Magufuli's government hit by more foreign aid cuts

                                                               President John Magufuli

 

 By Prosper Makene
 President John Magufuli's still-nascent government has been hit with substantial external aid cuts just months before it unveils its maiden budget for fiscal year 2016/17.

 

It was confirmed yesterday that 10 out of a group of 14 western donor entities have announced their withdrawal of general budget support to Tanzania, hence potentially losing the country hundreds of millions of US dollars in foreign aid.

 

The four entities that are still thus far supporting the country's national budget are the European Union (EU), the World Bank, the African Development Bank (AfDB) and Denmark, according to the permanent secretary in the Ministry of Finance and Planning, Servacius Likwelile.

 

“The number of development partners has decreased but we remain optimistic to see more partners coming in to support the national budget," Likwelile told journalists yesterday in Dar es Salaam. 

 

Apart from the four already mentioned, other members of the official donor group that provides general budget support (GBS) to the Tanzanian government are Finland, Germany, Britain, Norway, Sweden, Ireland, Canada, and Japan. Likwelile did not give reasons for their withdrawals.

 

The announcement came just a day after the Millennium Challenge Corporation (MCC) programme, a United States government foreign aid agency, confirmed its cancellation of a $472 million (over 1 trillion/-) aid package to Tanzania because of Zanzibar’s disputed election.

 

In a Twitter message yesterday, outspoken opposition member of parliament Zitto Kabwe suggested that the EU could soon follow suit and cut off up to 800 million euros in aid to Tanzania.

 

Tanzania has long been one of Africa's biggest per capita aid recipients, for many years depending heavily on donor support for development projects.

 

According to Likwelile, there were initially a total of 14 development partners providing budget support to the government, a number which later dropped to 12 and has now been cut to four.

 

“Most of the development partners are encouraged by the fifth government’s efforts to boost tax collection and tighten government expenditure ... definitely we will see more development partners coming back to support the budget,” the PS said.

 

He was speaking after participating in the signing of a new loan agreement with the Japan International Cooperation Agency (JICA) worth the equivalent of 116.4bn/-, which he said will be channeled to the government's 2016/17 budget.

 

Back in 2014, the GBS donor group withheld nearly $500 million in budget support to Tanzania over corruption allegations tied to the infamous Tegeta Escrow account scandal involving how government monies set aside to pay the independent power producer IPTL was instead fraudulently used.

 

According to Zitto, less than 20 per cent of funds required for development expenditure in the annual budget are sourced from internal revenue channels, with the rest coming from external sources, usually in the form of loans or grants.

 

The Magufuli administration has announced plans to boost spending on industrial and infrastructure projects like better roads and reliable electricity in its first budget, while also cutting the budget deficit.

 

Under government budget guideline plans released in February, spending is expected to rise to 22.99 trillion/- in 2016/17 from 22.49trn/- previously, but the deficit will shrink to the equivalent of less than 3 per cent of gross domestic product, from 4.2 per cent.

 

Magufuli began his presidency back in November with a series of high profile moves aimed at reining in corruption and slashing wasteful spending within government.

 

On Tuesday this week he reiterated his call for Tanzanians to work hard towards ending the country’s dependence on donor money.

 

He is reported to have told a public rally in his home village in Chato district, Geita region that it was time for the country to wean itself off foreign aid which comes with conditions.

 

The government has already said it plans to borrow the equivalent of 1.78trn/- from external commercial sources during 2016/17, while financial aid and loans from development partners is expected to fall by 9.3 per cent to 2.1trn/- during the fiscal year.