When it comes to direct project support, the Government of Tanzania – or the government on Zanzibar when the project is in Zanzibar - negotiates directly with development partners to agree on the areas that need assistance, and when agreed, the two parties enter into agreement to implement the project.
Direct project funds have been an important source of financing development expenditures in the Tanzania. However, when it comes to aid effectiveness, direct project support has demonstrated the following disadvantages:
- The persistent high volume of off-budget project financing arrangements has provided many Government agencies with continued access to financing channels that largely bypass and therefore undermine the national budget process.
- The dominance of foreign project financing which continue to predominantly reflect the priorities of DPs has limited and undermined the discretion that is available to the GoT to allocate funds in accordance with national priorities. This in turns has precented the Government from taking full and effective ownership and leadership in managing the development process.
- Projects have often lacked transparency and DPs supporting the projects have been better informed about their implantation than the Government and other domestic stakeholders. Hence, accountability to DPs has been given priority over domestic accountability.
- Project funding has been more unpredictable than other modalities, as it depends on implementation progress that is difficult to bring in line with the national budget calendar.
The setting up of costly project implementation units (PIUs) parallel to Government systems and structures has undermined Government structures and systems and prevented project sustainability.
Despite the fact that project funding is the least preferred aid modality (according to the JAST), many projects have had great impact on the ground in Tanzania.