Issues and Prospects of Aid Modalities in Africa
Discussion Paper

Kenji Yamada1
March 2002

1. Evolution of Aid Modalities in Africa
Rise and Fall of Project and Program Aid
Most Western countries initiated aid programs in Africa in the 1960s in
the wake of independence from former colonial states. In this period, donors
encouraged African governments to plan their countries development, and urged
the adoption of policies encouraging industrial growth. In the 1970s, the focus ofaid shifted increasingly to poverty alleviation with a priority on projects todevelop rural areas. Project aids were used largely by donors when they provided
aid for infrastructure and social services especially in the 1960s, for poverty
alleviation and rural development in the 1970s. By the end of the 1970s, theproject aid modality was established across all sectors in the portfolios of mostdonors (Lancaster, 1999, p45-46). Project aid is attractive from the donors’ pointof view. It is highly visible to peoples both in donor and host countries. It is
technologically straightforward, consisting of transplants of technology alreadyavailable in the donor country (Mosley and Eeckhout, 2000, p133).
In the 1980s, with the economic crisis in Africa and debt defaults
associated with it, donors were forced to reconsider the effectiveness of projectaid modality. Discourse now focused on the role of economic policies as
impediments to growth and the importance of stabilization and structuraladjustment reforms. In this period, donors needed an instrument that wasquick-disbursing, that would bring about policy change, and that would build
government capacity in Africa. Project aid could not meet these donors’ needs. In
this situation, for several donors, financial program aid came to occupy a growing
proportion of foreign aid budgets. Foreign aid was used in large part as balanceof payments support for governments committed to economic-reform programs
based on a neoclassical economic vision of free markets, private investment-led
growth, and minimal government intervention in the economy (Lancaster, 2000,
1

Kenji Yamada, PhD in Political Science, is a chief researcher at the International Development

Center of Japan.

1p46).
In addition to inability to deal with the crisis situation, project aid has
been criticized in terms of ownership, fragmentation, and weak impact on the
sector level (World Bank, 2000, p1). According to these critics, project aid tends tobe donor driven, which undermines local ownership, commitment, and hence has
negative effects on project sustainability. Project aid is also likely to be
fragmented, leading to uncoordinated multiplicity of aid projects, and to disperse
government capacity over many small units. The concentration of attention andfunds on specific projects leads to the lack of an overall view of the sector as awhole, and to the lack of sufficient attention to policy, administrative andinstitutional environments under which projects must operate. Furthermore,
project aid tends to have weak impact on solving basic problems at the sector
level. Ad hoc, enclave-type approaches ignore the lack of coherent sector policies,
system and budgets. Through fungibility, project aid allows shifts in government
spending to non-priority items, especially into political patronage in the case of acorrupt government (Mosley and Eeckhout, 2000, p135).
Program assistance has proved to be helpful in particular circumstances,such as emergencies. Structural adjustment operations (SALs) were able toachieve large and rapid injections of money into countries in crisis, and wereparticularly effective in improving balance of payments. Sectoral adjustment
operations (Secals) could lead to increased expenditures for the sector concernedin some countries. However, SALs did not usually control how funds were spent
within sectors, and were less effective in promoting long term sectoral objectives.
Secals focused almost exclusively on increased finance for the sector, but
increased financing for the sector does not necessarily mean improving sector
outputs and performance (World Bank, 2001, p2).
Reaction to a Growing Dissatisfaction
In the 1990s, because of the limitation on the extent of reforms and thecontinuation of low growth rates in most of Africa, donor agencies turned to lookfor other causes of lagging growth. Much attention was now paid to the quality of
governance in African countries and the capacity of their governments to manage
their economies (Lancaster, 1999, p47). Poverty alleviation and improvements inthe socio-economic welfare of vulnerable households were again emphasized as
the overarching objective of development. Poverty reduction – in its broader
sense – measured in terms of output rather than inputs was seen as the primary
goal to strive for (Thorbeck, 2000, p44). In addition to these factors, a growing
dissatisfaction with both the project and program approaches has led to the riseof Sector-wide Approaches (SWAPs) and budgetary support as major aid
modalities in Africa.
Present Situation of Aid Modalities in Africa
As a result, there are at present various aid modalities used as
2

