International Aid and Tanzanian Development

DSA Scotland Mini-Conference

University of Strathclyde – Friday 30th May 2014

Dr Michael TribeDepartment of EconomicsUniversity of Strathclyde

2DSA Scotland Mini-Conference May 2014 – Dr Michael Tribe

International Aid and Tanzanian Development

1. First, a selection of statistics to set the context – a comparison between Tanzania, Ghana and Uganda over the period from 1980 to 2012

2. Second, a run through some issues and/or conclusions arising from the statistics

3. Third, some issues relating to Tanzanian ‘aid experience’

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Some Basics - 1

Comparative Basic Aid Statistics – Tanzania, Ghana and Uganda  2010 2011 2012 2010 2011 2012 2010 2011 2012

Tanzania Ghana UgandaNet ODA (US$ m) 2,958 2,446 2,832 1,693 1,810 1,808 1,723 1,578 1,655

Bilateral Share (%)

56 68 63 53 49 48 60 62 56

Net ODA / GNI (%)

13.1 10.4 10.1 5.3 4.8 4.7 10.9 10.1 9.9

Population (m) 45.0 46.4 47.8 24.3 24.8 25.4 34.0 35.1 36.3

GNI per capita (Atlas US$)

530 540 570 1,260 1,410 1,550 460 470 440

Source: OECD DAC Aid Statistics 2014 – online

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Some Basics - 2

Major Donors to Tanzania, Ghana and Uganda – 2011-12 average US$ m

Tanzania Ghana UgandaUSA 555 268 396IDA 404 401 188UK 224 129 149AfDF 146 171 144EU Institutions 145 89 160Japan 134 81 63Global Fund 125 87Sweden 121Denmark 119 80 66Norway 105 70IMF (Concessional Trust Funds) 185Germany 89 55Canada 86Source: OECD DAC Aid Statistics 2014 – online

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Some Basics - 3

Tanzania

Ghana

Uganda

Source: OECD DAC Aid Statistics 2014 – online

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ODA in context

ODA as % of GNI

ODA as % of Govt

Expenditure

ODA per capita < US$ (2011)

1.25/day

1990 2011 2001 2012

Tanzania 28.56 10.32 78.59(2004-5 Budget)

70.31(2009-10 Actual)

104.26(1992)

116.91 (2007)

Ghana 9.69 4.75 64.42 (2001)

21.52(2012)

116.16(1992)

231.95 (2006)

Uganda 15.69 10.10 65.30(2001)

49.62(2012)

83.39(1992)

152.67 (2009)

Sources: For all but Tanzanian ODA as % of Govt Expenditure – World Bank World Development Indicators 2014 (ODA per capita US$1.25 per day author’s calculationsFor Tanzanian ODA as % of Govt Expenditure – Republic of Tanzania PRSP 2005 Table 8.1 and 2010 Table 7.2

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GDP Growth

• Tanzania’s annual average GDP growth for 1990 to 2012 was 5.24% - amounting to a GDP in 2012 which was 3.34 times that of 1988 in real terms

• Ghana’s annual average GDP growth for 1990 to 2012 was 5.55% - amounting to a GDP in 2012 which was 3.62 times that of 1988 in real terms

• Uganda’s annual average GDP growth for 1990 to 2012 was 6.81% - amounting to a GDP in 2012 which was 4.81 times that of 1988 in real terms

• All data calculated by the author at constant 2005 US$ prices from the World Development Indicators

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Poverty Headcount and HDI

Human Development Index – 1990 and 2012Tanzania Ghana Uganda

1990 0.353 0.427 0.3062012 0.476 0.558 0.456

HDI Rank 2012 152 135 161Source: UNDP HDR online 2014

Poverty Headcount (%) < US$1.25 PPP per dayTanzania Ghana Uganda

1992 72.59 51.07 70.01Most recent 67.87 28.59 38.01

(2007) (2006) (2009)Source: World Development Indicators 2014

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Net Effect of International FlowsNet Effect of ODA, NGO, Remittances and Illicit Flows –

Tanzania, Ghana and Uganda – about 2012 – US$ millionsTanzania Ghana Uganda

Net ODA Inflows +2,436 +1,800 +1,582

Private ‘NGO’ Inflows* +10 +58 +19

Personal Remittances Inflows

+59 +121 +642

Illicit Flows** +216 -55 -793

Net Flows +2,721 +1,924 +1,450

Sources: Tables 3, 5, 13 and 16

** This data is based on a recent report by Global Financial Integrity, and have beencorrected for what appears to be an error in consolidating their estimates – as yet I have not received a reply to my enquiry about the data

* This data is from OECD sources, but is difficult to estimate – very recently www.d-portal.org has published a new data compilation which will be included in my updated and complete paper

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What are the Issues?

• The three economies reviewed show quite strong sustained growth over a 30 year period, in two cases recovering from significant decline in the 1970s and early 1980s

• Tanzania has received substantial amounts of ODA through this period, and Ghana and Uganda received substantial amounts of ODA following establishment of stable governance in the 1980s

• Although there have been no systematic individual country studies of the contribution of ODA to economic growth it would be difficult to believe that ODA has not made a positive contribution

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What are the Issues? - 2• Recent cross-country economic studies of aid and

economic growth conclude that there is a positive and significant, but not very strong, relationship between aid inflows and growth – see Arndt et al. 2013; Clemens et al. 2012; and Lof et al. 2013 – essentially rebutting the wild assertions of Moyo, 2009 and the arguments of Easterly, 2006.

• ODA has been running at a significant proportion of GDP (and of foreign exchange receipts) over this period – one analytical issue is related to ‘what is the counterfactual?’ – what would the economic performance have been in the absence of ODA?

