World Bank (Washington, DC)

Tanzania: WB Supports Tanzania's Efforts to Strengthen the Business Climate and Make the Power Sector Financially Sustainable

press release

Washington — The World Bank's Board of Executive Directors has approved two operations from the International Development Association (IDA*) to help Tanzania strengthen its capacity to manage public expenditures, its business environment, and the financial sustainability of the power sector. Both operations aim to accelerate inclusive economic growth and pave the way for shared prosperity and reduced poverty.

The IDA credit of US$85 million for the Eleventh Poverty Reduction Support Credit (PRSC 11) which was approved today is designed to further strengthen the management of public finance and improve investment climate in select strategic areas. This is the final operation in a series of three annual programmatic development policy operations (DPOs) in support of Tanzania's implementation of its poverty reduction strategy, MKUKUTA II, complemented by the First Five Year Development Plan (FYDP I).

"The operation will help to create a better business climate to stimulate private investment and help mobilize larger domestic revenue," said Emmanuel Mungunasi, the World Bank Task Team Leader for the operation. "Benefits from growth will be shared more broadly across the country by creating a sound public expenditure policy through which revenues will be distributed."

The operation supports the Government of Tanzania's effort to build economic resilience as the country faces growing demand for investment to fill infrastructure gaps. The operation also helps the country build competitiveness for much-needed economic diversification and develop its geographical advantage as a coastal transit country for the region.

Last Friday, March 21, the WB Board approved the IDA credit of US$100 million for the Second Power and Gas Sector Development Policy Operation (DPO). The operation will help Tanzania improve financial sustainability of the power sector, and promote public-private partnerships for increasing generation capacity.

"Access to electricity remains very low at around 24 percent of the population and has only improved marginally over the past few years," said Yutaka Yoshino, the World Bank Task Team Leader for the operation. "By improving the viability of the power sector, the DPO will help the country expand access to electricity and improve the reliability of power supply which will boost private sector development and improve living conditions for households."

The Power and Gas Sector DPO has a particular focus on strengthening the policy and institutional framework for the management of Tanzania's natural gas resources, including facilitating good management of future natural gas revenues.

"The Power and Gas DPO series supports Tanzania's power and natural gas agenda, including the fiscal sustainability of the energy sector which is critical for improving productivity in the country," said Philippe Dongier, the World Bank Country Director for Tanzania. "The operation is also helping to strengthen governance of the power and gas sectors, as well as improving the business environment to attract private sector investments."

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