instruments of providing aid in Africa (CIDA, 2000, p2). In stand-alone projects,
donor-funded activities are outside of government’s sector program. Donor funds
are fed into project accounts accessed only by an intermediary agency that isaccountable to the donor. In terms of SWAPs, there are basically three types ofmodalities, i.e., project type aid, earmarked funds, and sector budgetary support(pooled funds). In project type aid, donor-funded activities support the
government’s sector framework but are managed as projects. For example,
donor-funded activities rely on donor management systems, reporting,contracting, etc. In earmarked funds, donor funding supports the government’s
sector policy framework. Dedicated accounts are used for financing but withconditionalities or performance agreements linked to their release. In sector
budgetary support, donors provide funds pooled with other donors. Althoughsome preconditions may apply to the release of donor funds, this modality reliedincreasingly on common procedures, e.g., appraisal, reporting, monitoring andevaluation, and joint review processes. Unlike sector budgetary support,
budgetary support is provided by donors to the government but not linked to a
specific sector program. In return, donors usually engage in policy dialogue withthe government on the total budget, not just for a specific sector.
2. Rise of Sector-wide Approaches (SWAPs) and Budgetary Support
SWAPs are expected to address the weaknesses of project and programapproaches and to achieve greater overall impact with development assistance.
The main features include (World Bank, 2001, p4):
- All key donors sign on to the program. Aid coordination is made under
the leadership of the host government with broad consultation withstakeholders.
- A comprehensive sector policy framework is formulated, which is
sector-wide scope, covering all relevant areas, policies, programs, andprojects. Based on an overall policy for the sector, a strategy ofmeasures to achieve policy objectives over the medium term areformulated, which is then translated into a program of specificintervention in the near term.
- Expenditure framework is formulated including an overall expenditure
program, and intrasectoral spending plan, derived from program
priority. This is followed by joint reviews of actual performance against
the plans, and adjustments as appropriate.
- The capacity of government is enhanced through common
implementation structures and procedures (harmonization of donor
procedures) and use and strengthening of government institutions,procedures, and staff.
A significant characteristic of SWAPs is the incorporation of two
aspirations in operational terms: 1) full recipient responsibility for theframework, and for preparation and implementation of programs to be supported
by donors, and 2) effective co-ordination of donor inputs into such programs3

(Andersen, 2000, p181). Another distinguishing feature is that SWAPs emphasize
process, and do not define everything in advance as does a project. The emphasis
is to track improvement over time, not to meet ex ante standards.
Strengths and Weaknesses of SWAPs
The advantages of SWAPs are that they can deal with most of theshortcomings of project and program approaches. Activities and projects under
the SWAPs cannot be fragmented, utilizing developing government institutions
and procedures. It is expected that SWAPs offer scope for greater domestic
ownership and provide an effective mechanism for aid coordination. Furthermore,
SWAPs can combine policy reform and institutional support as well as provisionof substantial budgetary funds through the selected public sector organization. In
particular they can be designed to create a supportive policy environment for thedelivery of services to beneficiaries, which may have wider potential impact thanprojects (Killick, 2000, p 245).
However, there are barriers that hinder the effective promotion of SWAPs
in many countries. First, SWAPs are not appropriate in all countries (World
Bank, 2000, p8). A country should have macro economic and political stability.
Sector programs need adequate and stable financing which cannot be realized
under conditions of high inflation or excess deficit spending. The country shouldhave political stability because a long-term program cannot be developed orsustained in a context of rapidly changing regimes. Second, the country shouldhave the intention to take an integrated and collaborative approach and strong
commitment to take leadership of the process. Third, the country must have atleast the minimum level of institutional capacity to handle the development andimplementation of the program. According to some observers, these preconditions
for starting to develop a sector program may limit its application to a few
developing countries.
Second, there are factors that work against harmonization of donors’
procedures. The objective of common procedures is to reduce the administrative
burden placed on the government by different procedures and from donor todonor (World Bank, 2000, p11). However, this requires donors to compromise on
their own internal procedures. Harmonization can be easily achieved in areas
such as reporting formats and timing, common performance indicators, joint
missions, procedures and norms for technical assistance. It is difficult to promoteharmonization in the areas of procurement and financial management. This isbecause of the need for some donors to be associated with specific inputs orcomponents, i.e. “showing the flag”, and/or of narrow commercial interests, suchas tied procurement. Some donors also fear the loss of direct control over the useof their funds because there is a risk of waste or misapplication. Beside thesefactors, the harmonization may be hindered by resentment and jealousy that
often exist between donors in the case of real or imagined dominance by certain
donors. Some donors may be simply unable to finance recurrent costs, and cannot
or do not want to change their practices to accommodate new joint methods
4

