What is General Budget Support?
GBS is an aid delivery modality that provides financial assistance to the national budget. In the case of Tanzania, the funds are provided by Development Partners (DPs) and used by Government to reach the goals of Tanzania’s National Strategy for Growth and Reduction of Poverty (popularly known as MKUKUTA for Tanzania’s Mainland and MKUZA for Zanzibar).
It is up to the government to manage the money and it is spent according to the prioritizing made in the national budget, in dialogue with development partners and a unified assessment framework. This means that budget support as an aid modality leaves more of the responsibility with the recipient government than more traditional project assistance. One of the objectives of budget support is to increase the level of discretionary resources available to Government.
GBS in Tanzania
Tanzania’s tax base is in general to small to generate adequate domestic revenues for implementing poverty reduction plans. It is highly dependent on external aid, which is received mainly through three modalities: project support, sector and programme baskets, and not at least GBS.
Multilateral Debt Fund (MDF) was the first deliberate joint effort to provide external financing directly to the budget. Its aim was to assist the government to keep its external debt commitments fully serviced without cutting finance in other crucial areas. It was set up to provide interim debt relief whilst Tanzania endeavored to fulfill the necessary requirements to obtain HIPC (Highly indebted poor countries) relief. Once obtained, and the debt was considered to be at a sustainable level under HIPC, there was a shift towards direct budget support in 2001, replacing MDF.
Following its introduction there has been an increased sense of ownership of the development process by the Government together with major contributions made to the alignment process and donor harmonization. It has also helped focus dialogue on the strategic issues of policy and economic management and as a result made positive contributions to policy design.
In the Financial Year (FY) 2010/11 General Budget Support to Tanzania is expected to be around USD 531 million to be disbursed using the GBS facility, representing 6.4% of the Government's budget in the financial year 2010/11.
In Tanzania, the GBS is financed by 11 bilateral Development Partners and 3 Multilateral: The African Development Bank, Canada, Denmark, the European Commission, Finland, Germany, Ireland, Japan, Norway, the Netherlands, Sweden, Switzerland, the United Kingdom, and the World Bank. The group is led by a Troika (the Chair, the incoming Chair and the outgoing Chair), which rotates every year. Norway is the Chair for the Financial Year 2010/11, where the incoming Chair is represented by The European Commission and the outgoing Chair is represented by The African Development Bank.
Once a year (usually around November), the GBS stakeholders meet at an Annual Review where they evaluate the progress made by Government in meeting the targets set out in the MKUKUTA and MKUZA. The Review is an opportunity for Development Partners, Government and domestic stakeholders to discuss development challenges and set out the objectives for the coming year.
Why is GBS a preferred aid modality?
The Government of Tanzania has stated GBS as its preferred aid modality, for the following reasons:
-
The funds go straight into the national budget and the GOT decides how to spend the money, thereby increasing national ownership of development issues.
-
GBS strengthens the parliamentary role for decision-making and shifts government accountability from donors to citizens.
-
It makes aid contributions more predictable and so makes it easier for the GoT to implement its poverty reduction programme.
-
GBS saves time and will eventually save money as there is one, rather than many, process for reviews, assessment and dialogue with donors.
-
GBS is fully in line with commitments under the international aid effectiveness and harmonization agenda and will be further promoted under the implementation of the Joint Assistance Strategy for Tanzania (JAST).
GBS is favored by donors for countries like Tanzania which are politically stable, have carried out successful economic reform programmes, have initiated governance reforms and which have shown a strong commitment to poverty reduction and the targets set out in the Millennium Development Goals (MDGs). Tanzania is one of the leading recipients of GBS in the world.
GBS builds on the principle that government is accountable to the Tanzanian citizens. An active citizenry and Parliament can ensure Government promotes Tanzania's development goals effectively. The media has a crucial role to play in terms of informing the public about achievements and shortcomings.