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Report No. P-978

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This report is for official use only by the Bank Group and specifically authorized organizationsor persons. It may not be published, quoted or cited without Bank Group authorzation. TheBank Group does not accept responsibility for the accuracy or completeness of the report.

INTERNATIONAL DEVELOPMENT ASSOCIATION

REPORT AND RECOMMENDATION

OF THE

PRESIDENT

TO THE

EXECUTIVE DIRECTORS

ON A

PROPOSED DEVELOPMENT CREDIT

TO THE

UNITED REPUBLIC OF TANZANIA

FOR A

THIRD HIGHWAY PROJECT

July 15, 1971

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INTERNATIONAL DEELOPMENT ASSOCIAT-ON

REPORT AND RECOMMENDATION OF THE PRESIDENTTC THE EXECUTIVE DIRECTORS

ON A PROPOSED DEVELOPM'ENT CREDITTO THE UNITED REPUBLIC OF TANZANIA

FOR A THIRD HIGHWAY PROJECT

1. I submit the following report and recommendation on a proposedcredit to the United Republic of Tanzania for the equivalent of US$6.5million on standard IDA terms to help finance a Third Highway Project.

PART I - THE ECONOINY

2. Since attaining independence in 1961 Tanzania, under the out-standing leadership of President Nyerere, has had an enviable record ofpolitical stability. The absence of tribal and racial strife has enabledthe country to devote much time and thought to the formulation of medium-and long-term development objectives and also to apply a considerable pro-portion of its meagre resources to development.

3. Soon after its independence Tanzania declared its intention toestablish a socialist society. In the furtherance of this objective, thecountry has steadily enlarged the scope of the public sector and showndetermination to secure a commanding role for the Government in the economy.The ever-wqidening role of the Government has inevitably eroded the role ofprivate enterprise in many activities. The Government is aware of thedislocation of economic life resulting from some of its policies but doesnot consider the price too high when viewed against the background of itssocio-economic objectives. Considerable emphasis has been placed onausterity and self-help, and there has been a conspicuous absence ofprojects which are mainly prestigious. A serious effort has also beenmade to bring about a more equitable distribution of incomes. Wages oflow income workers have steadily risen - although a recent policy haslinked this to productivity increases - while politicians, ministers,high-placed civil servants and employees of public corporations have hadto accept cuts in emoluments.

4. For many years the Government has been particularly concernedto improve the living standard of the rural population. This has not beeneasy, since Tanzania is a large country and the majority of the people liveon scattered holdings on the periphery. The absence of population concen-trations makes it difficult to provide social or economic services, suchas health services, education, extension services, water supplies andfeeder roads. To help remedy this situation, the Government launched aprogram of village settlements during its First Five-Year Plan (1964-69),aimed at bringing about a regrouping of the rural population. This programproved expensive and was abandoned at an early stage of the Plan.

5. During the present Plan (1969-74), the Government has formulatedan ambitious, but very different, program to encourage the rural populationto live together in newly formed villages. These villages, known as Ujamaavillages, are to be established on a voluntary basis and operated by thevillager themselves. UJjamaa villages are based on the extended familyprinciples which have for long governed traditional African life and requirethat members of the group perform tasks such as constructing dwellings,clearing and cultivating land and harvesting within a cooperative frame-work and share the goods held in common. Apart from extending socialistideas and organization to the countryside, Ujamaa villages provide the mosteconomical and, perhaps, the only means of bringing a variety of essentialservices to the rural population.

6. The fcrmation of Ujamaa villages proceeded slowly at first buthas lately been gathering momentum. The initial suspicion of people isgiving way to greater acceptance and during the first two years of thePlan some 2,500 villages were established. The response to the Ujamaamovement has not been uniform throughout the country; progress has beenparticularly slow in areas where peasant farmers are already engaged inthe production of well-established cash crops and hence often do not feelthe necessity to change to a new and untried way of life. WThile theGovernment is anxious to speed up the formation of Ujamaa villages, itrecognizes that the movement will gain ground and be successful only ifthe principle of voluntary association is preserved. The process ofbringing the bulk of Tanzania's rural population into Ujamaa villages willtake a long time. In the meantime, it is necessary to monltor the programcarefully and assess its costs and benefits.

