Finland Ambassador to Tanzania, Sinikka Antila (L) receives a report on development projects in the oil and gas industry in Tanzania. The report is given by Deputy Minister for Energy and Minerals, Stephen Masele. Photo Credit: Muhidin Issa Michuzi.
By TZ Business News Staff
Stalled rural electrification and road projects in Tanzania are set to resume construction as donors resume their budget support, the Website Janes.com has reported.
Although the website’s report does not identify the specific projects to resume, it is generally known many development projects were shelved when Tanzania’s development partners froze aid to this country in 2014 to demand accountability for the corrupt withdrawal of some USD 120 million from an escrow account at the Central Bank.
Tanzania, East Africa’s second largest economy after Kenya is currently implementing a myriad of projects that require donor funding in the energy and infrastructure sectors, such as construction of ports, roads and power plants under a 25.2 billion dollar five-year development plan, according to Interpress News Agency (IPS).
But the government said in 2014 the delay in the disbursement of aid funds threatened to prompt it to shelve some critical projects until financial year 2015/16.
On 11 March 2015, Tanzania’s finance minister Saada Mkuya confirmed that the country’s development partners will resume their budgetary support programme imminently, Janes.com reports.
The General Budget Support (GBS) committee, made up of a number of bi- and multilateral partners, had suspended its budget support to Tanzania in October 2014. This was in response to allegations that around USD120 million that was held in an escrow account jointly held by the Independent Power Tanzania Ltd (IPTL) and state power utility Tanzania Electric Supply Company (Tanesco) had been distributed illegally among government officials and other individuals.
But following a meeting with the Tanzanian government, the GBS has agreed to release the second tranche of USD558 million (equivalent to around 5% of the total budget) that they promised to provide during the 2014/15 fiscal year.
The resumption of budgetary support will provide a much needed boost to the government’s finances, reducing non-payment risk to state contractors during the remaining months of the current financial year. The financial difficulty the government had faced during the suspension was underlined by Mkuya back in January, when she admitted that the government had been forced to shelve some development projects, including rural electrification and roads improvement schemes.
Tanzania Minister for Finance and Economic affairs Saada Salum Mkuya
A trickle of the aid money has already been released, according to press reports in Dar es Salaam. Donors have already released $15 million (Sh25.8 billion) of the $558 million (Sh959 billion) budget support they withheld over the Tegeta escrow account scam, according to one media report. The money was sent in December, according to a statement by the Development Partners Group Tanzania.
Development Partners chairperson Sinikka Antila said last October that they would not release a single dollar of the $558 million pledged to boost the 2014/2015 Budget until they were satisfied with the outcome of the investigations into the controversial payment of Independent Power Tanzania Limited (IPTL) escrow money to Pan Africa Power Solutions Tanzania Limited.
The donors maintained their stand even after Parliament discussed the Controller and Auditor General’s report, saying the money would be released only in the face of evidence of the government’s commitment to resolving the matter.
Ms Antila told the newspaper paper that the donor community was concerned about how the escrow money was paid to the company that claims to have bought 70 per cent shares of IPTL that were held by the Malaysian firm Mechmar Berhad Corporation. But a statement released took note of the progress made as a result of the work by the CAG, PAC and Parliament, which led to release of $15 million in December.
So far, $84 million (about 15 per cent) of the budget support funding for 2014/15) has been handed over. Of this amount, $6 million was disbursed in July.
Decisions on the rest of the funding depend on further discussions and the actions of the government of Tanzania. The President’s speech of December 22 and the resolutions approved by Parliament went some way to ease the tensions but the donors are still reportedly assessing the situation and consulting the Ministry of Finance on further disbursements, press reports said in Dar es Salaam.
“Development Partners will still maintain dialogue with the Ministry of Finance and any decisions on further disbursements will be communicated to the minister,” the statement said.
Ms Antila, who doubles as the Finnish Budget Support Chairperson and Finland’s ambassador to Tanzania, is reportedly in constant dialogue with the ministry of Finance at the highest level.
In March 2014, firm commitments for budget support in the financial year 2014/15 worth $558 million were communicated to the government–with the caveat that disbursements would be informed by developments in the IPTL case.
The contribution to budget finances of development partners is approximately 5% per cent of the national public expenditure programme. Those currently giving budget support to Tanzania are Canada, Denmark, Finland, Germany, Ireland, Japan, Sweden, the United Kingdom, the African Development Bank, the European Commission and the World Bank.
The Tegeta escrow scandal involved the fraudulent withdrawal of Sh306 billion from the Central Bank to pay IPTL. The money, part of which a parliamentary investigation found to be public, was then shared among public figures and influential individuals.
Prof Anna Tibaijuka was sacked from the Lands, Housing and Human Settlements Development portfolio last month on the grounds that she received Sh1.6 billion from VIP Engineering and Marketing owner James Rugemalira.
President Kikwete said the fate of the Energy and Minerals Minister, Professor Sospeter Mhongo, would be decided after he receives the report of a team formed to investigate him.
The former Attorney General, Judge Frederick Werema, resigned a week before the Head of State addressed the nation on the matter. Two days later, Energy and Minerals Permanent Secretary Eliakim Maswi was suspended pending investigations into his involvement in the withdrawal of the Sh306 billion.
President Kikwete said then that the Chief Justice would handle the case of Judges Aloycius Mujulizi and John Ruhangisa, whose names appeared on a list of people who received cash from Mr Rugemalira.
Janes.com says the restoration of aid is also an endorsement of the steps taken by President Jakaya Kikwete and the government to investigate the corruption scandal and bring to account those responsible, which includes the dismissal or resignation of four ministers who were allegedly implicated, in line with the recommendations of the parliament’s Public Accounts Committee (PAC). Several senior civil servants are also currently suspended as part of the ongoing investigation.
