Development Initiatives, where I briefly worked earlier this year, has a fascinating new report out. It’s called Investments to End Poverty, and aims to document as accurately as possible the size and nature of all the resource that are available for poverty reduction. Duncan Green at Oxfam calls it “a goldmine of killer facts and infographics“. I’m going digging, to see if I can find a few nuggets.
In particular, this post will mostly look at what the report says about Tanzania. But first, some more detail on the report as a whole.
The report details aid flows from traditional donors, of course, but also goes much further – looking at private investment, loans, remittances, aid spending by NGOs and non-traditional donors, for example. And as the chart below shows, these other sources of funds now dwarf aid (official development assistance, or ODA).
The report also notes, rightly, that international flows are only part of the picture. Domestic spending also has a huge role to play, most obviously in the form of government expenditure but also private spending by households and business.
“In 2011 government spending across all developing countries totalled $5.9 trillion, almost three times the estimated $2.1 trillion in international resources that developing countries received.”
However, the report doesn’t try to include detailed figures on domestic spending, even government spending, on the basis that it is “difficult to quantify”, “varies in different contexts and is poorly understood across countries.”
Incidentally, I fear this is one of the report’s weak spots. It claims to cover “all resources on poverty reduction”, but in practice it’s almost all about international resource flows. This is arguably misleading, ignoring the inconvenient fact that a large proportion of international resource flows has little or nothing to do with poverty reduction, while downplaying the biggest single resource for poverty reduction – domestic government spending in developing countries – from the bulk of its analysis. Worse, it carries the implied suggestion that reducing poverty is primarily the responsibility of developed rather than developing countries.
Nevertheless, the depth of detail in the report on international resource flows is remarkable. More than half the 300+ pages are taken up with double-page spreads of data and graphics on every significant donor, each type of resource flow, and several aid-recipient countries.
Which brings me to the purpose of this post – to look at what the report says about Tanzania.
1. Domestic resources matter most in Tanzania, remittances hardly at all
Here’s the gold. The chart below shows how four sources of finance have gone up and down over the past decade. For me, this is the most interesting chart on Tanzania in the report. (No coincidence, it’s also the only bit that includes data on Tanzania’s own government expenditure.)
The chart shows three important trends:
- Business is booming. International commercial resources (largely foreign investment) is fast catching up with aid.
- Tax 3 – 1 Aid. Domestic resources are more important than aid for poverty reduction in Tanzania, and becoming even more so.
- Remittances nil. Tanzania get’s almost nothing in private resource flows.
This third point is in stark contrast to much of the international conversation on development. Remittances (largely money sent home by Tanzanians living abroad) are almost irrelevant in Tanzania – private flows in the chart above. In many developing countries private remittances from citizens living and working abroad vastly outweigh aid flows (e.g. India, Senegal, Liberia), but in Tanzania this is not the case. In fact, the (UK) Guardian reported recently that four times as much money flowed out of Tanzania in private remittances ($274m) than into Tanzania ($80m) in 2011:
As a comparison, a similar amount was transferred out of Uganda that year ($291m), but over ten times as much ($855m) flowed into Uganda as into Tanzania.
2. The importance of aid in Tanzania is declining.
Ignore the spike in 2006, that’s an anomaly related to debt relief. Focus instead on how aid was worth 25% of Tanzania’s national income around 10 years ago, but has now dropped to less than half of that share.
3. Each donor has its own preferred aid modality
The US likes “mixed project aid” – money and commodities directed straight to projects. The World Bank (IDA) and African Development Bank’s support is almost entirely loans. European countries prefer grants, including General Budget Support.
4. More than a quarter of aid to Tanzania goes to health, less than 5% to education. Really?
I’m a bit doubtful of this one, on both counts. Perhaps PEPFAR, the Global Fund, etc. add up to an awful lot, but why so little on education, generally a favourite of donors? Perhaps 2011 was an unusual year?
Finally, some concluding thoughts
These charts come from the double-page spread on Tanzania, which is also available as a stand-alone pdf. The breakdowns of aid spending by donor, sector and type don’t say much that those familiar with the aid environment in Tanzania will not already be aware of. But I have rarely seen the trends on domestic revenue, aid, investment and remittances spelled out quite so clearly.
These are the trends that represent a fundamental change in Tanzania’s economy, and even in its politics. Donors, and aid, matter much less than ten years ago. Business matters more. And with the rise in domestic budget spending, there is a much bigger national cake to be fought over. What gets taxed, and by how much? And how is it spent? That’s politics.