofexternal reserves at prudent levels and the financing of external capitalinflows on concessional terms (the external debt service ratio was 5.5percent in 1973) attests to prudent financial management. Indeed, withexternal reserves at about $145 million in late 1973 - the equivalent of 4months imports - the economy appeared in relatively good shape before theevents of the winter of 1973-74.
The Current Situation
13. Three events occurred then which resulted in a drastic change inthe overall balance of payments of Tanzania. First, import prices rosesharply; most particularly petroleum prices. Overall import pricesincreased an estimated 15 to 20 percent. The increased cost of petroleumimports, whose prices rose three-fold, is estimated at $67 million in 1974alone, or 14 percent of 1973 imports. Second, the 1973 rains failed in manyparts of the country resulting in a substantial reduction in food production.in 1973-74. This became evident in January and February 1974 necessitatingsubstantial increases in imports of basic food items in 1974. The droughtbecame general in 1974 necessitating continued high levels of food importsfrom September 1974 to August 1975 when the new crop harvest begins. Itis estimated that food imports in 1974 will cost $147 million compared toan annual average in 1970-72 of $40 million. Finally, agricultural exportvolumes declined or stagnated so that Tanzania could not fully benefitfrom higher export prices. The drought was a primary reason for thedecline or stagnation in food and agricultural export production in 1974,but it also reflected weaknesses in agricultural development policy.
14. The overall balance of payments was in surplus in 1972 and 1973but the net result of the events of 1973-74 described above is thatreserves are estimated to decline by $89 million even after allowingfor drawings on the IMF of $34 million and $11 million of bilateralB.O.P. financing to meet the emergency. As a result external reservesat the end of 1974 are estimated at $56 million - or less than one monthsimport equivalent of 1974 imports.
15. The upward trend of import prices, high food imports and stagnantagricultural export volumes is expected to continue into 1975. Ajudgement on the outlook for the overall B.O.P. in 1975 depends onseveral crucial assumptions.
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We have assumed that:
(a) normal weather will return in 1974-75,resulting innormal food crop production, and thereby permitting
substantially reduced food imports after September1975;
(b) agricultural export volumes, which have been stagnant
or declining in recent years, will grow from September1975 onwards;
(c) petroleum prices will increase 4 percent in volume
compared to the 9 percent historical trend, a slowing
made possible by conservation measures (price increases and
a ban on weekend gasoline sales) and the substitution of new
hydroelectric power for diesel.
(d) non-food consumer imports will be held constant in
nominal terms involving an estimated decline in real
terms of 7 percent, capital goods imports will increase4 percent in real terms and 11 percent in nominal terms,
a rate below recent trends;
(e) regular external capital disbursements under project agreementswill increase 10 percent in current terms after 1975: and
(f) external reserves will not be built up, even though theyare less than would be desirable.
Based on these assumptions, it is estimated that the overall B.O.P. deficit
for 1975 will be $142 million. This estimate is conisistent with the one madeby the IMF as part of the first credit tranche arrangements in October
1974.
16. Thus, the immediate problem is managing the estimated B.O.P. deficit
of $142 million in 1975. External reserves are so low that they cannot
be prudently used to finance the deficit. We judge that consumer imports
other than food will be at austerity levels in 1975 with an estimated
decline of 7 percent in real terms. For example, the Government has banned
all liquor, tobacco and sugar imports and has reduced automobile imports to
a maximum of 300, far less than a replacement level. Reducing raw materials
and spare parts for industry would only reduce growth and savings and
exacerbate domestic inflationary trends which emerged in 1974. If capital
goods and construction materials imports were reduced by the extent of the
deficit, public sector investment would have to be reduced by 50 percent which
would seriously undermine the development program built up with great effort
over recent years. Thus, the preferred alternative is to arrange financing
for the 1975 B.O.P. deficit of $142 million.
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17. Most, if not all, of the financing for the 1975 B.O.P. deficitwill have to be quick disbursing because of the immediacy of the problem.Our B.O.P. projections already assume that disbursements under existingand new project financing arrangements will be increased substantiallyin 1975 (by 21 percent) and the Tanzanian authorities have taken measuresto this end. Thus, program assistance is required in 1975 in order toavoid a reduction in investment.
The Longer Term Problem
18. While there are necessarily increasing uncertainties when thecomponents of the B.O.P. are projected into the future, the trend andmagnituue of the projected B.O.P. deficits indicates a major problem.Assuming continuation of present economic policies, the overall B.O.P.dpfici ts would be about as follows:
TiS$ Million
1976 561977 751978 891979 971980 101
Concessionary aid will not be available in anything like these magnitudesand reliance on external borrowing on conventional terms would exhaustTanzania's external creditworthiness. The trend and size of B.O.P. deficitsover 1976-80 is therefore not sustainable, and economic policy remediesmust be adopted. The Tanzanian authorities agree with this diagnosis.
19. The policy remedies required are discussed in Part V below.It will take time to implement these policy changes. For example,new investments in agriculture, industry and mining that will directlyand indirectly benefit the B.O.P. will take several years to cometo fruition. In addition, it will take a few years to make furtherchanges to the development budget if for no other reason than that ittakes time to build up new priority projects.
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PART IV - INVESTMENT POLICIES AND PROGRA4
General
20. The public sector dominates investment in Tanzania. Private
investment has amounted to about Sh 500 million ($71.4 million) per year
for the last five years and is expected to account for less than 18
percent of total investment this year. The Government's development
budget accounts for over 75 percent of the total public sector invest-
ment program. The bulk of the extra budgetary program is accounted for
by parastatal (nationalized company) investments in agriculture and
industry financed by self-generated funds, borrowing from the local
banking system, direct borrowing from foreign sources and transfers
fromn the budget.
21. During the second five-year plan period (1969-74) Tanzania achieved
an impressive level of investment which reached 33 percent of monetary
GDP, or 23 percent of total GDP, at 1971 market prices. However, this
increased rate of investrment was not significantly reflected in the growth
of gross domestic product. This was a result of a heavy bias in these
investments toward infrastructure (particularly in communications links
with Zambia), the difficulty in mounting effective programs in agriculture
and the under-utilization of some investments, particularly in industry.
In 1971 severe financial difficulties resulted in drastic cuts in the 1971-72
development budget. The Government instituted an intensive mid-plan review
at that time and decided to make a conscious effort to reallocate develop-
ment expenditures to more productive, quick-yielding investments. However,
it has taken some time for this policy decision to reflect itself in the
pattern of investment expenditures. Some major infrastructure projects
have only recently been completed and the identification and preparation
of directly productive projects in the agricultural, industry and mining
sectors has proved to be a slow and difficult: process.
The 1974-75 Investment Program
22. The 1974-75 investment plan forms the bridge between the second
five-year plan, which ended in June 1974 and the third plan due to start
in July 1975. The overall 1974-75 developmernt budget of Sh 2.2 billion
($314 million) represents a 38 percent increase over the 1973-74 program.
However, the extent of the foreign and local resource constraints were
not fully appreciated when the 1974-75 plan Was formulated and some short-
fall in implementation is likely. The Government is, therefore, actively
reviewing the developmnent budget to ensure that any shortfalls which
occur do not affect the directly productive sectors. Consideration is being
given to freezing some ongoing infrastructure projects, especially those with
high import content and for which legal commitments have not been made. All
new projects will be reviewed in the light of their production potential.
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Tanzania: 1974-75 Development Program
Total Public SectoGovernment Development Budget Investment Program_
$ million % $ million %
Directly Productive Sectors 114.9 36.5 176.9 4 0 2
Agriculture2/ 79.4 25.2 127.5 31.8Conmmerce, Industry Mining 35.5 11.3 49.4 12.4
Economic Infrastructure 117.0 37.1 137.9 34.5
Water 31.9 10.0 31.9 7.9Power 31.3 9.9 40.4 10.1Communications 30.4 9.7 31.3 7.8Other 23.4 7.5 34.3 8.7
Social Infrastructure 28.9 9.0 30.8 7.6
Education 15.9 5.1 17.8 4.4Health 11.7 3.6 11.7 2.9Other 1.3 0.3 1.3 0.3
Other (including Security) 55.3 17.4 55.3 13.7
Total 316.1 100 400.9 100
Tanzania-Zambia RailwaY3 3.6 3.6
Total 319.7 404.5
1/ Budgetary plus extra-budgetary expenditures.
2/ Includes tea, meat, sugar and cashew processing.
3/ Local costs only (these are entirely financed by a Chinese Commodity credit).