(World Bank, 2001, p11). These factors tend to limit the number of donors thatcan participate in SWAPs.
This limitation can be seen in the application of pooled fund in developing
countries. The ultimate objective of SWAPs is sector budgetary support, that is,pooling of donor resources of government funds (World Bank, 2001, p31). Under
this modality, donors do not earmark their funds in which different funds fromdifferent donors would no longer be identified separately. However, there are
only a few examples of pooling of funds in sector-wide projects in the World Bank
(World Bank, 2001, p31). These include: the Zambia technical assistance andhealth district funds; common disbursements under the Bangladesh health sector
program; district funds under the Senegal health program; preparation studies
for the Zambia education program; and health sector program and local
government reform program in Tanzania. Instead of pooling, most sector-wide
programs thus far earmark funds (World Bank, 2001, p31).
Third, there is a risk of unsustainability. As in the case of Zambia health,the progress of SWAPs may be blocked due to client policy changes that areinconsistent with the agreed framework (World Bank, 2001, p5). Moreover, aquestion arises about who can guarantee the continuity of donors’ support to thepromotion of SWAPs in the future. Since SWAPs deal with medium andlong-term planning issues, the effectiveness of SWAPs requires the long-term
commitment of donors’ support. However it is possible that the present
supportive policy of donor agencies might change because of change in leaders ofdonor agencies, changes in economic situation or public opinion in donor
countries.
Fourth, SWAPs cannot deal with many important issues that transcend a
sector. Poverty alleviation, for example, is a multi-sectoral issue that requires aholistic approach, which cannot be meaningfully broken down into sectoral issues(Mosley and Eeckhout, 2000, p151). Programs to improve administrative andinstitutional environments cannot be addressed effectively by SWAPs either. For
example, the execution of civil service reform (including reviews of the public
payment structure and improve the management quality) or the establishment of
a medium-term budget expenditure framework involves all ministerial bodies inthe development of such a framework (Mosley and Eeckhout, 2000, p151).
Strengths and Weaknesses of Budgetary Support
Under budget support, like pooled funds in SWAPs, donors do notearmark their funds in which different funds from different donors would nolonger be identified separately. Unlike sector budgetary support, however,budgetary support provided by donors is not linked to a specific sector program.
The rationale of introducing budgetary support is that it can enhance
government ownership, hence sustainability, since it gives full power regarding
the management of funds to government that provide public services to citizens.
It is cost-effective in a sense that budget support can reduce transaction costs
5significantly of both donors and the host government. It can provide a facility
flexible enough for the host government to utilize resources for priority programs.
From the donor’s perspective, budget support can increase its impact by joint
efforts with other donors, make aid more effective by minimizing transaction costand by giving influence on the host government in such areas as financial
management reform, public service reform, and good governance. Furthermore,budgetary support can overcome the limitation of SWAPs by dealing withmulti-sectoral issues such as poverty reduction and civil service reforms.
Nevertheless, budgetary support also has weaknesses that are similar to
but more serious than those of SWAPs. It has problems of limitation of its
application to a few developing countries since it requires a high level ofgovernment capacity in terms of planning, implementation, evaluation andmonitoring as well as good governance. It may limit donors’ participation due tothe problems of flag down, harmonization, and loss of direct control of donors’
funds. The continuity of donor’s support is also uncertain in the case of a change
in political leaders and outbreak of political problems in developing countries aswell as policy change on the side of donors. The withdrawal of foreign aid has themost devastating effects on overall development planning in budgetary support.
Moreover, since the host government should be accountable for performance andresult not only to its nationals but also to donors, the influence of donors on
overall policy and institutional environment become the biggest in this modality.
Do SWAPs and Budgetary Support Really Enhance Local Ownership?
It should be recognized that the application of SWAPs and budgetary
support to many developing countries is likely to bring about a fundamental
problem that may contradict the most important rationale of these aid modalities.
Although it is claimed that a potential benefit of SWAPs and budgetary support
is to enhance local ownership, there exists tension between the enhancement oflocal ownership and promotion of these aid modalities in Africa. Most SWAPs
and budgetary support have been used in low-income and aid-dependent
countries with multiple active donors (World Bank, 2001, p5). In these countries,
it is very difficult to meet a basic precondition for these modalities as well as for
successful foreign aid in general, namely full recipient responsibility for theframework, and for preparation and implementation of programs supported bydonors (Andersen, 2000, p181). For many African countries, it is hard to carryout this task in practice due to weak human capacity to practice full ownership,including in a sector program context (Andersen, 2000, p185). Ownership is ofparticular importance in the planning phase because of the politicaldecision-making and value judgments involved. However, the subsequent designof sector programs is often handicapped by lack of specialized personnel as well
as by non-existent or very weak sectoral planning units. As a result, donors may
involve in the process to assist the preparation of the program. This entails therisk of ownership. Donor representatives may feel tempted to influence sector
authorities to adopt policies and program designs, and eventually insist on
conditionalities, with which the government may not be in full agreement. The
6