7. In its external relations Tanzania has pursued a 'non-aligned'policy and has good relations with both western countries and communistcountries in Europe and Asia. The major proportion of external assistanceto Tanzania has been and continues to be provided by western countries.At the same time, small amounts of aid have been obtained from Russia andother countries in eastern Europe. In addition, a large project to estab-lish a rail link between Landlocked Zambia and the Tanzanian port of Dares Salaam is being financed by the People's Republic of China, which hasalso provided finance for other projects in Tanzania.

8. Following the military coup in Uganda in January 1971, whichresulted in the replacement of President Obote by General Amin, and thesubsequent refusal by Tanzania to recognize the new Ugandan Government,some strains have developed in the East African Community. Since thattime, the East African Authority (the highest executive organ of theCommunity comprising the Heads of State of the three member countries) hasnot met and the various Ministerial CouLicils of the Community have alsonot been convened. Pending a resolution of the political impasse, thethree countries have shown a willingness to seek a modus vivendi for en-suring continuity in the day-to-day operations of the Community Secretariatand the common services. Routine operations requiring the cooperation of

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the three countries have been conducted through informal contact. In thisway, a major disruption of the Community's activities has so far beenavoided. In addition, despite the differences between the Heads of State,the East African Legislative Assembly met in May 1971 and approved the1971/72 budgets of the Community Secretariat and other institutions. None-theless, as recent reports have underlined, the political difficultiesbetween Tanzania and Uganda have not yet been resolved and continue tointerrupt the Community's progress.

9. An economic mission from the Bank visited Tanzania during Augustand September 1969 and its report "The Economic Development and Prospectsof Tanzania" (No. AE-7 in two volumes) was distributed to the ExecutiveDirectors in March 1970. The mission reviewed Tanzania's Second Five-YearPlan which was launched in July 1969 and concluded that the targets of thePlan were generally realistic and that the programs were worthy of externalsupport. It was the mission's assessment that Tanzania's capacity to im-plement the Plan was now significantly better than during the First Planbut that a resource constraint might appear if external assistance fellshort of the required amounts.

10. Tanzania's Second Five-Year Plan envisages an overall investmentof Sh 8,055 million during the fiscal years 1970-74. The Bank's 1969economic mission concluded that investment during the Plan could amountto about Sh 7,430 million - some Sh 600 million less than the Plan target -with most of the shortfall occurring in the private and parastatal sectors.The mission estimated that the Central Government's development program(including contributions to parastatal organizations) could amount to aboutSh 3,380 million, of which internal sources - mainly recurrent budgetsurpluses and borrowTing - would provide about 55 percent and externalsources the rest.

11. During the first year of the Plan, the Central Government'sdevelopment expenditure amounted to Sh 623 million which, on the average,is close to the Plan target. In fiscal year 1971, however, developmentexpenditure rose steeply to Sh 850 million. During these two years ex-ternal aid amounted to Sh 450 million or only 30 percent of developmentexpenditure, substantially short of the Plan's expectation that it wouldamount to about 45 percent of the total. Hence there has been considerablepressure on internal resources, resulting in a high level of borrowing fromthe Central Bank and a consequent rundown in foreign assets. In order toprevent an aggravation of the situation, the Government has decided tolimit development expenditure in fiscal year 1972 to about the levelattained in 1971.

12. An economic and preinvestment studies mission visited Tanzania,Kenya and Uganda during October and November 1970, with the principalobjective of preparing a program of preinvestment studies to provide afirm basis for the investment programs. Volume I of the mission's report(No. AE-16) which deals with recent economic developments within the East

African Community, Kenya, Tanzania and Uganda was distributed to theExecutive Directors on July 14, 1971; basic data on the economy are givenin Annex II. The report confirms that Tanzania has experienced difficultyin raising resources on an adequate scale to finance its investment programand that increased external assistance is required if the rising tread ofdevelopment expenditure is to be maintained. The draft volumes of thereport dealing with preinvestment studies have recently been discussed withthe governments and it is expected that these volumes will be distributedto the Executive Directors by mid-August.

