Scenario Analysis Concept Note, Zero Draft
1.
Introduction and Background
In the planning and budget process in Tanzania there are a number of sources of incomplete
information. This concept note focuses in particular on two of these sources. Firstly, in the
resource envelope there is uncertainty and unpredictability in external finance commitments,
especially through the General Budget Support modality. Secondly, only recently has reporting
and evaluation of intervention in different sectors of the economy been generated to facilitate
clear forward planning and prioritization decisions on resource allocations across these sectors.
The lack of clearly costed medium term programmes from Government has been identified by
Development Partners as an obstacle to making clearer medium term commitments. There is a
vicious cycle here since at the same time, for Government, the unpredictability of external
finance commitments has emerged as a major constraint to developing a more realistic medium
term expenditure framework.
In recognition of these issues, and as a result of ongoing discussions with Government, the World
Bank has developed a proposal for an analytical approach for mapping out scenarios for the
budget framework and MKUKUTA implementation assuming differing levels of external financing.
This analysis will require firstly the development of a sound basis for estimating the upper and
lower bounds of future resource envelopes. Secondly it implies the organisation of intervention
priorities in different sectors into a consistent and sustainable implementation strategy that offers
proposals for concrete interventions for scaling up the scope of the budget interventions
regardless of financing modality.
This proposal was included in the discussions on the PEFAR exercise for 2007. The PER Main
working group and the PER Macro working group considered these proposals and a Task Force
was formed, comprising members from MOF, MPEE, MEM, MOID and DPs led by the World Bank.
The Task Force commissioned MOF and MPEE to draft a concept note. This concept note lays out
a proposal for undertaking scenario analysis to resolve this impasse. Section2 lays out the
rationale for undertaking this analysis and Section 3 sets out the aims, results, outputs and
activities. Sections 4 and 5 deal with the methodology and timetable required to produce these
results.
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2.
Rationale
In order to achieve the goals and targets set out under Vision 2025, the MKUKUTA and the CCM
election manifesto there is a need to consolidate and accelerate the current growth path. The
medium term framework identifies three sets of challenges 1:
1. Macroeconomic stability and financing growth acceleration including: aid
dependency and absorption issues; domestic resource mobilisation; foreign direct
investment and public private partnerships
2. Prioritisation of interventions to accelerate growth, especially infrastructure
provision and quick wins; balance between recurrent expenditure and investment;
linkages and synergies between sectors; and clear criteria for balancing the sequencing,
spread and focus of MKUKUTA implementation
3. Governance including effective management of policy and resources; coordination and
coherence; effective decentralisation; improved regulatory environment; facilitating
private sector development
For Government, the proposed scenario analysis can contribute to each of these challenge areas
and offer solutions for the way forward. Scenario analysis offers planning based on sector
costing, priorities and past performance on the basis of shared criteria. This would facilitate
resource allocation decisions based on sustainable and consistent criteria across sectors and offer
realistic forecasts for MTEFs. For prioritisation, greater clarity on the overall resource envelope
regardless of financial modality could facilitate the sequencing and integration of MKUKUTA
implementation and offer a means of attaining balance between recurrent expenditure and
investment. This in turn could offer a strategy for scaling-up aid absorption within sustainability
and consistency criteria. The proposed process for scenario analysis would facilitate capacity
building and strengthening of Government planning, budgeting and reporting systems. More
realistic planning would give greater credibility to the Government and reduced uncertainty could
contribute to an improved business environment.
For Development Partners such scenario analysis would provide clarity on the implications of
uncertainty in external financing on planning, budgeting and implementation processes. This
could form the basis for clear aid strategies and greater alignment to Government systems across
all financing modalities. This could give input for the development of a framework for identifying
DP responsibilities in the aid relationship as individual agencies and as a collective.
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Planning and Budget Guidelines 2007
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3.
Aims and Results
The aim of the scenario analysis is:
To produce an analysis of alternative levels of MKUKUTA implementation for input into
the Planning and Budget Guidelines process and serve as the basis for a strategy for
scaling-up financing of the MKUKUTA, especially for external finance commitments
The expected results of the scenario analysis are:
1.
A robust, sustainable and consistent medium term financing strategy exists for the
implementation of MKUKUTA at national, cluster and sector level
2.
Government planning and budgeting systems are strengthened
In order to achieve these results the following outputs are necessary:
1.
Credible external financing scenarios are produced with upper and lower bound
projections of external projections developed on the basis of current MTEF predictions
2.
Alternative levels of MKUKUTA implementation are mapped out using consistency and
sustainability criteria and integrated at cluster level with sequenced priorities at national,
cluster and sector
The following activities and inputs are necessary to produce these outputs:
Activities to achieve output 1:
a) PER Macro uses current MTEF projections as the basis for developing robust financing
projections and scenarios in conjunction with PBG committee
b) PER Main develops sustainability criteria for cluster interventions for different scenarios
taking into account the macroeconomic framework
c) Finance ceilings are developed at cluster level under these criteria
Activities to achieve output 2:
a) PER Sector WGs review and revise existing costing scenarios and other relevant material
to determine medium term priorities
b) PER Cluster WGs review and synthesise sector inputs and develop criteria for cluster
consistency, and prioritise sector interventions under these criteria
c) PER Main reviews and synthesises the cluster inputs and prioritises interventions under
consistency criteria
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4.
Methodology
4.1
Who will be involved?
