Tanzania - Formula-based System of Block Grants

Development Of A System For Allocating Grants To Local Government Authorities In Tanzania
Client:	-
Funding Source:	DANIDA
Type of Grant:	Research
Period Funded:	September 2001 - January 2002
Location:	Dar es Salaam, Tanzania
Amount:	-

Project Summary:

Tanzania is currently undergoing a wave of decentralization reforms in a process which started with the reintroduction of local government authorities in 1982. The first wave of reforms during the late 1980s and early 1990s resulted in the assignment of significant expenditure (functional) responsibilities to local government authorities, including primary education, basic health care, roads, water and urban services.

However, the first wave of decentralization reforms has revealed several constraints of the decentralization reforms as well. For instance, the budgetary discretion of local government authorities has in fact been relatively limited, and local governments have little discretion to raise own source revenues. As a result, local governments continue to be highly dependent on intergovernmental fiscal transfers. Transfers account for approximately two-thirds of local government resources, and the majority of transfers are sectorally-based conditional transfers. The improvements in service delivery commonly associated with fiscal decentralization reforms have thus far failed to materialize in Tanzania.

Funded by DANIDA, the current study on the development of a system of intergovernmental grants in Tanzania will take place in the context of the Local Government Reform Program. Based on a solid understanding of transfer design issues and the particular situation in Tanzania, the objective of the study is to analyze the shortcomings of the present system of intergovernmental transfers and propose equitable and transparent options for allocating grants to local government authorities in Tanzania.

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