recipient government nevertheless accepts the interference in order to please thedonor as this may substantially increase the chances of getting financial support
for a program (Andersen, 2000, p186). As Andersen points out, genuine
ownership of the development programs is unlikely to take root until citizens of
the host countries are equipped and allowed to take full responsibility of
government functions with limited and highly skilled expert assistance fromoutside (Andersen, 2000, p186).
Second, it is also very difficult for low-income and aid-dependent
countries to meet another basic precondition for SWAPs and budgetary support.
Under these aid modalities, in principle, aid coordination should be made under
the leadership of the host government. In practice, however, since thegovernment is not able to take the lead in donor co-ordination, one of the donors,
together with the government, tends to carry out this task. In this situation, inorder to maintain the ownership of a program, the government needs to have thewillpower to say to donors: “Here is my program in this sector; if you wish to help
me implement it, you are most welcome. If you wish to do something different, I
regret that you are not welcome in this sector in this country” (Harrold, 1995,
p13). However, it is hard for a government of a poor and aid-dependent country
to make such a blunt statement vis-à-vis a major donor because it entails the riskof losing the aid money (Andersen, 2000, p183).
Furthermore, the whole process of SWAPs and budgetary support itself
entails the risk of undermining local ownership. In addition to enhance local
ownership, another rationale (or rather a major objective) of participating in
SWAPs and budgetary support for donors is to promote policy changes, public
sector reforms, and good governance that are conducive to development in hostcountries. Thus these reforms are introduced as part of SWAPs and budgetary
support and come laden with conditionality. The reform measures are usuallydonor import in which outsiders introduce, even impose, reforms intended tochange the way that sovereign governments organize themselves and spend theirmoney. Donor agencies are likely to craft the reforms, finance them, and play a
big role in implementation. Positive effects of donor involvement are to provide
ideas on how to proceed, technical help and money for training andimplementation. This gives an impetus for the host government to undertake
reforms or make them speed up (Berg, 2000, p291). A negative effect of donorsponsorship is that policy changes and reform programs introduced as conditions
to support SWAPs and budgets can undermine local ownership of the reforms.
According to Berg (2000, p299), experience of past failed reforms of public sector
management as part of conditioned policy loans shows that governments usuallyaccept these reform programs when they are hard pressed for money. Theirleaders might have believed in them half-heartedly. As a result, they did notalways make full efforts to develop local backing. There were not sufficient publicdebates over rationale and content of reform programs. The specificconditionalities in adjustment loans were often unknown to either the generalpublic, or even fairly senior officials. Many people regarded these conditioned
reform programs as imposed by the Bretton Woods institutions. Under these7

circumstances it was hard to have the kind of general and open dialogues that
nourished true ownership. Elliot Berg’s analysis implies that there is a greatrisk that the reform programs under SWAPs and budgetary support in Africa
may follow the same path as past failed reforms of public sector management.
Rethinking Project Aid
Ownership has been used extensively in aid policy and debate in recent
years. It is based on the acknowledgement that the host country must own its
country’s development to achieve sustainable changes (Selvervik, 2000, p18). Oneof the rationales to introduce SWAPs and budgetary support is that they canenhance local ownership. This contradicts our views on the relationship between
SWAPs, budgetary support and ownership. In order to make our arguments clear,different kinds of ownership should be distinguished, namely ownership at the
project (micro) level and ownership at the sector and macro level (or overallownership at the national level). As critics of project aid insist, project aid was
likely to undermine local ownership at project level. However, many project aids
have not undermined overall ownership at the sector and national level (if it is
not part of conditioned policy loans). When donors directly control the projects
and are accountable to their results, donors tend not to interfere with the sector
and overall policy and administrative system of the host government. This is boththe strength and weakness of project aids. Project aids can push forward
development process if host governments are reform-oriented with relatively
good administrative and institutional environment. The costs of donors’
withdrawal of their support for the host governments are smaller than SWAPs
and budgetary support since basic national development plan and sector plan are
not largely influenced by project aids. Project aids do not work if the governments
are not good without policy and institutional environments conducive todevelopment. SWAPs and budgetary support can be designed to address theseissues. Nevertheless, donor sponsored reforms tend to be donor driven and hencecannot enhance ownership and sustain reform programs at the sector and macrolevels if the governments are not reform-minded and if they fail to develop local
backing.
Second, many of the shortcomings of project aid pointed out by scholars
and officials are not the fundamental flaws of development. The problems ofproject aid, such as uncoordinated fragmentation, donor driven, and weak impact
at the sectoral level, can be solved if project aids are well integrated into sector
policy, strategy and programs of the host country. The donor-driven nature of
project aids can be modified if projects are designed to meet genuine local needs
based on active participation of the beneficiary especially in the planning process.
The effectiveness of project aid is diminished unless there are supportive overall
policies, institutional and economic environments under which projects must
operate (Cassels, p7). However, these constraints can be overcome if projects areoperated within SWAPs and with budgetary support that can be designed toaddress these issues.