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23. Even before the review the current development budget 1/ showeda marked change of emphasis from earlier years. Over 36 percent of thedevelopment budget and over 44 percent of the total public sector programis to be concentrated in the directly productive sectors of agriculture,industry and mining; this compares to 27 percent of the development budget
in 1972-73 and 23 percent in 1937-74. Several major communications projectsother than the Tan-Zam Railway have now been completed and expenditures for thissector are expected to make up less than 10 percent of the development budget,compared to over 28 percent in 1970-71. The relative importance of otherinfrastructure investments, including water, has also declined. Expenditureson social investments including education and health are expected to formabout 9 percent of the development budget. The 30 largest projects amountto Sh 926 million ($132.3 million) or 42 percent of the total developmentbudget. These include major investments in sugar, cotton, livestock,seed multiplication, leather processing, cement, communications, medicaltraining and water and power development. The remainder of the Government'sdevelopment program comprises a large number of medium and smaller scaleprojects, many of which will be implemented by the regional administrationsunder the new decentralized government structure (paragraph 8 above).
Agriculture
24. Agriculture has been allocated highest priority; about 25 percentof the Government's development budget and over 30 percent of publicsector investments are expected to take place in this sector. Ongoingprograms, including grain storage and seed multiplication projects, aredesigned to support Tanzania's efforts to become self-sufficient in theproduction of food crops. In addition, Sh 35 million has been allocatedto the 10 major maize producing regions in an attempt to promote small-holder production of the crop. Subsidized fertilizers, the use of insec-ticides and improved transport facilities are being supported under thisprogram. However, the Government was late in recognizing the problemsof the food production sector and properly articulated and well-conceivedfood production programs still have to be formulated. The Bank Group iscurrently discussing these problems with the Government and it is hopedthat a special maize production project will be ready for implementation in1976. Other major elements of the agriculture investment program includenearly Sh 200 million for sugar production projects designed to makeTanzania self-sufficient in this commodity by 1977; a major effort in thelivestock sector, which will establish parastatal and ujamaa ranches,improve livestock marketing for the traditional sector and expand meatprocessing facilities; smallholder export oriented projects for tea,tobacco, and cotton; and a major effort to increase cashew production.In addition, several integrated regional projects are in the early stagesof implementation, preparation and identification. Many of these effortsare being supported by ongoing Bank Group projects.
1/ For the purposes of comparison the Tanzania-Zambia Railway,which is being 100% financed on concessional terms by thePeoples Republic of China, has been treated as an extra-budgetary item.
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25. Although most of these projects are well-conceived, organizationaldifficulties, low producer prices until 1974 and inadequacies in themarketing system have resulted in a slower rate of implementation thanmight have otherwise been expected. These problems and the measures theGovernment is taking to solve them are discussed in Part V.
Industry and Mining
26. The Government's strategy for industrial development gives priorityto the processing of agricultural products and raw materials for localconsumption and for export. Many of the most obvious import substitutionprojects have already been implemented. The 1974-75 program includesprojects for the expansion of cashew processing, a new cement factory,a new sugar factory, the expansion of existing textile mills, a new tannery,a shoe factory and a canvas mill.
27. Although not included in the current development budget, Tanzaniahas made arrangements with the People's Republic of China to developTanzania's coal and iron ore. It is understood that the project involves100 percent Chinese financing on concessional terms.
28. Although there are a number of promising possibilities in themining sector, projects still have to be identified and prepared; theoverall allocation to mining of Sh 16.0 million ($2.2 million) is smallbut could rise rapidly.
Cormunications
29. The proportion of the development budget, excluding the Tan-ZamRailway, devoted to this sector has declined from a high of over 28percent in 1970-71 to under 10 percent for the current year. Within theoverall allocation the program is now increasingly focusing on theexpansion and upgrading of the network of secondary and tertiary roads,in particular of feeder roads in line with the importance given toagricultural development, and improving the maintenance of the presentroad network. Five of the 15 major road projects are exclusively forfeeder road development. Several major trunk road projects will becompleted during the year; only a few urgently needed, high priority, newtrunk road improvements will be commenced in 1974-75.
Water and Power
30. The Government has given high priority to the expansion of potablewater supplies, particularly for the rural sector, and public expenditureson water have risen from about Sh 62 million ($8.8 million) in 1970-71to a projected Sh 220 million ($31.4 million) in 1974-75. Although theGovernment's ability to redirect expenditures from this sector has
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been inhibited by commitments to ongoing projects, in light of the
current resource constraints an attempt has been made to reallocate
expenditures from this to more directly productive sectors. The
proportion of the development budget allocated to water has fallen
from 11.8 percent last year to 10 percent for the current year. Over
80 percent of the water program is being financed by foreign donors.
31. About Sh 156 million ($22.3 million) or 72 percent of budgeted
investments in the power sector are allocated to the Kidatu Hydroelectric
Power Project which is being supported by Loan No. 715-TA. This 100 MW
project is expected to come on stream in July 1975 and should result in
annual savings of imported fuel of about $13 million per year.
Education
32. The Government's development strategy in this sector is sound and
well-conceived. The policy is to have universal primary education by
1989, with all secondary, higher education and training geared strictly
to manpower needs. The Government's 1974-75 development program reflects
these policy objectives. About Sh 57 million ($8.1 million) or 52 per-
cent of the sector budget is devoted to primary education. Owing to
resource constraints the expansion of primary education has, however,
been more limited than planned and universal primary education will not
now be reached by the target date. The programs for the expansion of
secondary education (Sh 21.5 million, $3.1 million), teacher training
(Sh 10 million, $1.4 million), higher education (Sh 7.8 million, $1.1
million) and technical education (Sh 10.3 million, $1.2 million) have been
determined strictly in accordance with projected manpower requirements.
Virtually every post-primary education project is being supported by
foreign agencies including the Association.
Health
33. The Government's strategy in this sector is to develop an economical
rural based health system, organized around rural health centers with out-
lying dispensaries, designed to satisfy the entire health needs of the
family except those which can only be provided in the hospital. Rural
hospitals at the district and regional levels, equipped to provide major
curative services,will also be established to complement the system. This
strategy calls for medical auxiliaries to operate the country's health
care facilities at all levels, under the overall supervision of physicians.
The investment program is geared to the phased production of the required
rural health facilities and the expansion of medical training to meet the
manpower demands. The 1974-75 health program (3.6 percent of the total
development budget) includes modest allocations for the construction and
expansion of training institutions for medical aids and auxiliaries as
well as the expansion of the health faculty at the University of Dar es
Salaam. About Sh 33 million ($4.7 million), or 41 percent of the health
sector development budget, is being administered by the regions, primarily
for the construction of rural health centers and dispensaries.
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The New Capital City
34. In October 1973 the Government decided to shift the capital fromDar es Salaam to Dodoma which is more centrally located and from whichthe Government feels that it will be easier to stimulate and guiderural development. Details of the move and its phasing, which wasoriginally scheduled to take place over 10 years, are presently beingfinalized. The Prime Minister's Office moved to the new capital inOctober 1974. No reliable cost estimates are at present available.Meanwhile about Sh 23 million ($3.3 million), or just over one percent ofthe current development budget, has been allocated for the new capital.In addition, about Sh 9 million ($1.3 million), financed by loans fromthe Tanzania Housing Bank and other banking institutions in Tanzania,is expected to be spent on residential housing in the new capital duringthe year.
Summary
35. We have examined the 1974-75 development budget in detail and webelieve that its pattern of sectoral allocations and project content aresound.
PART V - MANAGING THE MEDIUM TERMBALANCE OF PAYMENTS PROBLEM
General
36. The projected size and persistent trend of overall B.O.P. deficitsover 1975-80 suggest that major remedial measures are required in thestructure of the Tanzanian economy. The projected trend is the consequenceof the expected deterioration in the terms of trade and the slow growthof export volumes. Thus, less relative real resources are expected tobeavailable to sustain the growth of consumption and investment. Asalready noted, persistent B.O.P. deficits resulting from the present patternof investment, consumption and output would require a level of externalborrowing, which is likely to be increasingly on conventional terms, suchthat creditworthiness would soon be exhausted. Continued external borrowingon conventional terms would inevitably result in external debt managementproblems in the 1980s. Reducing the level of consumption absolutely atpresent low levels of per capita incomes and consumption is politicallyunacceptable. However, the rate of increase of consumption can be moderated.Even if this is achieved, the resource constraint will be such that therewill not be enough resources to sustain the present rate of increase ofinvestment. It follows that if the growth rate of GDP is to be maintainedand hopefully increased, then investment will have to be restructured tobecome more productive, especially in ways that benefit the B.O.P. The
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preferred solution is therefore a judicious blend of demand managementand restructuring of investment in ways that increase the growth of outputdespite the limited resources available. This solution seeks to increaseoutput while moderating the rate of increase of consumption and investment.