13. At the end of 1969, Tanzania's outstanding external public debt,including undisbursed amounts, was $347.0 million equivalent (including$72.1 million representing a notional one-third share on account of theEast African Community Corporations). Interest and amortization paymentson account of Tanzania's own debt amounted to $14.7 million equivalent in1969 while the notional share of payments on account of the Coiporationswas a further $5.4 million. Together these payments absorbed 7.4 percentof the foreign exchange earnings during the year. Although Tanzania hassucceeded in raising considerable amounts locally to finance development,its low per capita income and the relatively limited prospects for itspredominantly agricultural exports justify lending on concessional terms.

PART II - BA1NK GRLOUP -- IT,h TO TYiNZJATIA

14. Tanzania joined the Bank Group in 1962. Beginning with an IDAcredit for education in 1963, Tanzania has to date received a total ofnine credits and three Bank loans amounting to $102.9 million. In addition,Tanzania has been a beneficiary of six loans totalling $162.8 million whichhave been extended for the cevelopment of common services operated on aregional basis for the three member countries of the East African Community(EAC), Kenya, Tanzania and Uganda. Sur,mary statements of the Bank andIDA's assistance to Tanzania and the East African common services are inAnnex I.

15. Taking account of the lending for the East African common serv-ices, about half of the Bank Group's assistance to Tanzania has so farbeen for the improvement of transportation, including railways, highwaysand harbors. The remainder of the Group's support has been directedtowards the development of agriculture, education, power and telecormuni-cations. A large part of the lending to Tanzania, both directly and throughthe corporations of EAC, has occurred in the past three years.

16. Reflecting the central place of agriculture in the Tanzanianeconomy and the heavy emphasis placed by the Government on the developmentof the rural sector, it is expected that our assistance to Tanzania in thecoming years will to an increasing extent be aimed at raising agriculturalproduction. A smallholder tea development project is now in an advancedstage of appraisal, and a cotton project and a second livestock projectfor which Bank Group assistance will probably be requested are under

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preparation by the Government irith assistance from our Permanent lNissionin Eastern Africa (PMEA). Apart from such directly productive projects,we expect that, as in the case of the proposed Third Highway Project, ouroperations in other sectors will also be largely geared to serving therural community.

17. Although delays have occurred from time to time in the executionof Bank and IDA projects in Tanzania, performance has for the most partbeen satisfactory and there are no serious current problems. Reconstruc-tion of the 880 kIn of primary roads included in the First Highway Project(Credits Nos 48 TA and 115 TA) was completed in 1970, and work on theSecond Highway Project (Credit No. 142 TA and Loan No. 586 TA), wJhichconsists of the reconstruction of a 510 km section of the Tan-Zam Highway,is progressing satisfactorily. With the Association's agreement, therights and obligations of the National Development Credit Agency (NDCA)under the Agricultural Credit Project (Credit No. 80 TA) and the Flue-Cured Tobacco Project (Credit No. 217 TA) were transierred to the newiTanzania Rural Development Bank (TRDB) with effect from May 1, 1971.

18. IFC's only investments in Tanzania to date, totalling $4.4million, were made in Kilombero Sugar Company in 1960 and 1964. Thiscompany encountered financial difficulties and in 1969 IFC and otherinvestors sold their interest in the company to the Government. Dis-cussions have recently been taking place regarding the possibility of IFCinvesting in a tourism venture in Tanzania.

PART III - THE PROJECT

The Transport Sector

19. 'rhe transport sector in Tanzania presently consists of about34,000 km of roads, of w7hich the bulk are low standard gravel or earthroads; 2,500 km oi railway operated by the East African Railways Cor-poration (EARC); three ocean ports operated by the East African HarboursCorporation (EAHC), of which the port at Dar es Salaam is the most imn-portant; coastal shipping; and regularly scheduled air services. Thedevelopment of the sector is dictated by the need to serve the productiveactivities and population widely distributed around the country, to facil-itate the movement of Tanzanian exports and imports to and from the porbsand to accommodate the transport needs of neighboring landlocked coun-tries - Rwanda, Burundi, the Eastern part of Congo (Kinshasa), and to anincreasing extent Zambia.