• For Tanzania the poverty headcount appears to have become somewhat ‘stuck’ although the HDI indicator shows clear ‘improvement’

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What are the Issues? - 3• For Ghana and Uganda the period under review

has seen a fall in the poverty headcount and an ‘improvement’ in the HDI indicator

• Has ODA contributed to poverty reduction in these three countries over this period?

• Given the high proportion of foreign exchange inflows contributed by ODA in these three countries is there any danger of a ‘Dutch Disease’ factor intervening?

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What are the Issues? - 4

• How have ‘governance’ factors fared relative to ODA?

• What has been the experience with Budget Support?• What has been the experience with public

expenditure management?• To what extent has there been compliance with the

principles of the Paris Declaration?• Is there any significant experience of corruption

being associated with ODA or with public expenditure management?

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Specific Tanzanian Aid Issues

• Villagisation – Ujamaa Villages – attitude of donors

• Ujamaa – Arusha Declaration – attitude of donors• TAZARA – Chinese Aid and priority for Zambian

copper exports following Rhodesian UDI• Aid volatility – short-term variations (turning aid

on and off)

More recently• Corruption and the Air Traffic Control Issue – who

is corrupt? Issue of corruption originating in donor countries ....

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Positive Tanzanian attributes

• GoT established an “Assistance Strategy” in the early 2000s which the donor community signed up to

• GoT was ‘ahead of the game’ in this respect with the main issues included in the Paris Declaration of 2005

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ReferencesArndt, C., Jones, S. and Tarp, F. 2013. Assessing Foreign Aid’s Long-Run Contribution to

Growth in Development. WIDER Working Paper No. 2013/072. Helsinki: UN University – World Institute for Development Economics Research – downloaded from www.wider.unu.edu

Clemens, M., Radelet, S., Bhavnani, R. and Bazzi, S. 2012 Counting Chickens when they Hatch: Timing and the Effects of Aid on Growth. The Economic Journal, 122(561): 590-617.

Easterly, W. 2006. The White man’s Burden: Why the West's Efforts to Aid the Rest have Done so Much Ill and so Little Good. London: Penguin Books.

GPEDC. 2013. Guide to the Monitoring Framework of the Global Partnership. Paris and New York: OECD and UNDP – downloaded from www.effectivecooperation.org

Kaberuka, D. 2011. Development and Aid in Africa: What have we learned from the past 50 years? Chapter 3 in OECD DAC. Development Co-operation Report 2011. Paris: OECD DAC – downloadable from the OECD website: www.oecd.org

Kharas, H. 2007. Trends and Issues in Development Aid. Working Paper 1, Wolfensohn Center for Development. Washington: Brookings Institution – downloadable from www.brookings.edu/wolfensohncenter

Lof, M., Jemaneh, T. Mekasha and Tarp, F. 2013. Aid and income: Another time-series perspective. WIDER Working Paper No. 2013/069. Helsinki: UN University – World Institute for Development Economics Research – downloaded from www.wider.unu.edu

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Moyo, D. 2010. Dead Aid: How Aid is Not Working and How There is a Better Way for Africa. Penguin Books: London.

OECD. 2005 and 2008. The Paris Declaration on Aid Effectiveness – and The Accra Agenda for Action. Paris: Organisation for Economic Cooperation and Development – downloadable from the OECD website: http://www.oecd.org/dataoecd/11/41/34428351.pdf

OECD. 2011. Busan Partnership for Effective Development Co-operation. Paris: Organisation for Economic Cooperation and Development – downloadable from the OECD website: http://www.oecd.org/dac/aideffectiveness/49650173.pdf

OECD DAC Statistics

Oxford Policy Management. 2013. Tanzania Public Finance Management Reform Programme Phase III Completion Report. Report prepared for Sida Tanzania and Ministry of Finance of the Government of Tanzania. Oxford: Oxford Policy Management.

Republic of Tanzania. 2006. Joint Assistance Strategy for Tanzania. Dar es Salaam: Ministry of Finance – downloaded from www.mof.go.tz/mofdocs 16th May 2014.

Selbervik, H. 1999. Aid and conditionality – The role of the bilateral donor: A case study of Norwegian–Tanzanian aid relationship. A Report submitted to the Norwegian Ministry of Foreign Affairs by the Chr. Michelsen Institute. Oslo: NORAD – downloadable from www.norad.no

 Severino, J-M., and Ray, O. 2009. The End of ODA: Death and Rebirth of a Global Public Policy. Working Paper No. 167. Washington: Center for Global Development – downloadable from: www.cgdev.org

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Severino, J-M. and Ray, O. 2010. The End of ODA (II): The Birth of Hypercollective Action. CGD Working Paper 218, Washington, D.C.: Center for Global Development – downloadable from: www.cgdev.org

Sumner, A. and Tribe, M. 2011.The Case for Aid in Fiscally Constrained Times: Morals, Ethics and Economics. Journal of International Development. Vol 23 pages 782-801.

Tribe, M. 2013. Aid and Development: Issues and Reflections. Discussion Paper 13-09 Department of Economics, University of Strathclyde May – downloadable from http://www.strath.ac.uk/economics/departmentalresearch/discussionpapers/

Tribe, M. and Wanambi, N. 2003. Development Expenditure Management in Uganda. In Potts, D., Ryan, P. and Toner, A. (eds.). Development Planning and Poverty Reduction. London: Palgrave Macmillan: 148-163.

World Bank. 2014a. World Development Indicators 2014. Accessed from UK Data Service at http://discover.ukdataservice.ac.uk