Public Investment Policy
37. As noted in Part IV,the Government has already made substantialprogress in reallocating public sector investment to the directly pro-ductive sectors of agriculture, industry and mining and has informed theBank that it will continue to pursue this objective. This will implythat investment resources will be available for other sectors. Althoughthere will be political and institutional difficulties in making thesereallocations (for example, the Government is committed to supply waterto all rural areas in 20 years and these plans will now have to berephasec) thie Government is deternined to carry them out.
Agriculture Policy
38. A second policy area is to improve agricultural production. Thesingle most worrying weakness in the economy is the low rate of growth ofagriculture production as reflected in the stagnation of per capita foodoutput. While this is a result of a range of problems, there is consensuson some of the primary contributing factors. Until recently, producerincentives were dampened by low agricultural producer prices. However, theGovernment has responded to this situation by substantially increasing theprices of the major crops in 1973 and 1974. For example, producer prices wereincreased substantially on May 1, 1974, and increased again on November 1,1974 for the 1974-75 crop season. The November price increases include a50 percent increase for maize, 23 percent for paddy, 30 percent for wheat,75 percent for cotton and 20 percent for flue cured tobacco. Correspondingadjustments have also been made to the controlled retail prices. Theseprices are now close to the projected long term world parity. The Governmenthas informed the Bank of its intention to continue to maintainprices at levels which provide sufficient incentive to producers. Theincreased rural incomes made possible by these higher producer prices willnot, in our judgement, increase consumption to unmanageable levels, and theforeign exchange gains of increased production would substantially exceedthe foreign exchange costs involved in the increased rural consumption.
39. There are three other policies affecting producer incomes where theappropriate action raises great, difficulties. One is that the structureof progressive export taxes, largely on "older" traditional crops such ascoffee, are now such that at higher prevailing world prices the producerreceives relatively less than at lower prices. This probably has an adverseeffect on production. However, the short run supply elasticity of coffeeis low, and with a premium on savings, taxing the "windfall" incomes generatedby higher world prices is a legitimate fiscal objective. Another is thepresent uniform national producer price policy. Although this policy results
- 15 -
in some misallocation of resources, its modification is a complex subject,e.g., if transport differentials are not set correctly, internal crosshaulage will occur. It is also a politically sensitive issue in egalitarianTanzania. Finally, the rise in the import prices of agriculture inputs suchas fertilizer, has affected the impact of input subsidy policies. However,input subsidy levels will have to be examined by the Government in the contextof producer price policy and tax policies. The Government has informed theBank that it will initiate studies of these complex issues with a view totaking appropriate action.
40. A second factor contributing to agricultural stagnation is inadequateproject planning and implementation. For example, the IDA assisted teaand tobacco projects are far behind original schedules. Part of the problemis that skilled staff has been dispersed too widely and staff turnover hasbeen extreme as a result of agency proliferation and government decentralization.Concentrating limited staff on priority areas and projects and greater stabilityof staff tenure are seen as the solutions. The Government has begun to move inthis direction. For example, a team of project implementation experts hasbeen established in the Ministry of Agriculture. The Government has alsonotified the Bank that it will arrange longer tenure for senior staff whosefrequent rotation has disrupted implementation. The Bank Group willassist the Government's efforts by provision of project planning staff underthe IDA assisted Kigoma project as well as the regular services of the Bank'sRegional Mission in East Africa (RMEA). Furthermore, the Bank's Resident Rep-resentative in Tanzania is concentrating his attention on this problem.
41. A third contributing factor to the agricultural production problem isthe inadequacy of distribution systems for production inputs, consumer goodsand the marketing of crops. One problem here is inadequate road transport.This is due, in part, to the transition to a mixed system of private, coopera-tive and state truck operators. The Association has agreed to provide exper-tise to find solutions in the road transport sector under the Highway MaintenanceProject (Credit 507-TA). The Government has informed the Bank that it willtake measures to improve distribution of inputs, consumer goods, and marketingof crops. These measures are expected to include improvements in truckmaintenance, use of army trucks in supply emergencies, improvement of creditfacilitiesfor private truckers, and measures to improve cooperative marketingwhich is presently seriously inadequate in a number of respects.
42. Another contributing factor to the agricultural problem is that whenvillagization under ujamaa is poorly planned and implemented,as has happenedon occasion, this disrupts agricultural production for at least one season, ifnot longer. The Government decided to increase rapidly the pace of villagiza-tion in 1974 and, although the statistics are unreliable, it appears thatabout two million persons were resettled during the year. It is also apparentthat many of these moves were poorly planned and that some adverse effect onagricultural production in 1975 can be expected. In the emergency facingTanzania, the planning and implementation of villagization will have to beimproved to minimize the short run negative effects on production. The Govern-ment and TANU party recognize this, and the Central Committee of the Party iscurrently conducting an inquiry into the problems of ujamaa implementation. Mean-while, the Government has informed the Bank that villagization plans will con-tinue to be kept under constant review and their implementation will be relatedto the availability of suitable land, competent staff, adequate plans andsupply of production inputs. When farmers are resettled within established cashcrop areas, villagization will be implemented in ways not to disrupt production.
- 16 -
Industry and Mining
43. In the area of industry and mining, improvement in the productivityof existing state manufacturing enterprises is very important. These arenow largely insulated from market incentives by the system of price, importand marketing controls. The Government is currently identifying possibleimprovements to the present incentive systems for managers and workers, tomore effectivelv relate bonuses to increased productivity. The recent Bankindustry/mining sector mission found cases where the export/domestic priceratio was adverse to exports. Furthermore, incentives for the export of manu-factured goods are needed and the Government has indicated to the Bank thatit intends ts initiate appropriate studies. The development of selectedindustrial and mining ventures will have a substantial impact on the B.O.P.outlook. The manufacture of textiles, sisal, cashew and cement, based onlocal raw materials, for all of which projects are being prepared or are inthe early stages of implementation, are examples of industries with expansionpotential. Phosphate, soda ash, rare metals from beach sands, iron ore andcoal, and natural gas are examples of mineral development possibilities. Theeconomic potential of these industrial and mining possibilities are so impor-tant that the Government has decided that scarce skilled manpower and financewill be concentrated on the processing of these projects. The Bank is nowexploring the feasibility of an IDA credit to assist in project preparationin these sectors.
Private Consumption
44. It has already been emphasized that measures to slow down the rate ofgrowth of private consumption will be required to deal with the projectedB.O.P. problem. The Government has already introduced and intends to main-tain a wage and salary freeze although this will be increasingly difficult tomaintain if inflationary pressures persist, and it is difficult to insulatethe economy from inflation from the import side. The Government is alsotaxing unsatisfied demand where consumer goods are in short supply as is nowthe case for several basic items such as textiles and beer. The recentlyannounced increased prices (para. 38 above) will also modify thegrowth in private consumption. Finally, state enterprise product prices willneed to be adjusted where inflation is raising costs if state enterprisesavings are to be maintained. This will be difficult because higher pricesconflict with the objective of holding down the cost of living for the poor.
Government Consumption
45. The Government is having to examine the rate of growth of its ownexpenditure, particularly of non-development recurrent expenditure. A declinein the rate of increase of investment that generates high levels of recurrentexpencitures, tor example in the social sectors, would automatically havea favorable effect on Government consumption. While increases in the rate oftaxation are unlikely to be possible given the present high ratio of tax revenueto monetary GDP, it may be feasible to devise direct or indirect methods forcollecting user charges for sertain social services, such as rural water, atpresent supplied free of charge. The Government has informed the Bank that itwill take further measures to slow the rate of growth of Government consumptionand to curtail non-development recurrent expenditure.
- 17 -
Summary
46. The policy measures outlined above can be expected to reduce the B.O.P.
gap to manageable levels, without undue damage to the development effort,
if implemented effectively and as quickly as possible. The Government
recognizes the need for action along these lines. Many of these policy
changes have already been introduced and will be developed further in the
formulation of the 1975-76 development budget and the new Five Year Develop-
ment Plan both scheduled to begin July 1, 1975. Furthermore, in the agri-
cultural sector future public investment and staff will be concentrated
in areas of highest productive potential. In this context, special measures
will be devoted to a national food production program, and within this
program, a special program to increase maize production.
PART VI - TUE PROGRAM LOAN
47. The above analysis suggests that Tanzania is facing very difficult and
unexpected problems in the pursuit of its development objectives. The
B.O.P. has come under severe strain because of the unforeseen scale
of import price inflation and an extraordinary level of food
imports brought about by the drought and by stagnant agriculture which
has also adversely effected export volumes. Furthermore, the B.O.P.
problem is likely to persist through the 1970s because of the anticipated
decline in terms of trade and an expected slow growth in export volumes.