20. For several decades, transport policy was directed almost ex-clusively toward the requirements of external trade and emphasis wasplaced on the development of the East African Railways, which now forms

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the backbone of the transport sector and carries the bulk of heavy, 'Longdistance traffic. With assistance from the Bank, substantial expenditurehas been incurred in recent years in modernizing and expanding the EastAfrican Railways in accordance with the growth of traffic, and this programof development is continuing.

21. In the past the East African Railways were protected from roadcompetition by restrictive licensing of truck operators. Under the ar-rangements for Loan No. 428 EA of September, 1965 for the former EastAfrican Railways and Harbours Administration, the C-overnments of Kenya,Tanzania and Uganda agreed to carry out a study to assist them in formu-lating sound regulatory, investment and pricing policies for all surfacemodes of transport in the three countries. This study, financed by UNDPwith the Bank as executing agency, concluded that competition between roadand rail of'fered the more economic solution to coordination between thetwo modes of transport. It recommended that iARC's rate and tariff struc-ture be revised to prevent any uneconomic transfer of traffic from rail toroad transport and that restrictive road licensing practices then beabolished. Under the terms of Bank Loan No. 674 EA to EARG signed in INay1970, the three Govrernments have agreed to implement the study's mainfindings and this is in progress.

22. The railway system in Tanzania is now undergoing a further majorextension through the construction, wTith finance from the People's Republicof China, of the Tanzania-Zambia Railway which, though basical'y designedto carry Zambian transit traffic, should help to stimulate agriculturaland industrial development in the southern part of Tanzania. A 500 kmsection of this railway, between Dar es Salaam and Nlimba, is scheduledto come into service by the end of 1971. Plans are in hand to provide thenew facilities at the port of Dar es Salaam which will be required tohandle the additional traffic generated by the new railway when it becomesfully operational, which is currently expected to occur in early 1975.The Bank has been approached by EAIC for another lean to help finance theproposed port development.

23. In addition to the extension and modernization of the railwaysystem, a substantial program was initiated during Tanzania's First Five-Year Plan to improve primary and secondary roads in order to foster regionaldevelopment. During the Second Five-Year Plan, particularly the firstthree years of it, the highway program will continue to be dominated bytrunk route development, particularly by the reconstruction of the Tan-Zam Highway. Nonetheless, it is hoped during the Second Plan period toachieve a better balance betwreen the development of trunk routes and othertypes of roads and a careful review is currently being made by the Govern-ment of the priority of all proposed expenditures on highways with thisin view. In accordance with the importance attached by the Government todeveloping the rural sector, increased emphasis is being given to roadswhich will assist agricultural expansion.

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24. Highway planning is carried out by the Planning Divrision of thejilnistry of Communications, Transport and Labour (C0C1;'5RXS) in close con-tact wnith the Roads and Aerodromes Division (RAD) of CWiWMORKS. The RAD isresponsible for design, construction and maintenance of primrary ancsecondary roads and has recently begun to take cover responsibility forfeeder roads frcm the District Councils. During the past few years a lackof competent and experienced engineers has adversely affected COW1FORIKS'performance, especially in road maintenance and planning. However, anumber of additional staff have now been recruited, partly under the Staffingand Training Program initiated under the First IDA Highway Project, andbilateral technical assistance from Canada has further eased the staffingsituation. Road maintenance is a continuing problem but it is hoped thatmajor steps to deal with this will be initiated following a study of roadmaintenance requirements in Tanzania which is currently being carried outwith financial assistance from the United States. The Bank has indicatedits willingness to consider providing finance for a road maintenance projectbased on the outcome of this study.

25. In accordance with Tanzania's development philosophy, the role ofthe Government in the provision of road transport services has been extendedover the past few years. A Government-onmed National Transport Companyhas been created to control Zambia-Tanzania Road Services, which providesthe bulk of road transport services for Zambian exports and imports viaDar es Salaam, and the Dar es Silaam lvHotor Transport Company, wihich providesurban bus services. The Gcvernment has tentatively proposed to expand thaactivities of this organization into the field of inter-regional roadtransport by taking over existing long distance operations now largelyowned and operated by private interests, but no finm policy has yet evolved.Financing has been requested from UIDP for a study of the implications ofthe proposed nationalization policy and the most suitable course of actionwith respect to the developnent of the National Transport Company.