8Third, a major strength of project aid is that it can effectively transfer
technologies from donors to host countries. Each donor has its own process offostering technologies, know-how and ideas in the development and such process
is not substitutable to those in other countries. Developing countries cangenerate new ideas and put them into action efficiently through learning fromsuch processes of different donor countries. Since the 1980s, technicalcooperation has been severely criticized. The criticisms include its supply driven
nature, excessive emphasis on tangible and measurable output as opposed to
institution building, and the establishment of parallel project management unit.
They also include insufficient emphasis on training, excessive reliance on
long-term resident expatriate advisers, failure of the expert-counterpart model,
and massive distortions in the market of technical cooperation (Berg, 1993).
These criticisms are related to the shortcomings of the way of delivering past
technical cooperation, and should not underplay the significance of idea andtechnology transfer itself to facilitate development in the host countries.
Fourth, project aid can allow donors to act as innovators in development
approaches through specific interventions. With their greater resources andability to take risks, they can support pilot ventures that can establish
approaches and activities, which, if successful, can be ‘scaled up’ and replicatedby domestic authorities (Healey and Killick, 2000, p228). China has proved its
power to make excellent use of project aid to pilot new activities, which are thentaken up with local finance. A country like China with low dependence is likely toprefer project aid to policy conditional program aid. If aid dependence is low but
sector policy or management is weak, project support and technical cooperation
are still likely to be the most appropriate instruments to facilitate policy
development and pilot new approaches (ODI, 2001, p65).
In addition, unlike SWAPs and budgetary support, project aids can beapplied to many developing countries. Even if host governments do not havesufficient capacity to manage sector programs, donors may make use of project
aids for capacity building since they can directly participate in the projects andassociated exchange of idea for development. Even when donors do not support ahost government regarding its policy or regime type, donors may assist poverty
reduction in the country by project aids through NGOs. Project aids should be
used especially in post-conflict countries since political and economic stabilities
in those countries are not certain in the foreseeable future.
3. Issues on Aid Modalities in Tanzania
Impact of the Helleiner Report
In Tanzania, there has been a significant shift from project aid to SWAPs,
and now increasingly from SWAPs to budgetary support. This development dates
back to the mid 1990’s when aid fatigue, rising corruption and lack of progress in
reducing poverty generated strong debate on the effectiveness of aid (TAS, 2002,
p6). It was also the time when Tanzania’s relations with donors were strained9mainly due to serious slippage in revenue collection and rising corruption. In
mid-1994, the Danish Ministry of Foreign Affairs and the Danish government
assembled a group of independent advisers on development co-operation issues
between Tanzania and donors. The report submitted by this group – theHelleiner report (1995) – and the adoption of the Agreed Notes in January 1997
set in motion the process for building a new relationship.
The report offered a list of recommendations with respect to ownership,partnership, responsibilities of the Government of Tanzania (GoT) such as civil
service reform, budgetary reform and economic management, social sector
strategy, dealing with corruption, as well as to immediate risks andrequirements (Helleiner et al, 1995). The recommendations implied radical
changes in the relationship between the donors and the GoT in order to enhancethe effectiveness of foreign aid. These include:- The need for the GoT to insist on preparing the first draft of all policy
documents- The need for donors to be willing to withhold or delay aid until the local
conditions necessary for ownership are satisfied- The need to shift from the existing situation of an uncoordinatedproliferation of projects to a more rationalized and focused program- The need to adopt a sectoral focus or concentration- The importance of harmonizing country programs with Tanzania’s own
prioritization of projects- The need to develop a vision for long-term development and to draw up
supportive strategies and investment programs- The need for full disclosure of committed donor resources for the
purposes of proper budgetary planning- The need to plan a gradual decline in external support for Tanzania
An independent review of the implementation of the Agreed Notes inMarch 1999 reported significant progress on almost all the provisions. These
include macroeconomic management (preparation of PFP), aid co-ordination(implementation of SWAPs, PER/MTEF, Quarterly sector consultations,
MDF/PRBS, CBF), and democracy and governance (multiparty system,
formulation of Vision 2025, National Poverty Eradication Strategy, National Anti
Corruption Strategy). According to this review, areas that still face problems
include:- Separate/parallel
donorsystems/procedureson
procurement,
recruitment and staff remuneration, accounting, reporting formats,monitoring, and management of projects which tax heavily the limited
Government capacity- Fragmented and uncoordinated project support which reduces
efficiency and effectiveness- Management and disbursements of resources outside the Government
system (exchequer) undermining transparency and accountability
10