The Government has taken measures to curtail petroleum and non-essential
imports, to prune recurrent budget expenditures, to impose a public sector
wage and salary freeze and to activate the agricultural sector by
increasing producer prices. Despite this, a B.O.P. deficit in 1975 of
about $142 million is projected after allowing for a substantial increase
in disbursements from the pipeline of existing projects. The
time it would take to commit and disburse new project loans makes it
impossible for external landers to assist in any immediately effective
manner through more project assistance. Without additional quick disbursing
external assistance, it will be impossible to sustain the ongoing investment
program. This program deserves support in order to maintain Tanzania's
development effort at a reasonabie level. Additional quick disbursing
assistance will give the Government time to implement policy changes to
cope with the medium term B.O.P. program. Tanzania has therefore requested
a program loan of $30 million from the Bank.
48. A special economic appraisal mission which visited Tanzania in
September examined the Government's program of development policies and
investment outlays as outlined in Parts IV and V. Another mission visited
Tanzania in November, following agreement between the International Monetary
Fund and Tanzania on a standby, to negotiate the proposed program loan;
it held detailed discussions with the Government on the major economic and
financial policy changes required for dealing with the medium term B.O.P. problem
while promoting the growth of the economy and the Government's other develop-
ment objectives. The main elements of these policy changes are outlined in
Part V and were accepted by the Government. The implementation of these
policies are expected to have a far-reaching impact on development and the
B.O.P. problem.
49. Considering the magnitude of the B.O.P. problem in 1975, and its unique
and unexpected character, the support we can provide to the investment program,
and the steps the Government has already taken and the further steps we are
confident it will take in the near future, there is ample justification for a
program loan of $30 million. Preliminary contacts made by the Tanzanian authorities
and Bank staff with other external lenders, including the IMF, indicates that there
- 18 -
is a reasonable chance that the balance of the 1975 deficit of $142 million
will be covered from these other sources. However, if these alternative sources
of external finance prove to be inadequate, the Tanzanian authorities may
approach the Bank for a second program loan in the course of 1975. I am satis-
fied that the loan proposal meets the criteria for program loans spelled out
in my memorandum to the Executive Directors of December 15, 1970 on the
Pearson Commission recommendation concerning program lending, namely:
(a) Tanzania has an ongoing development program and
has taken and intends to take supporting economic
and financial policies which provide a satisfactory
basis for external assistance;
(b) The needed transfer of resources from external
lenders in support of the ongoing development program
cannot be achieved effectively and expeditiously by
the financing of investment projects, including
justifiable local currency expenditures; and
(c) Other external sources are not available to Tanzania
to fill the gap on terms appropriate to Tanzania'seconomic conditions.
50. A part of the loan proceeds would be used for private sector imports,
which account for about 40 percent of the total in Tanzania; procurement
in respect of these would be subject to normal commercial practices. The
remainder of the loan proceeds would be used for parastatal and government
imports. The parastatal sector follows normal commeicial procurement
practices using competitive bidding where appropriate. In respect of
imports made by government departments the procurement regulations of
the Central Tender Board apply. For overseas procurement, these require
advertisement in the Government Gazette, in the local press and that
notices be sent to local embassies. Practically all countries from which
prospective suppliers are likely to be interested are represented by
missions in Tanzania. Adequate time, usually at least six weeks, must be
given for prospective suppliers to prepare and subrit tenders. The
procedures ensure full opportunity for participation by foreign suppliers.
The bids are evaluated on the basis of prescribed procedures and are
awarded to the lowest evaluLated bidder. The Government's procedures are
irn accordance with the Bank Groups procurement guidelines. As a check,
particularly on the private and parastatal sectors, the Dank of Tanzaria
requires that, with a few exceptions, all imports be subject to cormipulsory
quality and quantity inspection and price comparisor, by the General Super-
intendence Company, Switzerland, before shipment is effected. General
Superintendence is reqcuired to ascertain whether f.o.b. prices invoicec
correspond, within reasonable limits, with the generally prevailing exportprices. The above procedures are generally sound and ensure econoaic
procurement cf goods.
51. Foreign exchange provided under the loan would be utilized for essen-
tial imports of capital equipment, intermediate goods and raw materials for
the public and private sectors. No disbursements would be made for food, fuel,
fertilizers or consumer goods. Tanzania would be reimbursed for foreign
exchange expenditure on eligible imports on the basis of import documents and
evidence of payment submitted to the Bank. Appropriate arrangements to
- 19 -
this effect have been agreed between the Bank and the Borrower. Inorder to simplify the procedures, individual import expenditures of lessthan $500 would not be eligible for reimbursement. No disbursementswould be made for imports for which other sources of foreign financinghave been secured (Section 2(e), Schedule I, draft Loan Agreement). Itis expected that the proceeds of the proposed loan would be disbursed bythe end of June 1975.
52. The Bank of Tanzania would open a special project account inthe name of the Government, to which the Tanzania shilling equivalentof the imports financed under the project will be credited. TheGovernment would withdraw funds from the project account to cover expen-ditures under the 1974-75 Government development budget for each ofthe following votes: Prime Minister and Second Vice President's Office,(regional and rural development), Agriculture, Education, Commerce andIndustries, Communications and Works, Lands, Housing and Urban Development,Finance, Health, Water Development and Power, and Natural Resources andTourism (Schedule 4, draft Loan Agreement), Withdrawals from the projectaccount would be made by the Government periodically for the aforementionedpurposes, after the Bank has had an opportunity to review withdrawal proposals.The use of the counterpart funds in financing investments would be limited tothose expenditures which are not otherwise financed by external sources.
PART VII - LEGAL INSTRUMENTS AND AUTHORITY
53. The draft Loan Agreement between the United Republic of Tanzaniaand the Bank, the Report of the Committee provided for in Article III,Section 4(iii) of the Articles of Agreement of the Bank and the text ofa resolution approving the proposed Loan are being distributed to theExecutive Directors separately.
54. I am satisfied that the proposed Loan would comply with the Articlesof Agreement of the Bank.
PART VIII - RECOMMENDATION
I recommend that the Executive Directors approve the proposed Loan.
Robert S. McNamaraPresident
Attachments
Washington, D.C.November 25, 1974
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ANNEX IPage 2 of 7
ECONOMIC DEVELOPMENT DATA(Amounts in millions of U.S. dollars)
Actuadl Projected 19 64- 19 67 - 19 70 - 19723 - 1970 1971 1972
1970 1971 1972 194 975 1976 1969 1972 1973 1976- -
NATIONAL ACCOIINTS _ __
3-Year Average at 1967- 1969 Prices & Exchange hates Average. Annual Growth Rates As Percent of GOT
Gross Domestic Product 1214.1 1275.4 1347.7 1494.7 1562.0 1632.1 6.1 4.9 5.6 4.5 100.0 100.9 103.6
Gains from Terms of Trade)± -60.2 - 10.6 - 47.0 - 21.5 - 32.3 - 49.0
Gross Domestic Income 1213.9 126-4.6 1-295.7 14732 159.7 1531 5.0 45 5.1 4.0 10. 100 100
Import (lncl. lIFS) 366.6 395.1 365.7 413.6 400.3 389.5 6.7 6.8 1.4 0.6 30.2 31.2 28.2
Exports (import casacity) 302~O_.5 310. 1 306.0 275.2 787.2 379. 2.1 3.6 0.7 2.0 25.0 24.6 73.6
Resource Gap 63.1 84.5 59.7 138.4 113.1 60.3 5.2 -6.7 4.6
Consumption Expenditures 1022.8 1061.6 1060.0 1288.3 1315.8 1312.4 5.8 4.8 4.7 3.8 64.3 84.0 81.8
Investment ". (in.. stocks) 254.3 387.6 295.4 323.3 327.0 331.0 9.1 6.4 6.7 2.4 30.9 22.7 22.8
Dom-stic Sav-ings 191.1 203.1 235.7 184.9 213.9 270.7 1.4 2.7 7.3 4.7 15.7 16.1 16.2
National1 Savings 198.0 306.6 235.3 1809 207.3 261.3 3.1 3.4 4.9 4.5 16.3 16.4 16.7
MERPCHAND)ISE TRADE Annual Data at Cu,rrnt Plrices1 9 66. 72 197 0-73 197 3- 76 As Percent of Total.