26. The Bank Group's assistance to the highway sector in Tanzania hasso far been concentrated upon the development of primary and secondaryroads. As already indicated, the First Highway Project consisted prin-cipally of the reconstruction of six sections of main roads in variousparts of the country. The Second Highway Project, which is being financedjointly wiUl SwTeden, provides for the reconstruction of a section of theTan-Zam Highway; the reconstruction of other parts of this road is beingfinanced by the United States. Because of the continued low standard ofmuch of Tanzania's main highway system and the growth of traffic, furtherimprovements to certain major road links are necessary. At the same time,increasing attention is being given by the Bank and other agencies to theneed to improve minor roads serving agricultural districts in order tosupport the Government's endeavors to promote rural development.

-8-

The ProJect

27. A report entitled "Appraisal of the Third Highway Project inTanzania" is being circulated separately. A Credit and Project Summaryis provided in Annex III.

28. The project, which was partly prepared through studies financedunder the First Highway Project, was appraised in the field in December1970. Negotiations were held in lWashington in HIay 1971. The TanzanianGovernment was represented by Messrs. I.M. Kiaduma, Principal Secretary,COTIJORKS; R. Korosso, Senior Assistant Secretary, Ministry of Finance;H. Singh, Engineer-in-Chief, Department of Wlorks and. Supplies, CCNJORKS;R.M. i'Iinja, Engineer, C024CRKTS; and E.F. Kapinga, Attorney General'sChambers.

29. The project comprises:

(a) the paving of a 200 km section of the main Southern TrunkRoad between 1Utwara and Masasi, part of wJhich was improvedto gravel standard under the First Highway Project;

(b) betterment of 475 km of agricultural feeder roads in theGeita district and Iviara region in Northern Tanzania throughthe creation of departmental units and the provision ofstaff and equipment for them;

(c) technical assistance to direct and supervise the aboveworks, train local staff required for the betterment unitsto be established under (b), and continue the staffing andtraining program in COMOCRKS initiated under the FirstHiighway Project; and

(d) engineering and other studies for the preparation of thepresent project and a further 250 km of roads wihich seemlikely candidates for inclusion in future highway projectsin Tanzania.

30. The works included in the project, though varying considerablyin their character, are all geared to the general objective of stimulatingagricultural development. The Ntwara-Masasi road forms a part of theregional highway linking the port of Mtwara and the entire southern fringeof the country inland to the Tan-Zam Highway near Mbeya. Most of thepresent traffic is agricultural and is principally concerned writh themovement of the substantial cashew nut crop grown in the area. The feederroads in the Geita district provide an outlet for the district's importantcotton crop, while the Mara region roads are essential to a milk-producingscheme established recently with Danish technical and financial assistance,

31. The main economic benefits from the project will be savings inroad maintenance and vehicle operating costs, increased local capacity toprovide betterment and maintenance services for rural roads, and agri-cultural development induced by the roads. The estimated economic rates

of return on the major elements of the project range from 14 percent to28 percent. The project is not expected to give rise to any serious

ecological problems.

32. The total cost of the project is estimated at US$9.5 millionequivalent. The proposed credit of US$6.5 million will cover the esti-mated foreign exchange component representing about 68 percent of thistotal. About US$163,000 of the credit would be provided for retroactivefinancing of studies undertaken in connection with the preparation of the

project. The local currency component of the project cost amounting toUS$3.0 mil:Lion woulc be financed by the Government.

33. The RhD, assisted by qualified consultants, would be responsiblefor the execution of the project. The RAD is also responsible for exec-uting the First and Second Highwifay Projects and hence is fam.liar with the

Association's procedures.

34. The contract for improvement of the Htwara-Masasi road would beawarded in accordance with the Association's guidelines for internationalcompetitive bidding. The execution of these wiorks would be supervised by

consultants.

