FISCAL DECENTRALIZATION IN TANZANIA: ASSESSING THE IMPLEMENTATION OF THE FORMULA-BASED RECURRENT GRANT SYSTEM

Since 1999, Tanzania has been pursuing an active local government reform agenda based on the notion of "decentralization by devolution". Prior to the introduction of a formula-based grant system in 2004-2005, Tanzania relied on a discretionary system of local government allocations, in which local government allocations were determined in an earmarked and ad hoc manner by central government officials. During FY 2004-2005, formula-based recurrent sectoral grants were introduced for primary education and local health services, whereas formula-based grants were introduced for the remaining grant-aided sectors at the local level in 2005/2006. Among the policy objectives pursued with the introduction of the formula-based grant system was the desire to achieve a more objective and equitable allocation of resources among local governments. Interventions are needed at a number of levels in order to assure that the formula-based recurrent grant system is properly adhered to, and that the progress towards instituting a more objective, equitable, efficient, and transparent allocation of central-local resources is consolidated.