Imports 5Capital goods 94.2 117.0 125.2 137.2 138.0 149.5 13.5 14.0 7.4 29.6 30.7 31.0
Interme.diate goods (emtfuels) 101.7 132.1 154.4 210.6 212.1 226.6 13.5 21.5 7.6 31.9 34.6 38.2
Fuels and related materials 27.0 35.8 41.3 139.4 145.0 161.6 16.3 27.7 42.0 6.5 9.4 10.2
o f which: Petroleume (27.0) (35.8) (41.3) (139.4) (145.0) (161.8) (16.3) (27.7) (42.0) (9.5) (9.4) (10.2)
Cvnsu.mpt,ion gosd.s 95.5 96.6 82.9 225.3 188.0 84.8 1.0 1.4 -5.7 30.0 25.3 20.5
Total March. 1aports (elf) 31. 81.5 403.8 712.5 631 627 87 1. 9.3 100.0 100.0 100.0
Exports!7
Primary prodtucts (excl. fuels) 183.1 163.1 208.6 229.5 332 .7 337.4 0.6 13.2 6.2 77.4 75.4 7 2 .3
Pades and related materials ) )of swhich: Petroleum ) 53.4 ) 59.8 30.7 42.0 43.7 48.8 (14.5 ) 9.7 22.5 ) 22.6 ) 24.6 10.6
Manofactured goods ) )__ 49.1 54.0 59.4 65.4 ))6.6 )___)17.0
Total Mereh. Broorts (fob) 236tT 24 2.6 288.4 42 5.5 435.8 4517 _JT.7 1 T73 100.0 10-0.0 T16-0Tourism and Boer.,, Traue . .. .
Merchandise Trade lIndices Average 1967-69- 100
Export Price Index 100.6 102.0 112.6 174.2 170.1 172.0
Import Price Index 99.0 103.5 129.9 187.8 189.2 196.5
Terms of Trade Index 101.6 98.5 86.7 92.7 89.9 87.0
Exports Volume loden. 126.0 127.0 132.0 135.3 143.0 149.6
VALUE A.DD.D BY SECTOR Annual. Data at 1966 Prices and Exchange Eaten Average Annual Growth Rates As Percent of Total1964-69 1965-70 1966-71 1967-72
Agriculture 446.5 442.7 471.2 3.3 4.4 1.4 2.6 40.0 38.1 38.5
Industry and finiing 179 .2 198.0 202.7 9.3 8.3 7 .2 5.0 16.0 17.0 16.5
Service 691.1 522.0 551.3 7.1 7.6 7.0 6.1 44.0 44..9..2 45AI.±.2
Total 1116.8 1162.7 1255.3 5 .7 6.3 4.7 4.5 102.0 100.0 102 0
PUBLIC FINANCE Annual 1Dana at Cemen.t Prices 19 67 -72 As Percent of GC
Cen`tral Ouve`rnmant) ___
Current Receipts 235.6 260.3 306.3 14.0 19.2 20.6 22.0
Current Expenditures 228.4 249.3 306.6 15.4 16.6 19.7 23.0
Budgetary Savings 7 .2 11.0 -0.3 0.6 0.9 --
Other Pablic Sector 39.0 57.0 75.0 25.0 3.7 4.5 5.6
Putlic Sector Tnvestment 163.0 233.0 233.0 21.0 13.3 16.4 17.5
CURRENT EXPENDITURE DETAILS Actual Preti.;.As % Total Current Expend.) Ff1971 FY1972 FY1973
Education 21.1 17.5 18.6Other Social Services 10.3
Agriculture 31.5 27.3 12.5Other Economic Services) ) 15.4Adsainiatraticn and Defenne 30.5 32.0 9.54/
Otber 16.9 23.2 33.7
Total Current Expenditures 100.0 100.0 100.0
SEL.ECTED INDICATORS 1960- 1965- 1970- 1973-
(Calculated from -year averaged data) 1.965 1970 1975 1978
Average TCOIR 2.9 4.3 4.3
ImPort Elasticity 1.6 0.4 0.3
Marginal Domestic Savings Sale o.i 0.2 0.25
Marginal National Savin-gs Rate 0.2 0.0 0.2
L.ABOR FORCE AND Total Labor Force Value Added Per. Worker (in current priecs)
OUTPUJT PER WJORKIER In Millions % of Total in UlSDollars Percent of Average
1971 1971 197 1 1971
Agriculture 5.3 91 98 43
Industry 0.0 2 1590 694
Service 0.4 7 2170 948
Total 5.TS0 7
not applicable -nml or negligible
not available --less than) half the
smallest unit shown1/ Includes re-exports, unclassified domestic exponts and adjustmensa for time, valee and coverage November 18, 1974
E/ Defense only
HAIANCE OF PAYKENTS1 EXTERNAL ASSISTANCE AND DEFT
7amaunts in millims of U.S. dollars at current prices)
Avg. AnnualActual Estimated rojected Crowth Rate
1969 1970 1971 1972 1973 1974 19751_ 96 1977 1978 1979 1969-1979
SUMMARY BALANCE OF PAYMENTS
Exports (incl. NFS) 276.8 308.8 333.1 397.5 479.8 516.9 543.4 646.8 713.0 802.7 915.6 13.0pp7ort49{7cl. NFS) 288.4 373.1 449.8 476.1 591.1 776.9 757.4 765.3 859.8 964.2 1079.3 14.0Resource B3alance (X-M) -11.6 -64.3 -116.7 -78.6 -111.3 -260.0 -214.0 -118.5 -146.8 -161.5 -163.7
Interest (net) -2.9 3.5 3.0 34 -5-9 -7.3 -13.6 -21.1 -22.6 -32.0 -49.7 )33.0Direct Investment Income ) ) ) ) -1.5 -1.5 - 1.5 - 1.5 -1.5 -1.5 -1.5Workers' Remittance 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 -Current Transfers (nt) 8.6 12.4 9.3 -1.7 0.7 14.0 7.0 7.7 8.5 9.3 10.2 1.7Balance on Curren Accounts -5.9 -55.4 -110.4 -83.7 -118. -7 r -22r -13. -162. - 1rr -Tr
Private Direct Investmernt nil nil nil nil nil nil nil nil nil nil nil -Official Capital Grants 10.0 12.0 14.0 16.0 18.0 20.0 21.5 23.1 24.8 26.7 28.7 11.0
Public M6ILT LoansDisbursements 44.0 49.1 49.8 126.6 154.2 133.0 82.6 83.2 91.5 100.6 110.7 9.7
-Repay r.nts -9.9 -9.7 -11.9 -15.4 -13.2 -14.0 -14.0 -14.0 -14.0 -14.5 -15.0 4.3Net Disbursermnts 34T1 39i4 37.9 111.2 141.0 n5 Tzr 8 6 .1 9 5 . 7 10.8
Other M< LoansDisbursements
-Repayments 0.0 0.0 0.0 :. .. .. ... ..NRetDisbursements rr rr 1T.T1 .1 3 .2 T1rr -5.6 17r
Actuml EstimatedCapital Transactions n.e.i. -21.0 -52.0 -15.0 28.2 -6.6 199 1970 1971 192 1973Change in Net Reserves 2.8 -15.3 - 4.7 60.2 27.7 DE;3T AND DEFT SERVICE1/
Public Debt Out. & Disbursed 176.4 220.2 262.5 344.5 424.6GRANT AND LOAN COMMITMENTS
Official Grants & Grant-like Interest on Public Debt 6.1 6.2 6.6 6.9 8.7Repayments on Public Debt 9.9 9.7 11.9 29.0 11.5
FPublic M< Loans Total Public Debt Service 16.0 15.9 18.5 35.8 20.2IBRD 7.0 30.0 - - - Other Debt Service (net) - - - - -IDA 20.5 9.0 9.8 10.8 28.8 Total Debt Service (net) -Other - - - - -Other Multi-lateral - - - 3.3 2.0 Burden on Export Eirnings (%)Governments 48.8 232.4 26.3 49.3 94.9Suppliers - 0.3 - - - Public Debt Service 5.8 5.2 5.6 9.0 4.2Financial Institutions 3.2 3.0 _ _ _ Total Debt Service 5.8 5.2 5.6 9.0 4.2Bonds - - - TDS+Direct Invest. Inc. 5.1 4.8 5.1 7.7 3.0Public Loans n.e.i. 16.9 2.2 0.8
Total Public W =LT Loans Average Terms of Public Debt
Actual Dobt Outstanding on Dec. 31, 1972 Int. as % Prior Year DO&D 65 4.2 3.5 3.0 2.6 2.5ETERN9AL DEBT Disbursed Onl,y Percent Amsort. as % Prior Year DO8,D 6.8 5.5 5.4 11.0 3.3World Bank 0 rIDA 49.1 14.2 IBRD Debt Out. & DisbursedOther MIltilateral 2.5 0.7 " as % Public Debt O&D 1.4 1.7 4.1 7.6 7.4Governments 213.5 62.0 " as % Public Debt Service2/ 0.0 0.6 1.6 2.2 10.0Suppliers 0.3 0.1Financial Institutions 24.2 7.0 IDA Debt Out. & DisbursedBonds 10.1 2.9 " as % Public Debt O&D 14.2 15.4 16.1 15.6 13.7Public Debts n.e.i 20.9 6.1 as % Public Debt Service_/ 0.6 0.6 1.1 1.1 1.9Total Public M14&T Debt 344.6 100.0
Other M&lT DebtsShort-term Debt (disb. only)