- Heavy dependency on TA/consultants in executing projects which isvery costly- Unsynchronized Country Assistance Strategies (CAS)- Inadequate Government capacity
Move Toward Basket Funding and Budgetary Support
A significant change in donors’ aid policies can be seen in many areas. In
Tanzania donors have moved into basket funding for a range of programs orprocesses. They include Public Expenditure Review, Local Government Reform
Program, Agricultural Strategy, Rural Development Strategy, Road Program
including TANROADS, Poverty Reduction Strategy Paper, Public Policy Reform
Program, Legal sector, Health sector, Education sector, and Agricultural sector.
The World Bank has strongly supported this trend, and is now moving
progressively from basket funding to budget support funding (UNDP, p22). WorldBank is providing increasingly more support to budget support, about 30-40
percent of World Bank funding. Most of the Adjustment Programs were in theform of budget support including Programmatic Structural Adjustment Credit(SAC I and PSAC I) and Poverty Reduction Support Credit. DFID is ahead of thedonors in this type of funding, offering about 60% of total aid volume for budget
support in Tanzania. Beside UK, the governments of Denmark, Ireland, Sweden,
Netherlands, and of Switzerland also strongly support Poverty Reduction
Budgetary Support (PRBS).
The Government of Tanzania (GoT) also seems to prefer budget support
funding to other aid modalities. This is implied by the following demands madeto donors in Tanzania Assistance Strategy (TAS) in 2002.
- As far as possible adopt the joint actions approach and harmonizedrules and procedures (formulation, supervision and evaluation missions;accounting, disbursement and reporting; annual consultations, etc.)with the view to enhance government capacity. The initiatives on basket
funds in health, education, LGRP and the PRBS provide a basis for theway forward- As far as possible untie aid and provide technical assistance for capacity
building. Some donors have completely untied aid while others are still
constrained by policy stance and legal framework- Adopt the MTEF with the view to improve the predictability ofresources- As far as possible donor support approaches which increase aid
effectiveness- Decentralize authority on decision making to the country missions inorder to expedite and deepen consultations
At the CG meeting in 2001, the President of GoT also stated:

11

While considerable progress has been made in preparing and costing
sector specific interventions to alleviate poverty, the existing
international financing mechanisms are, it seems to us, still largely
similar to those of the preceding years. In our view, there is a pressing
need to review these mechanisms, in order to ensure realistic, effective,
and more flexible support for interventions aimed at reducing poverty.
In this connection, the Government welcomes the increased
willingness of the international partners to support our poverty reduction
programmes on a “basket” and sector-wide basis, or through projects
conforming to the poverty reduction strategy. More flexible and untied
forms of international assistance are critical to our poverty reduction
efforts at this stage, when it is becoming increasingly important toembark on more cost-effective and imaginative programmes for the
benefit of the poor.
Risk of Ownership
It is understandable that the GoT prefers budgetary support over SWAPs
and project aid given the fact that Tanzania is largely aid-dependent and has
serious debt problem. Around 25-30 percent of the total Government budget and80 percent of the development budget are dependent on foreign aid/finances.
Tanzania
hasdevelopment
co-operation
programs
with
over
50
Governments/donors, international financial institutions and NGO covering
hundreds of projects virtually in all sectors (TAS, 2002, p6). In this situation,
fragmented and uncoordinated project aid reduces efficiency and effectiveness of
assistance, and cannot meet pressing needs of the country.
However, this movement entails risks that may undermine local
ownership of the reforms. First, although it is claimed that Tanzania is taking
ownership and leadership, it still appears the whole process is still by and large
donor-driven. There are many evidences to support this (UNDP, 2001, p22). The
World Bank chairs the CG meeting, not the Ministry of Finance. The secretariat
and analytical processes for PER are provided by the World Bank. The PRSP
similarly is under heavy external influence. Meanwhile in the sector ministries
technical advisers are involved in the development and monitoring of SWAP. The
donor-driven nature of the reform process is also seen by the statement made by
the President of GoT at the CG meeting in September 2001,“---- (We) would like to request that our international partners, including
the Bretton Woods institutions, consult more closely with the beneficiary
countries in elaborating or reviewing poverty-reduction facilities andrelated operational issues, such as PRSP process. ----- (It) remains vitally
important that we too are so convinced, our own views having been taken
on board.” (Statement by the President of the United Republic of
Tanzania, his Excellency Benjamin William Mkapa, at the Consultative
Group Meeting for Tanzania, 7 September 2001, p10)

12

Second, there are not many general and open dialogues about reform
programs that nourished true ownership in Tanzania. Since not enough effort
has been made to make the public aware of the change, very few ordinary people
are aware of the acclaimed changes in partnership and aid practice. Only a few
people have been engaged in the changes in the Ministries, consultancy and civilsociety (UNDP, 2001, p22). Public debate is limited over the rationale andcontent of reform programs. A report on Joint Mid-Term Evaluation of EC, DFID
and IA Support to the Education Sector Development Programme Design,
Preparation and Management Process also concludes:
Projects were hastily formulated without significant consultation between
government, donors, stakeholders or primary beneficiaries. As a result,the projects were poorly designed and made overly optimistic
assumptions about GoT capacity and readiness to embark upon
preparation of a full education programme to be funded (eventually)
through project support (Ministry of Education and Culture, 2000, p36).
In this situation, it is possible that many Tanzanians regard these reform
programs as given by donors and the Bretton Woods institutions. The experienceof Structural Adjustment Programs in many countries indicates that reform
programs sponsored by aid donors may well fail for lack of sufficient local support(Berg, 2000, p299).
Third, GoT has to recognize that as it receives foreign assistance throughbudgetary support to a relatively greater degree, donors’ influence on overall
development planning and budget allocation inevitably increases, regardless ofwhether the influence is good or bad. Without the donor impetus, reforms might
not have been undertaken at all, or would have been long delayed. A risk is that
as GoT becomes more reliant on budgetary support, its overall development
planning and implementation will also depend on donors’ policies andpreferences that are often dependent on economic situations in donor countries
and the opinion of their public and parliament. The donor’s policies andpreferences are also compounded by the view of political leaders to poverty
reduction, governance, democracy and human rights. For example, in the case ofan outbreak of some political or military incident that is against the humanrights from the donors’ point of view, donors may withdraw all of their moneyfrom budget support because of fungibility problems as well as strong domestic
political pressure. This has devastating effects on GoT’s overall development
planning and implementation in the future.
Fourth, there would be tension between conditionalities possibly attached
to common basket fund and budgetary support and local ownership. The idea ofmoving from project to SWAPs and budgetary support in its pure and untied
version is not easily accepted in aid constituencies. As a sort of compensation forrelaxing direct control over aid resources, aid was made conditional on hostgovernments conducting sound economic and other policies, transparent andefficient financial and public sector managements and other measures. Greater
13