35. The betterment w-forks for the feeder roads in the Geita district

and Mara region, whlich are small-scale and scattered and would be of little

or no interest to contractors, would be carried out by units to be estab-lished in the two areas using departmental forces. Procurement of equip-

ment and materials required by these two units would comply with theAssociation's guidelines for international competitive bidding. Gon-sultants wQould be engaged to direct and supervise the activities of thebetterment units and would train local staff to take over the operationof the units in due course. Once the condition of the selected roads hadbeen improved, the equipment would be utilized for betterment works else-where and general road maintenance. The project would thus enable Tanzaniato build up a permanent capacity to plan, execute and maintain rural roads.The lessons learnt from these pilot betterment units would assist the

Government in setting up the countrywide maintenance/betterment programwhich is now under preparation.

36. In addition, in order to prepare the next group of roads forconsideration for Bank Group financing, consultants would be engagedunder the project to undertake feasibility studies and detailed engineerirgof about 250 km of high-priority roads. These roads would be selectedon the basis of a general review of priorities in the highway sectorpresently being carried out by the Planning Division of CCI;1,ORKS and dueto be completed by the end of October 1971.

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PART IV - LEGAL L\ISTRUIENTS AND AUTHORITY

37. The draft Development Credit Agreement between the UnitedRepublic of Tanzania and the Association, the Recommendation of theCommittee provided for in Article V, Section l(d) of the Articles ofAgreement and the text of a Pesolution approving the proposed Develop-ment Credit are being distributed to the Executive Directors separately.The draft Development Credit Agreement conforms to the normal patternfor credits for highway projects.

38. I am satisfied that the proposed Development Credit wouldcomply with the Articles of Agreement of the Association.

PART V - RECOI'MENDATION

39. I recommend that the Executive Directors approve the proposedcredit.

Robert S. iscNamaraPresident

Attac'nments

Washington, D.C.July 15, 1971

ANTNEX IPage 1

TANZANIA

Statement of Bank Loans and IDA Credits to Tanzaniaat June 30, 1971

Loan or (Amount in US$ million)Credit No. Year Borrower Purpose Bank IDA Undisbursed

45 TA 1963 Tanzania Education 4.648 TA 1964 Tanzania Roads 14.080 TA 1966 Tanzania Agricultural

Credit 5.0518 TA 1967 TANSCO Power 5.2 .8115 TA 1968 Tanzania Supplementary

Roads 3.0 1.0132 TA 1968 Tanzania Ranch Devel-

opment 1.3 o.8142 TA 1969 Tanzania Roads 15.5 3.4586 TA 1969 Tanzania Roads 7.0 7.0149 TA 1969 Tanzania Education 5.0 4.9217 TA 1970 Tanzania Tobacco 9.0 9.0715 TA 1970 TANESCO Power 30.0 29.8232 TA 1971 Tanzania Education -3.3 3.3

Total (less cancellations) 42.2 60.7

of which has been repaidto Bank and others

Total now outstanding 42.2

Amount sold: 0.1of which has been repaid 0.1

Total now held by Bankand IDA 42.1 60.7

Total undisbursed 37.6 22.4 60.0

ANNEX 1

Page 2

Statement of Bank Loansl for Comnion Services in East Africaat June 30, 1971

(Amount in US$ m.illion)Loan Nqo. Year Borrower Purpose Bank Undisbursed

110 EA 1955 East African RailwaysCorporation 2/ Railways 24.0

428 EA 1965 East African RailwaysCorporation 3/ Railw-ays 32.4

1966 East African 1HarboursCorporation 3/ Harbors 5.6

483 EA 1967 East African Posts andTeleconimnications Te'Lecommuni-Corporation 3/ cations 13.0 1.3

63B EA 1970 East African HarboursCorporation Harbors 35.0 30.2

674 EA 1970 East African RailwaysCorporation Railways 42.4 41.8

675 EA 1970 East African Posts andTelecommunications Telecommuni-Corporation cations 10.4 10-4

Total (less cancellations) 162.8

of which has been repaidto Bank and others 17.4

Total now outstanding 145.4

kaount sold: 24.4of which has been repaid 17.3 7.1

Total now held by Bank 138.3

Total undisbursed 83.7 8L7..

1/ Guaranteed jointly and severally by Tanzania, Kenya and Uganda.2/ Loan made originally to East African High Commission and also guaranteed

by United Kingdom.3/ Loan made originally to East African Common Services Authority.