not applicable e staff estimate 1/ Not including Tanzania's share in EAC (debt)not available - nil or negligible 2/ IBRD/IDA debt service as 7 of total public debt service
... not available separately -- less than half thebut included in total smallest unit shown
November 18, 1974
TANZANIABALANCE OF PAYMENTS
(Current US$ Millions)
ACTUAL PROJECTED1972 1973 1974 1975 1976 1977 1978 1979 1980
CURRENT ACCOUNTExports (f.o.b.) 288.4 332.7 425.5 435.8 451.6 474.7 506.7 550.0 600.9Imports (c.i.f.) 403.8 477.1 712.5 683.1 622.7 678.6 738.0 804.8 877.2Trade Balance -115.4 -144.3 -287.0 -247.3 -171.1 -203.9 -231.3 -254.8 -276.3Net Services 35.8 25.6 18.2 18.2 30.0 33.0 36.3 39.9 43.9Net Transfers - 4.2 0.7 14.0 7.0 7.7 8.5 9.3 10.2 11.3Current Account Balance - 83.7 -118.0 -254.8 -222.1 -133.4 -162.4 -185.7 -204.7 -221.1
CAPITAL ACCOUNTGovt. M< Loans
Tazara 94.6 108.5 70.0 7.0 - - - - -Other 32.0 45.7 63.0 75.6 83.2 91.5 100.6 110.7 121.8Less Repayments - 15.4 - 13.2 - 14.0 - 14.0 - 14.0 - 14.0 - 14.5 - 15.0 - 15.5Net Inflow 111.2 141.0 119.0 68.6 69.2 77.5 86.1 95.7 106.3Parastatal M< (Net) 6.2 9.8 9.7 10.6 11.7 12.9 14.1 15.6 17.1Private M< - 1.7 1.6 1.5 1.5 1.5 1.5 1.5 1.5 1.5Govt. Compensation Pints. - 5.7 - 5.1 - 5.0 - 5.0 - 5.0 - 5.0 - 5.0 - 5.0 - 5.0Other Capital Movements 7.2 - 17.8 - 12.6 - 14.0 - - - -Errors and Omissions 21.7 19.1 18.8 18.8 - - - - -Capital Acct. Balance 139.0 148.5 131.4 80.5 77.4 86.9 96.7 107.8 119.9Special Transactions 5.0 - 2.8 34.4* - - - - - -
Net Change in Reserves + 60.2 + 27.2 - 89.0 -141.6 - 56.0 - 75.5 - 89.0 - 96.9 -101.2
Net Reserves (IFS) 110.1 145.5 56.5 - - - - - -
* IMF 1st Credit Tranche & Special Oil Facility a)aszeDm
Eastern Africa RegionOctober 17, 1974
ANNEX IPage 5 of 7
BALANCE OF PAYMENTS PROJECTIONS
1. Exports (f.o.b.) - staff estimates.2. Imports (c.i.f.) - staff estimates.3. Net Services - 1972 and 1973 actuals. 1974 and 1975 from IMF/Bank of
Tanzania. For 1976 assume 10% growth + addition of US$10 m of earningsfrom Tazara. Thereafter 10% p.a. growth for total.
4. Net Transfers - 1972 and 1973 actuals. 1974 and 1975 from IMF/Bank ofTanzania. For 1976 and beyond, 10% p.a. growth assumed.
5. Govt. M< Loans -Tazara - 1972 and 1973 actuals. 1974 from IMF/Bank of Tanzania.For 1975, estimate of $7.0 m is based on twice cost of importedinputs estimated for 1975, on assumption that local costs areequal to import costs. (In 1974, the estimate of capital goodsTazara imports = approx. 1/2 of the $70 m capital inflow in 1974.)Other - 1972 and 1973 actuals. 1974 and 1975 from IMF/Bank ofTanzania. For 1976 and beyond, 10% p.a. growth assumed.Repayments - 1972 and 1973 actuals. 1974 and 1975 from IMF/Bankof Tanzania. For 1976 and 1977 no increase assumed lag - thenslight increase.
6. Parastatal M< - 1972 and 1973 actuals. 1974 and 1975 from IMF/Bank of Tanzania. Thereafter, 10% p.a. growth assumed.
7. Private M< - actuals 1972 and 1973. IMF/Bank of Tanzania for 1974and 1975. Thereafter assumed level.
8. Govt. Compensation Pmts. - 1972 and 1973 actuals. 1974 and 1975 IMF/Bank of Tanzania. Thereafter assumed level.
9. Other Capital Movements, Errors & Omissions - 1972 and 1973 actuals.1974 and 1975 IMF/Bank of Tanzania. Thereafter omitted since largelyoffsetting items in recent years.
10. Special Transactions - 1974 is IMF first credit tranche & specialoil facility.
Tanzania Government Development Expenditures Tanzania Public Sector1970/71 - 1974/75 Investment Program 3/ 4/
1970/71 i/ 1971/72 1' 1972/73 I/ 1973/74 2/ 1974/75 3/ 1974/75
Sh Mill. _ Sh Mill. _ Sh Mill. % Sh Mill. % Sh Mill. % Sh Mill. 7,
Directly Productive 26.7 10.3 29.9 23.3 36.5 44.2
Agriculture 130 15.8 55 7.9 170 22.6 225 16.2 548 25.2 880 31.8 8/
Commerce, Industry & Mining 90 10.9 17 2.4 55 7.3 98 7.1 245 11.3 341 12.4
Economic Infrastructure 47.5 55.6 43.8 45.8 37.1 34.5
Water 62 7.4 47 6.6 65 8.7 165 11.8 217 10.0 220 7.9
Power 10 1.2 88 12.4 80 10.7 210 15.1 216 9.9 279 10.1
Works & Communications 233 28.2 181 25.6 129 17.2 187 13.4 210 9.7 216 7.8
Housing & Urban Development 42 5.2 17 2.4 9 1.2 41 3.0 52 2.4 126 4.6
Natural Resources & Tourism 46 5.5 61 8.6 45 6.0 35 2.5 50 2.3 52 1.9
Capital Development - - - - 23 1.1 23 0.9
Other Regional Infrastructure - - - - 36 1.7 36 1.3
Social Infrastructure 7.7 6.8 7.5 8.9 9.0 7.6
Education - Culture & Youth 46 5.5 37 5.2 43 5.6 70 5.1 110 5.1 123 4.4Health 17 2.1 4 0.6 12 1.6 50 3.6 78 3.6 81 2.9
Labor 1 .1 7 1.0 2 0.3 3 0.2 9 0.3 9 0.3
Other 18.1 27.3 18.8 22.0 17.4 13.7
Regional Administration & Planning 5/ 39 4.7 41 5.8 18 2.4 69 5.0 87 4.0 87 3.1Central Administration & Planning 10 1.2 15 2.1 14 1.9 18 1.3 22 1.0 22 0.8Information & Broadcasting - 3 0.4 3 0.4 3 0.2 16 0.7 17 0.6
Security 6/ 101 12.2 134 19.0 105 14.1 210 15.5 256 11.7 256 9.2
Total 827 100 707 100 750 100 1384 100 2175 100 2768 100aq
Tanzania - Zambia Railway 7/ 2 148 180 211 25 25829 855 930 1595 2200 2793 o H
1/ Actual Expenditures 5/ licluding the Rural Development Fund
2/ Provisional Actual Expenditures 6/ Defense, National, Service, Home Affairs, Judiciary
3/ Estimates 7/ Local Costs only (these costs were entirely financed by a Chinese Commodity Credit)
4/ Budgetary plus extra budgetary expeniditures 8/ Includes tea, meat, sugar and cashew processitng
ANNEX IPage 7 of 7
Tanzania: Government Transactions; CentralGovernment and Regions, 1972/73-1974/75
(In millions of Tanzania shillings)
1972/73 1973/74 1974/75Unaudited Provisional BudgetActual Estimates
Current Revenue 2,328 3,080 3,664
Current Expenditure 2,240 2,766 3,385
Current Surplus 88 314 279
Development Expenditure 930 1,595 2,200
Overall Deficit -842 -1,281 -1,921
Financing
Net Foreign Loans & Grants 485 637 1,147
Net Domestic Borrowing 324 493 513
of which: banks -2 301 300
Other 33 151 261
Sources: Tanzania, Financial Statement and Revenue Estimates (1974/75); Estimatesof Public Expenditure, Ministerial Development Expenditure, and Regional DevelopmentExpenditure (1974/75); Estimates of Public Expenditure, Consolidated Fund Services,and Supply Votes (1974/75); and data provided by the Tanzanian authorities.