participation of donor organizations in SWAPs and budgetary support may
facilitate them to have broader access to policy information and give influence on
GoT’s policies, institutions and governance situations. This entails risks. First ofall, many reform programs that were introduced as part of the conditions forsome supports tend to undermine local ownership of the reforms and had otherreform-weakening effects. The second risk is that those conditionalities (or steps
to be taken) may not work well, with a result that continuing support for common
basket fund and budgetary support may discourage GoT from conducting genuine
reforms. As experience of structural adjustment programs shows that theadjustment money kept flowing coming even when host governments did not
fully implement reform programs. This was because none of the parties thatengaged themselves in the programs wanted to see these failed. A cessation of
disbursements was possibly a personal defeat for responsible members of thedonor staff as well as relevant officials of the host government. On the other hand,the continuity of the money flow contributed to the creation of a non-sanctions
atmosphere, diminished the credibility of specific reforms, and contributed to thepersistence of a soft budget constraint in general. “Since the avoidance costs of
non-compliance were reduced, decision-makers shifted their calculations of thecosts and benefits of reform implementation in the direction of
non-implementation” (Berg, 2000, p301).
Fifth, many reform measures and performance management systems aredonor imports. They have been crafted by donors, and usually with little local
input. Nevertheless, as shown by the experience of public sector management
programs under structural adjustment in many countries, donors have proved to
be imperfect designers and implementers of such reforms. According to Berg
(2000), the general problem has been aid agency failure to adapt programs to fit
country-specific conditions. “Most reform programs that have ended badly were
not based on bad ideas. They were not brought down because of basic conceptual
flaws but because of failure to foresee or adapt to blockages in implementationand in the post-implementation environment”(Berg, 2000, p301). Berg maintains
that “the main donor weakness has been inflexibility, a sluggish response to
emerging implementation difficulties, and an inability to tailor programs to thespecific features of low income country environments” (Berg, 2000, p301).
The tendency of donor agencies to have an illusion about the universal
applicability of their domestic policies and institutions may be one of the reasons
why donors are not good at design and implementation of reform programs indeveloping countries. Donor agencies tend to introduce their own values, policies
and institutions to poor countries without sufficient consideration of local context.
The second reason may be the lack of sufficient local participation in selection
and application of exogenous idea into each developing country. According toeconomic anthropologist Keiji Maegawa, any country that has successfully
realized a market-based economy has accepted the market mechanism only insuch a way that existing socio-economic structure is neither destroyed, replaced,or abandoned. The structure of the base society remains surprisingly intact evenafter a drastic change in the economic mechanism. He explains:14Many nations and societies have adopted Western institutions andobjects ----- in order to survive (or by their own choice). However, it isimportant to recognize that they did not accept Western inventions intheir original forms. Any item in culture will change its meaning whentransplanted to another culture, as seen widely in ethnography aroundthe world. ----- The essence of what has been called “modernization” is theadaptive acceptance of Western civilization under the persistent form of
the existing culture. That is, actors in the existing system have adapted
to the new system by reinterpreting each element of Western culture (i.e.,“civilization”) in their own value structure, modifying yet maintaining theexisting institutions. I shall call this “translative adaptation.” (Maegawa
1994, cited in Ohno, 1998, p13)
One of the issues in recent movements in Tanzania is the inadequate
process of translative adaptation by Tanzanian people when many reform
programs have been rapidly introduced by donor agencies. If this trend iscontinued, reform programs supported by donors might not sustain but tend to
perpetuate aid dependency of Tanzania.
4. Recommendations(1) Donor agencies should make sure periodically of the genuine commitment of
GoT to the PRSP process and reform programs. Tension between
conditionality and ownership can be relaxed only when GoT really wants toreform their financial and public sector management and to promote
pro-poor economic and social policy. Experience of structural adjustment in
Africa shows that reform-minded governments can use external pressure (i.e.,
conditionality) to persuade and contain strong opposition groups that favor
status quo. The pervasiveness of fungibility also draws attention to theimportance of selectivity in the choice of host governments. Despite donor
efforts to tie their assistance to preferred categories, governments can use
the extra resources provided through development assistance largely as theychoose. Therefore what difference aid makes depends on how hostgovernments respond to the resources thereby provided. Ownership is all(Healey and Killick, 2000, p243).
(2) Donor agencies should consult with GoT more closely in elaborating orreviewing poverty-reduction facilities and related operational issues, such as
PRSP process. There seems to be a gap between donors’ insistence of local
ownership and their actual behavior on the ground. Limited consultation
with GoT will undermine their ownership of PRSP and related reform
processes. It should be remembered that ownership means full recipient
government responsibility for the design of development programs (Andersen,
2000, p185).

