1. June 2014 Tanzania: Country Assistance Strategy Progress Report World Bank Group

2. Development context in Tanzania has changed since 2011 Strong growth has continued (at 7%), but poverty reduction & job creation remain central challenges Discovery of large reserves of natural gas provides a major opportunity Aid is going down as proportion of public investment. Public investment is on the rise reflecting expected future gas revenue growth and sustained economic growth Policy implementation & service delivery outcomes are lagging, primarily because of constrained institutional capacity to invest productively and manage efficiently “Big Results Now!” initiative to focus on implementation and delivery in key result areas 2

3. Progress of CAS Implementation Mixed progress towards achieving the CAS outcomes— about half of the expected outcomes are on track Delays in implementation & approval of some operations are the main causes Review of WBG CAS progress is in line with the government’s own assessment of its implementation record 3

4. Proposed CAS Adjustments 4  Agriculture Productivity integrating small farmers into commercial value chains  Key Infrastructure: Power, central corridor railway and port; urban transport infrastructure and water supply  Leveraging natural gas  Business Environment & Competitive Industries  Building employable skills through vocational and higher education Productive investments for growth of labor-intensive industries Targeted Programs for reduction of extreme poverty  Scaling up targeted social safety net program to benefit the extreme poor through conditional cash transfer  Education Quality  Reducing maternal mortality (if a strong and credible plan materializes)  Improving government openness, accountability, public finance management, in the context of OGP commitments.

5. New Modalities of WBG Support Evolution in the approach to budget support: more focus and more result-based support Power & Gas Public Finance & Open Government Business Environment and Competitive Industries Pensions (TBC) Guarantee operations: gas production; power PPPs Possible IBRD financing: Dar Port; housing finance WBG integrated services (WB + IFC): PPPs in energy; agribusiness; housing finance Extend the current Country Assistance Strategy by 12 months to June 30, 2016 Front Loading IDA 17 (estimated $1.8 billion) 5

6. 6 Annex 1: Proposed Lending Program FY15-16 Proposed ProgramsIDAIBRDFY Program Focus ADJUSTMENT 1: Accelerating the creation of productive jobs Business Environment and Industry Development Business Environment and Industry Development for Jobs $50m FY16 Addressing policy and regulatory constraints to growth of labor-intensive industries Agriculture and Agro-business Southern Agricultural Growth Corridor of Tanzania Project (SAGCOT) $60m FY15 Focusing on integrating small farmers and fishing communities into high growth potential commercial value chains Agriculture Sector Development Program $220m FY15 Regional Fisheries$15m FY15 Energy and Extractives Power and Gas DPOs$150m FY15-16 Supporting the shift to a lower cost sustainable power sector and the sound management of gas and mining resources. Also support efficient and responsive renewable energy-based rural electrification PRGs: Gas and Electricity PPPs$100m FY15-16 Renewable Energy for Rural Electrification $50m FY15 Regional Tanzania-Zambia Interconnector $60m FY16 Sustainable Mining AF$25m FY15 Transport Infrastructure and Trade Port of Dar es Salaam (IBRD) $350mFY16 Focusing on reducing transport costs within and between Tanzania, Burundi, Rwanda, DRC, Kenya, and Uganda – by augmenting capacity and operational efficiency of maritime and lake ports (on Lakes Victoria and Tanganyika), augmenting capacity and extending the central corridor railway, and improving efficiency of trade (Great Lakes Initiative) Regional Central Corridor Intermodal Railway and Lake Ports $70m FY16 Regional Great Lakes Trade Facilitation $10m FY16 BRT Additional Financing$50m FY15 Contd…

7. 7 Annex 1: Proposed Lending Program FY15-16 Proposed ProgramsIDAIBRDFY Program Focus ADJUSTMENT 1: Accelerating the creation of productive jobs Urbanization Dar es Salaam Metropolitan Project$130m FY15 Supporting improving efficiency and productivity for greater competitiveness and job creation in urban areas, by extending transport infrastructure (leveraging the Rapid Bus Transit), by increasing access to urban water supply and sanitation and reforming the utility, and by accelerating housing development and associated construction industry growth Water Sector Development Program$220m FY15 Housing Finance $200mFY16 Sustainability and Climate Change Adaptation (multi-sector) Climate Resilient Sustainable Growth Project $50m FY16 Improving management of water and environment resources to expand and sustain irrigation, hydro-electricity, and national park tourism Technical and Higher Education Science and Technical Higher Education – Additional Financing $15m FY15 Supporting the fast-growing labor force for employability and higher productivity, through performance-based funding and PPPs for higher education and vocational education Technical and Higher Education$120m FY16

8. 8 Annex 2: Proposed Knowledge Program FY15-16 Economic and Sector Work FYProgram Focus Poverty AssessmentFY15 Updated analysis of poverty and inequality, with special focus on demography and migration Gas Economic Policy NotesFY15 Series of analytical work on natural gas, including macro- modelling, institutional framework, and local content Economic Geography of Tourism-led GrowthFY15 Impact of tourism led growth on resources management, and on job creation in tourism-related industries Policy Notes for New Government (Programmatic)FY16Informative notes on a few critical strategic policy areas Urbanization ReviewFY16Review rapid urbanization process in Tanzania Public Expenditure Review (Programmatic)FY15-FY16 Analytical pieces on fiscal policy issues to inform budget preparation and execution Systematic Country DiagnosticFY16 Overall assessment of development challenges and identify priorities to prepare for the CPF Economic Update Series (Programmatic)FY15-FY16 Bi-yearly updates on the state of the Tanzanian economy and special topic for broad audience Assessment of Vulnerable and Marginalized Groups FY16Analyze the presence of VMGs in project areas Technical Assistance PFM & Procurement ReformFY15Support capacity development for country fiduciary systems Commodity ExchangeFY16 Facilitate competitive and efficient trade of agricultural commodities Power Sector ReformFY15-16Support efforts to reform the electricity utility EITI Implementation SupportFY16 Support the government’s efforts to establish and implement regulations related to EITI ICT for TransformationFY16Help government functions and systems to move to e- Government; and facilitate access to data related to service delivery in key sectors