ANNEX IIPage 1 of 9
A. BANK GROUP OPERATIONS IN TANZANIA 1/
1. Tanzania has received a total of 19 IDA credits and six Bank
loans amounting to $246.3 million. Our lending program, reflecting the
emphasis the Tanzanian Government is placing on agricultural develop-
ment, has increasingly focused on directly productive activities in
the rural sector. Up to the end of FY72, 10 out of 14 loans and credits
had been made for infrastructure. All but one of the nine loans to
the East African Community Organizations, of which Tanzania is a beneficiary
and co-guarantor, have been extended for improvements in transportation and
communications. However, the approval by the Executive Directors of the
Flue-Cured Tobacco Project (Credit No. 217-TA), in October 1970 opened a
new phase in our lending for more directly productive activities. The
Smallholder Tea Development Project (Credit No. 287-TA) and a Second Live-
stock Project (Credit No. 382-TA) were approved in March 1972 and in
April 1973, respectively. A Cotton Development Project (Credit No. 454-TA),
a Cashewnut Development Project (Loan No. 1014-TA), a Sugar Development
Project (Loan No. 1041-TA and Credit No. 513-TA) and the Kigoma Integrated
Rural Development Project (Credit No. 508-TA) were approved earlier this
year. A proposed dairy project has recently been appraised and a second
rural development project, a forestry project and a fisheries project are
under preparation.
2. Tanzania is developing an institutional structure, stressing greater
regionalization and development of ujamaa villages, designed to promote
and respond to development initiatives. These institutions are still in
their formative stages, and related organizational and staffing difficulties
have sometimes resulted in the project delays and the slow rates of dis-
bursement referred to in Part D of this Annex. Tanzania's education and
training programs are expected to solve the manpower problem in the longer
run, but meanwhile there will continue to be a need for technical assistance
in planning and implementation if the difficulties in executing projects
are to be overcome. The Government has taken steps to speed up recruitment
of needed expatriate technical expertise and instituted a regular high
level review for all externally aided projects. The Bank's Resident Repre-
sentative is giving special attention to these problems and in addition,
we hope to intensify, through our supervision missions, assistance in
project implementation. As a result of these efforts, it is expected that
project implementation should now improve.
3. Our Regional Mission in Eastern Africa was involved in the prepara-
tion of six projects in the agricultural sector. Our capacity to provide
such assistance has proved to be particularly valuable in a country where
project preparation capacity is, and for some time will be, limited. We
are also exploring with the Government how assistance of this kind can be
strengthened and best fitted to Tanzania. Through participation in their
1/ As of September 30, 1974
ANNEX IIPage 2 of 9
projects we have supported Tanzania's new development institutions atan early stage. Our supervision of the projects has resulted in bringingto light, earlier than might have happened otherwise, that some of theseinstitutions are facing significant difficulty in executing the projectsthey have undertaken. Because of our involvement, we have been able tohelp the Government in its consideration of how to overcome this problemwhose solution is fundamental to rapid development.
4. The urban Sites and Services Project (Credit No. 495-TA) approvedin July 1974 marked the Bank Group's first lending to Tanzania for urbandevelopment. The Credit for the Tanzania Investment Bank (Credit No. 460-TA)approved in February 1974 was the Bank Group's first lending in the indus-trial sector in Tanzania. A proposed project for textile development hasjust been appraised and a project for the development of an industrialestate is presently under preparation. Other projects outside the agri-cultural sector include a highway maintenance project (Credit No. 507-TA)which was approved on August 6, 1974. A water supply project, the secondphase power of the Kidatu Power Project (Loan No. 715-TA) and a furthereducation project are under preparation.
ANNEX IIPage 3 of 9
B. SUMMARY STATEMENT OF BANK LOANS FOR COMMON SERVICES GUARANTEED
BY KENYA, TANZANIA AND UGANDA AS AT September 30, 1974
(US$ million)Amount less cancellations
No. Year Borrower Purpose Bank Undisbursed
Three loans fully disbursed 75.0
638 EA 1969 EAHC Harbours 35.0 8.9
674 EA 1970 EARC Railwaya 42.4 19.5
675 EA 1970 EAPTC Telecommunications 10.4 o.6
843 EA 1972 EADB Development Finance 8.0 7.7
865 EA 1972 EAHC Harbors 26.5 22.0
914 EA 1973 EAPTC Telecommunications 32.5 25.9
Total 229.8 84.6
of which has been repaid 27.6
Total now outstanding 202.2
Amount sold 24.4of which has been repaid 24.4 0
Total now held by Bank 202.2
Total undisbursed 84.6
ANNEX IIPage 4 of 9
G. STATEMENT OF BANK LOANS AND IDA CREDITS TO TANZANIAas at September 30, 1974
(US$ million)Amount less cancellations
No. Year Borrower Purpose Bank IDA Undisbursed
One loan and six credits fully disbursed 5.2 43.o
586 TA 1969 Tanzania Roads 7.0 1.9
149 TA 1969 Tanzania Bducation 5.0 1.4
217 TA 1970 Tanzania Tobacco 9.0 7.7
715 TA 1970 TANESCO Power 30.0 .2
715-2 TA 1974 TANESCO Power 5.0 5.0
232 TA 1971 Tanzania Education 3.3 2.8
265 TA 1972 Tanzania Roads 6.5 5.7
287 TA 1972 Tanzania Smallholder Tea 10.8 7.9
371 TA 1973 Tanzania Education 10.3 10.2
382 TA 1973 Tanzania Livestock 18.5 18.4
454 TA 1974 Tanzania Cotton 17.5 17.5
460 TA 1974 Tanzania Tanzania Investment Bank 6.o 6.o
1014 TA 1974 Tanzania Cashewnut 21.0 21.0
495 TA 1975 Tanzania Sites and Services 8.5 8.5
507 TA 1975 Tanzania Highway Maintenance 10.2 10.2
508 TA 1975 Tanzania Rural Development 10.0 100
513 TA 1975 Tanzania Sugar 9.0 9.0
lo4i TA 1975 Tanzania Sugar 9.0 9.0
Total 77.2 167.6 152.4of which has been repaid 0.7 0.2
Total now outstanding 76.5 167.4
ANNEX IIPage 5 of 9
(US$ million)Amount less cancellationsBank IDA Undisbursed
Amount sold .1of which has been repaid .1 0
Total now held by Bank and IDA 76.5
Total undisbursed 37.1 115.4
ANNEX IIPage 6 of 9
D. PROJECTS IN EXECUTION 1/(As of September 30, 1974)
There are currently 16 projects under execution.
AGRICULTURAL SECTOR
Credit No. 217-TA - Tobacco Project: $9.0 million Credit of October 9,1970; Closing Date - September 30, 1976
As a result of the Tanzania Government's intention to complete itsvillagization program by 1976, the process has been accelerated and a totalof about 7,200 families have been moved to villages in the tobacco complexes,bringing the number of project farmers to 10,000. As a result of thesevigorous efforts, it is now likely that the appraisal target of 15,000 farmerswill be reached by 1975. Strict measures to enforce minimum tobacco acreagesper family will contribute to increased tobacco production. However, yieldsper hectare and quality of leaf have been below anticipated levels. Improve-ments are required to strengthen the extension and cooperative services.Provision of water supplies and social infrastructure is progressing well. Anew Financial Controller assumed his duties in September.
Creidt No. 287-TA - Smallholder Tea Project: $10.8 million Credit ofMarch 3, 1972; Closing Date - December 31, 1976
This project has experienced serious management problems both atheadquarters and in the field which have largely contributed to the short-fall in planting achievements, currently 45% of target. Insufficient and poorquality field supervision with inadequate control and guidance from headquartershave resulted in poor husbandry practices, low yields and poor quality of leafproduced. Of the four tea factories established or improved under the project,only one is performing satisfactorily. While the building of project roadsin two areas is proceeding satisfactorily, the start of works has slipped inthe two other areas owing to delays in appointment of consultants and staffingdifficulties. Work has now commenced in one of these areas and the Governmentis currently reviewing a draft consultancy agreement for the supervision ofconstruction in the last remaining area. In January 1974 the Association informedthe Government of its serious concern over management problems but until recentlystaff strengthening has been slow. New appointments have however now been madefor the posts of Operations Coordinator, Financial Controller, Chief TechnicalAdviser and candidates for other key posts are presently being reviewed. Asa result, it is now hoped that project implementation will improve. The Associa-tion has recently agreed to the extension of planting for a further year and willconsider further extension in the light of this season's performance.