It is envisaged to use the Public Expenditure Review (PER) working groups to develop the inputs
into the scenario analysis. Recently, the structure, membership and content of the PER sector,
thematic, cluster and main working groups was clarified. This Task Force was proposed by the
PER Macro Working Group and approved by the PER Main Working Group Chairman. The Task
Force will direct the overall production of scenario analysis inputs, in coordination with PER Main
and PER Macro working groups. In addition to the PER structure the Task Force will liaise with
members of the Planning and Budget Guidelines Committee in order to ensure the compatibility
and usefulness of the scenario analysis.
4.2
Financing Scenarios
In order to complete the projections, the DP members of the Task Force will work with DPs to
establish a framework for making projections based on current MTEF projections. From this
analysis the Task Force will liaise with the Planning and Budget Guidelines (PBG) committee to
develop the ceilings for the upper and lower bound scenarios. The limits to aid absorption need
to be defined based on existing modelling work. The methodology for determining external
financing commitments scenarios using different projections will need to be defined. These
overall financing scenarios need to be defined in order to guide the work at cluster a sector level.
Generating the implementation scenarios will involve an extensive review of existing analysis,
reports and performance evaluation of sectors, cluster strategies and the overall medium term
focus of the budget. If the scenarios are to be generated in SBAS format the focus will be on
summary level.
4.3
Sustainability and Consistency criteria at sector level
In the MKUKUTA sector costing studies carried out to date 2 there is a great deal of information
on the sectors and projected costs for reaching stated targets, including some scenario analysis
in terms of interrelated outcomes, such as in the health sector. However there are different
criteria in each sector and for these studies and other related costing material to be useful for
scenario analysis there are some gaps that would need to be filled across the sectors in order to
respond to sustainability and consistency imperatives. A major task for this exercise will be to
identify sustainability and consistency criteria that can then be used at each level of integration.
At sector level these criteria will facilitate the identification of the interventions involved in
2
Energy, Agriculture, Roads, Water and Sanitation, Health, and Lands
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different levels of financing, and at cluster level to integrate sector strategies before the overall
priorities for each scenario is determined.
In terms of sustainability at sector level, the scenarios offered to date have been unconstrained,
and the quick wins identified are for immediate financing. This approach needs to be developed
to offer a sequenced set of interventions that could be followed depending on the level of
financing available. Furthermore, while financing gaps have been identified, these need to be
differentiated between investment and maintenance/recurrent expenditure. The sequencing and
prioritisation within the sector should be based on an understanding of the relationship between
development and recurrent expenditure in that sector and the sustainable path necessary. The
degree of aid dependence of the sector should be ascertained along with the
Capacity
constraints should also be examined, especially since in these studies there is little reference to
past performance in absorbing allocated resources and reaching economic and social targets. The
relationship between aid financing through basket funds and general budget support, potential
for domestic resource mobilisation will need to be developed.
4.4
Sustainability and Consistency criteria at cluster level
From a consistency perspective, the costing exercises were carried out as relatively isolated
exercises and therefore a synthesis is required at cluster level to ensure that cluster strategy
objectives are being met. The synergies and linkages that have been explored from within each
sector will need to be viewed from the cluster perspective and coherence between sectors’
priorities determined. All sectors would need to address costing under the different financing and
sustainability criteria and relate these to performance, capacity and priority issues. At cluster level
sustainability and consistency criteria need to be outlined to guide sectors in developing their
prioritisations based on a variety of issues including: efficiency, effectiveness, performance,
trade-offs, quick wins, priorities, scaling-up and capacity issues, financing gaps for both
investment and recurrent expenditure. Sector and cluster level activities should be guided by
criteria emanating from the umbrella of macroeconomic sustainability and medium term
objectives at the cluster and national levels. As outlined in ‘Section 2 – Rationale’ above, the
medium term focus highlights three sets of challenges: macroeconomic stability, growth
acceleration through infrastructure and governance. Along with aid absorption challenges and
constraints that face scaling up of expenditure, general overall criteria should be developed to
ensure consistency and sustainability of the overall scenario analysis when all of the sector and
cluster levels have been integrated.
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5.
Timetable
The timetable for activities is outlined according to the following timetable, with the process
beginning in April with the finalisation of the concept note and Terms of Reference by the Task
Force and agreement with PER Main Working Group.
No.
1.a
Element
 Task Force holds consultation with PBG on scenario analysis
Completed By
Mid- May
process
PER Macro
DPG
 PER Macro considers the concept note and develops of
MOF/PAD
projections data
MPEE
 PER Main considers the process and agrees on way forward
1.b
 PER Main agrees ToR for scenario analysis process; discusses
Late May
PER Macro
 Criteria discussed and agreed at PER CWGs and instructions
PER CWGs
given to sector leads
 Guideline ceilings for cluster strategies and consistency criteria
Task Force
PER Main
projections and agrees sustainability criteria
1.c
Responsible
Task Force
Early June
Task Force
developed and agreement of way forward with CWGs and
PER Main
Sector WGs
PER Macro
PER CWGs
2.a
 Sector Working Groups form task teams to review and
Mid July
synthesise existing material and produce costing according to
Task Force
Sector
consistency and sustainability criteria established by CWGs
WGs
PER CWGs
2.b
 Cluster Working Groups receive and review individual sector
End July
PER CWGs
outputs and integrate them according to cluster level ceiling,
PER Main
consistency and sustainability criteria
2.c
 PER Main Working Group with assistance from PER Macro
synthesises Cluster inputs according to different scenarios
 The Task Force and PER Macro develops an integrated
Task Force
August
Task Force
PER Main
PER Macro
scenario analysis according to overall ceilings, consistency and
PBG
sustainability criteria in consultation with PBG Committee
MOF
 The Scenario Analysis is presented to PER Main and PER
MPEE
CWGs before submission to PBG committee
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