ANNEX IIPage 1

TANTZANIA

BASIC DATA

h~rea: 937,062 square km (including 53,483 square km of water area)

Population: (1970) 12.9 millionRate of Growth: 2.7 percent, p.a.Population density: 15 persons per square kon

Political Status: Independent since Decem}ber 1961

Gross Lbmestic Product at Current Factor Cost (1969): Sh 7,819 million, of which

Monetary Product: Sh 5,557 million (71.1 percent)Non-monetary Product: Sh 2,262 million (28.9 percent)Per Capita GDP (1969): Sh 606 (US$ 85)

Annual Rate of Growth (Constant 1966 prices): 1969 1966-1969

Total GDP 3.1 4.7i4bnetary 5.7 6.1

Percent of Total GDP (Current prices, 1969):

Agriculture 39.5jiining 2.0

Manufacturing 7.6Services including Commerce

and Transport 45.2Other Sectors 5.7

rercentage of EXpenditure of GNP at Current 'Karket Prices: 1969 1966-1969

Gross Capital formation 16.5 16.9Consumption 84.2 84.4Excports of Goods and Services 23.8 25.9Tliorts of Goods and Services 24.5 27.2

Nloney and Credit: (Sh million)1969 1968

Currency in circulation 605 529Commercial Bank deposits /1 1,596 1,289Commercial Bank Advances 71 1,093 899

A End of year.

ANNEX IIPage 2

IH5blic Sector 0(erations: (Sh rillion)1969/70 1968/69

Central Government:Recurrent revenue 1,535 1,257Recurrent expenditure 1,435 1,186

Surplus on Current Budget 100 71Development Expenditure 623 L60

Balance of Paymrients /a: (Sh million)1970 1969

Merchandise exports 1,808 1,7541-Lerchandise imports 2,360 1,790Net invisibles 80 65

of which net factor income -25 -21Balance on current account -392 108Net capital inflowf 485 132

Commodity concentration of exports 1969 1964(W)

Sisal 10 29Cotton 14 13Coffee 16 14Diamonds 11 9

Foreign exchange holdings(Bank of Tanzania) - February 28, 1971: Sh 365.3 million (US $ equivalent

51 million)

ThF Position: (US . Million)

Quota 32.0Dawalings _Allocation of SDR's 9.9if.inus Drawings

(August 1970) 3.5 6.4

External Public Debt:(US $ Million)

December 31 December 311969 1964

Total debt outstandingTanzania debt 274.9 168.5One-third of EAC debt 72.1 62.5

Total debt serviceTanzania debt 14.7 5.1One-third of EAC debt 5.4 4.2

Debt service ratio, percent 7.4 4.0

,a Includes Zmzibar.

AINNEK TIlPage 1

TANZATIA

CREDIT AND PROJECT SUTIARY

Borrower: United Republic of Tanzania.

Amount: US$6.5 million equivalent.

Terms: Standard IDA terms.

Project: THIRD HIGHW;AY PROJECTImprovement of 200 km of primary roads and 475 km ofagricultural feeder roads; technical assistance forproject supervision and training of local staff; andengineering and other studies for preparation of theproject and for the development of a further 250 kmof high priority roads.

Cost of (US$ '0OOs)Poject: Component Local Foreign Total

Construction 1,546 3,284 4,830Equipment, Materials

and Labor 472 1,005 1477Supervision and Training 340 643 983Preinvestment Studies 182 657 839

2,54O 5,589 8,129

Contingencies 483 901 1,384

Total Project Cost 3,023 62490 9,513

Financing: The credit would finance the foreign exchange componentof the project, amounting to 68% of total project costs.The local currency component would be provided by theBorrower.

Procurement International competitive bidding for awzard of contractArrangements: for primary road improvenment. Also for supply of equip-

ment and materials required for betterment of feederroads, which would be carried out using departmentalforces.

ANNEX IIIPage 2

Estimated Fiscal YearDisbursements: PS$ 'oos)

1972 1973 1974 1975 Total

3W) 2,750 3,190 200 6,500

Rate of Economic rate estimated at 14-28%.Return:

Map: A map is attached of Tanzania's highway system, indicatingthe proposed project.

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HIGHWAY SYSTEM tcJ Tsksyu

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