General Budget Support

What is general budget support (GBS)? Why is this the preferred aid modality by the Tanzanian Government, and how does it work? This fact sheet aims to provide answers to these questions and some general information about GBS.

What is General Budget Support?

GBS is a multi donor initiative  that aims to provide increased  resources to support the poverty reduction strategy of the Government of Tanzania through the implementation of their national development plan. Donor countries give their support directly to the Government, who then plans and utilizes this in their implementation of the annual national budget. It is up to the government to manage the money according to their national laws and regulations, and it is spent according to the prioritizing made in the national budget. Development partners do however engage in close dialogue with Government at various points in the planning, implementation and follow up phase. A key tool in this collaboration is the joint monitoring framework, the performance assessment framework (PAF), agreed between the Government and development partners.

The PAF monitors progress across sectors and enables the Government and development partners to jointly agree on progress towards implementation the national development plan and specific focus areas under this. Together this forms the basis for financial commitment from the development partners to the Government in the following year, thereby enabling budget preparations.The above implies that budget support as an aid modality, gives more of the responsibility to the recipient government compared to traditional project assistance. One of the objectives of budget support is to increase the level of discretionary resources available to Government for effective development expenditure.

GBS in Tanzania

Tanzania’s tax base is in general, as for most low income countries in the world, still too small to generate adequate domestic revenues for implementing effective poverty reduction plans. It is therefore highly dependent on external aid, which is received mainly through three modalities: project support, sector and programme baskets, and general budget support. Budget support was introduced in Tanzania in 2001 and replaced the Multilateral Debt Fund (MDF), as well as other earlier balance of payment support mechanisms utilized in the region in particular by the WB. The 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 aimed 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 the Financial Year (FY) 2010/11 GBS to Tanzania is expected to be approximately USD 531 million to be disbursed using the GBS facility, directly into the GoT budget. This represents a decline in GBS FY 2009/2010, when the funding modality reached million USD.

In Tanzania, GBS is financed by 11 bilateral Development Partners: Norway, UK, Japan, Sweden, Denmark, Ireland, Canada, Germany, Finland, Netherlands and Switzerland,  together with the European Commission, the World Bank and the African Development Bank. The group is led by the Troika (the Chair, the incoming Chair and the outgoing Chair) which rotates every year. Norway is the Chair for the Financial Year 2010/11. The incoming Chair is represented by The European Commission and the outgoing Chair is represented by The African Development Bank.  

Overview of the previous GBS Chairs:
2003        Denmark
2004        Norway
2005        Sweden
2006        Swiss
2007        UK
2008        Denmark
2009        African Development Bank
2010        Norway
2011        European Commission

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 the development process.
• 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 strategies.
• 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 GoT is accountable to its citizens. An active citizenry and Parliament can ensure that the 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.