1/ These notes are designed to inform the Executive Directors regarding theprogress of projects in execution, and in particular, to report any problemswhich are being encountered, and the actions being taken to remedy them. Theyshould be read in this sense, and with the understanding that they do notpurport to present a balanced evaluation of strengths and weaknesses inproject execution.
ANNEX IIPage 7 of 9
Credit No. 382-TA - Second Livestock Development Project: $18.5 million
Credit of Nlay 23, 1973; Closing Date - December 31, 1979
Invitations for bids for the three meat plants to be constructed
and improved under the Project have been issued. Contracts for land clearing
equipment have been awarded and detailed ranch plans are being prepared.
Credit No. 454-TA - Geita Cotton Project: $17.5 million Credit of
January 17, 1974; Closing Date - December 31, 1982
The Project became effective on April 5, 1974. The conditions in
which the Project will operate were radically changed by the decision,
effective April 15, 1974, that farmers throughout the District should
immediately move into villages. The move was poorly planned and in the
short run will adversely affect production of cotton and foodcrops. Although
in the long run villagization could well be advantageous to the project as
savings in mechanization, extension and credit staff could be achieved, the
initial implementation of the project will be delayed. Project staff are
currently reviewing the implications of the villagization with a view to
identifying necessary adjustments to the project. Staff recruitment has
been slow but most important posts, including that of Deputy Project Manager,
to which a staff member of the Agricultural Development Service has been
appointed, have now been filled.
Loan No. 1014-TA - Cashewnut Development Project: $21.0 million Loan
of June 24, 1974; Closing Date - December 31, 1981
The Loan was declared effective on September 26, 1974. Bids for
the five processing facilities to be constructed under the Project have
been received. However the lowest bid was considerably in excess of the
appraisal estimate for the project component. The Cashewnut Authority is
currently reviewing methods to reduce the cost of these items.
Credit No. 508-TA - Kigoma Rural Development Project: $10.0 million
Credit of August 21, 1974, Closing Date - December 31, 1980
The Government is currently taking the required actions precedent
to effectiveness. Recruitment of Project staff is moderately well advanced.
The pace of villagization in Kigoma region has been considerably more rapid
than expected at the time of appraisal. Insufficient attention has been
given to planning villages. The Village Site Feasibility Reports provided
under the Project will therefore be even more important as a screening device
in t'Le selection of Project villages than was anticipated earlier.
Credit No. 513-TA and Loan No. 1041-TA - Kilombero Sugar Development
Project: $9.0 million Credit and $9.0 million Loan of September 27, 1974;
Closing Date - December 31, 1970
The Government and the Kilombero Sugar Company are currently
taking the required actions precedent to effectiveness. Contracts for
the first phase of procurement have been let.
ANNEX IIPage 8 of 9
POWER SECTOR
Loan No. 715-TA - Kidatu Hydroelectric Project: $30.0 million Loan ofDecember 14, 1970 and Supplementary Loan No. 712-2-TA of June 24, 1974;Closing Date - June 30, 1976
A supplementary Loan of $5.0 million was approved by the ExecutiveDirectors on June 6, 1974 and Sweden has approved a grant of SKr 20million ($4.5) to cover the remaining foreign cost overruns which havebeen experienced by this Project. The supplementary Loan became effectiveon September 26, 1974. Although there have been some delays in manu-facturing the turbines and generators, the date of commissioning of thepower station remains, as originally scheduled, July 1975.
INDUSTRIAL SECTOR
Credit No. 460-TA - Tanzania Investment Bank Project: $6.0 millionCredit of February 13, 1974; Closing Date - June 30, 1978
This Credit was declared effective on April 18, 1974. Three sub-Projects have so far been submitted and approved.
TRANSPORTATION SECTOR
Loan No. 586-TA - Second Highway Project: $7.0 million Loan of February 24,1969; Original Closing Date - December 31, 1972: Revised Closing Date -September 30, 1974
Construction works were satisfactorily completed late in 1972.Outstanding contractors' claims have been settled and disbursements made.
Credit No. 265-TA - Third Highway Project: $6.5 million Credit ofAugust 6, 1971; Closing Date - December 31, 1974
After long delays by Government in completing tender arrangements,an award of contract for the improvement of the Mtwara-Masai Road hasbeen made. However, owing to the increase in world prices for civilworks since the appraisal in 1970, the bid price for improving this roadis now more than double the appraisal estimate. The African Development Bankis expected to make a loan of about $4.4 million equivalent to help cover thecost overruns. Work by two betterment units on the improvement of about475 km of agricultural feeder roads in the Geita district and Mara regionhas commenced. Consultants for the pre-investment studies to be fundedunder the Project have been selected.
Credit No. 507-TA - Highway Maintenance Project: $10.2 million Creditof August 21, 1974; Closing Date - June 30, 1979
The Government is currently taking the required actions precedentto effectiveness.
ANNEX IIPage 9 of 9
EDUCATION SECTOR
Credit No. 149-TA - Second Education Project: $5.0 million Credit of
May 29, 1969; Closing Date - December 31, 1975
Progress has improved recently. All civil works contracts have
now been awarded and although it is not expected that lost time can be
made up, all elements of the Project should be completed in good order
within a 24 month extension of the Closing Date.
Credit No. 232-TA - Third Education Project: $3.3 million Credit of
February 5, 1971; Closing Date - June 30, 1975
Bids for the construction of all 13 Project institutions were
received in May 1973 resulting in the contract award for four institutions
but due to high quotations and poor response, the remaining nine were
retendered. Although the new tenders were still higher than anticipated,
all civil works contracts have now been awarded. Although the lost time
cannot be made up, Project progress has now improved.
Credit No. 371-TA - Fourth Education Project: $10.3 million Credit of
April 13, 1973; Closing Date - June 30, 1978
The Credit was declared effective July 2, 1973. The Project
Coordinator has been appointed and after some delays, technical
assistance specialists to assist in Project implementation, provided
by the Danish International Development Agency, have arrived in Tanzania
and are now engaged in detailed design work.
URBAN SECTOR
Credit No. 495-TA - Sites and Services Project: $10.0 million Credit
of July 12, 1974; Closing Date - December 31, 1978
The Credit was declared effective on October 3, 1974. The civil
works contract for one site has already been awarded.
ANNEX IIIPage 1 o0 2
TANZANIA PROGRAM LOAN
Loan Summary
BORROWER: United Republic of Tanzania
MAOUNT: US $30.0 million equivalent
TERMS: 30 years including 10 years grace at8 percent per annum.
PROJECT The Droposed project would provide foreignDESCRIPTION: exchange for imports of essential capital,
intermediate goods and raw materials for thepublic and private sectors to enable theborrower to implement its 1974/75 developmentprogram.
PROCUREMENT Imports by the private and parastatalARRANGEIEUMTs: sectors would be subject to normal commercial
practices. In respect of imports bygovernmental agencies, the Government'stender procedures would apply. For overseasprocurement, these require advertisement inthe Government Gazette and in the localpress and notice to local embassies.Practically all the countries from whichprospective suppliers are likely to beinterested are represented by missions inTanzania. The procedures normally requireat least six weeks notice for submission ofbids. They are in accordance with Bank GroupGuidelines.
DISBURSEMNTARRANGEMENTS:
Imports: The borrower would be reimbursed for theforeign exchange expenditure on eligibleimports on the basis of evidence to besubmitted to the Bank periodically. Nodisbursements would be made for food, fuel,fertilizers and consumer goods or for importsfor which other sources of foreign financinghave been secured. Individual importexpenditures of less than $500 would not beeligible for reimbursement.
ANNEX IIIPage 2 of 2
CounterpartFunds: The Bank of Tanzania would open a special
project account in the name of the Government,to whioh the Tanzania shilling equivalent of
imports financed under the loan would becredited. The Government would withdrawfunds from the project account to coverdevelopment expenditures under specifiedvotes in its 1974/75 development budget.The use of the counterpart funds in financingsuch expenditures would be limited to thoseexpenditures which are not otherwise financedby external agencies. Withdrawals from theproject account would be made on the basisof periodic certification by the AccountantGeneral regarding such expenditures, andafter the Bank has had an opportunity toreview withdrawal proposals.
Approved Votes ofGovernment's 1974/75Developnent Budget US $ million equivalent
Prime Minister and Second Vice President's Office 12.2
Agriculture 44.8National Education 8.9
Commerce and Industries 21.1
Communications and Works 29.4
Lands, Housing and Urban Development 4.3Finance 314.9
Health 6.7
Natural Resources and Tourism 7.1
Water Development and Power 53.2
Total 222.6