15

(3) It should be noted that it is GoT that has to take full responsibility for the
results of the on-going reform programs. In the case of the failure of the
programs, donors will not take responsibility for the results of their advices.
The role of donor agencies is to act as a facilitator of PRSP process byproviding idea, technology, know how, and money. It is GoT’s responsibility
for putting those offered by donors into concrete shape.
(4) GoT should make more efforts to develop broad-based local support for thereform programs. As a UNDP report points out, so few people are aware of
the changes going on, even in Universities. Only a few people have been
engaged in the changes in the central and local government as well as civilsociety. This situation must be changed since sustainable reform programs
require sufficient local backing regardless of the change in politicalleadership in the near future. In order to develop broad-based local support
for reform programs, GoT should consult more closely with stakeholders at
all levels of government and at the community level in elaborating andreviewing the programs.
(5) Related to the above point, GoT should promote local participation in thewhole process of PRSP. Sufficient local participation is required not only todevelop broad-based local support but also to adapt programs to fit country
and local specific conditions. Present donor import reform programs should
not be accepted as they are. It is the Tanzanian people who adapt to the newprograms by reinterpreting each element of programs in their own value
structure, modifying yet maintaining the existing institutions. This process
is the key for the programs to sustain by adapting them to fit local context.
(6) Donor agencies and GoT should make a sub-optimal choice first, and to movegradually to an ideal model as situation permits. It is important to recognizethat many donors should participate in SWAPs. What is vital now for aid
dependent countries like Tanzania is to move stand-alone projects as many
as possible to project type aid in a sector reform program. In doing so,
fragmented aid projects can be incorporated in sector strategies andprograms. To this end, it is not wise to simply stick to ideal type of SWAPs
such as pooled funds and harmonization of procurement (untied aid) andconsequently discourage some donors from their greater participation in
SWAPs. Each aid modality has its own strengths and weaknesses. No single
aid modality is perfect. Therefore the issue is not which modality to choose,but how to combine various modalities to minimize risks and to maximize
total impact of aid on the sector level. By keeping SWAPs open to any donor,
GoT can also broaden the scope of manipulation and fully utilize different
characteristics in institutional and technological background of donors.
(7) It is worth considering a regional approach to development in the context of
SWAPs. Under this approach, a donor supports agreed sector program
activities in a particular geographical area. The regional approach could
effectively cope with the problem of aid in a decentralized government
16

system. The on-going decentralization process in Tanzania may complicate
the implementation of sector-wide programs because it raises questions as towhether and how foreign donors should become involved with decentralized
local authorities. However, the regional approach should not complicate
implementation of the national programs. Because of the fungibility of funds,
the geographical concentration of donor contributions merely substitutes fora central government allocation, which might as well then be allocated toanother area, or to other public services in the same or other areas. Even if adonor wishes to finance specific public services in excess of minimum
national standards for selected geographical areas, this would seem logicaland justifiable, seen from a national and central government point of view
since it can make reductions in the block grant, equal to the donor financing
of services (p191). Furthermore, the regional approach could allow GoT toextend and replicate successful pilot projects innovated by donors, promote
donors’ competition for best practices, and to utilize characteristics andcomparative strengths of each donor with respect to idea, technology, know
how and money.
(8) Both GoT and donors should plan a gradual decline in external support for
Tanzania. The donors represent around 25-30 percent of the total
Government budget and 80 percent of the development budget. In particular,
the rise of budgetary support as a major aid modality may create an
unhealthy relationship between GoT and donors. For donors, the continuing
budgetary support might keep GoT from making serious reforms, and in theworst case this might lead to a situation in which all the donor money would
dry up. For GoT, it is against its principle of self-reliance, since their wholedevelopment process would be largely influenced by donors’ preferences.
Unlike project aid, donors might withdraw a part or all of their budgetary
support for the sake of donors convenience or reasoning. In order to avoid
these worst situations, both GoT and the donors should make efforts to
reduce the currently considerable aid dependence of Tanzania gradually but
as soon as possible.

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