Public Sector Governance and Accountability Series: Budgeting and ...

The Budget and Its Coverage 69
BOX 2.2 Tanzania: A Promising Second-Generation Road Fund
Tanzania’s road fund in its current form came into operation in 2000. Its board
is composed of a chairman from the private sector; the permanent secretaries
of the Ministry of Works, Ministry of Finance, and Prime Minister’s Office for
Regional Administration and Local Government (PMORALG); a senior civil
servant; and several representatives of the private sector and of civil society
associations, who were appointed by the minister of works. The road fund has
its own dedicated secretariat.
More than 95 percent of the resources of the fund come from a fuel tax
(about US$0.08 per liter). The fund is mandated to use at least 90 percent of its
resources for maintenance and emergency repair. It allocates 63 percent of its
funding to TANROADS (the Tanzania National Roads Agency) for maintenance
of the national and regional roads, 7 percent to the Ministry of Works for development
projects on those roads, and 30 percent for local roads. The latter
funds are mostly passed through to the 100 or so local councils, according to a
formula agreed with PMORALG, which takes into account population, road
length, and division into equal shares. Of the local road funding, PMORALG
itself controls directly only 1 percent for administration and 3 percent for
development projects.
All these transfers are governed by performance agreements between the
road fund board and the implementation agencies. The agreements specify the
respective responsibilities of each party, policies, definitions, performance
indicators with means of verification, agency action plans, reporting requirements,
and budgets, giving details of works to be undertaken during the year.
Tanzania has made good progress, following the creation of a road fund
board and TANROADS. The road network has improved, and funding has
increased from T Sh 47.3 billion (about US$58 million) in fiscal year 2000/01
to T Sh 73.4 billion in fiscal year 2003/04 (about US$67 million). The performance
agreements between the road fund board and the implementation
agencies have contributed to improved accountability. Local roads now
receive significant funds for maintenance, and the country’s decentralization
has been enhanced by disbursing the funds directly to the local councils.
Because funds are still insufficient to maintain the roads, owing to a large
backlog of maintenance works, legislative revisions are under way—among
other things, to establish road boards at the national and regional levels to
cater specifically to development and management.
Sources: Andreski 2005; Gwilliam and Kumar 2002.
Tax earmarking
Different tax earmarking arrangements can be found (McCleary 1991):
A specific tax or fee for a specific end use, such as social security taxes and
gasoline taxes for highway investments