Public Service Reform Program in Tanzania (PSRP)

1. Public Service Reform Program in Tanzania (PSRP) Medium Term Pay Policy

2. Tanzania - Few Facts • Population: 32,128,480 • GNP per capita: $246 • Growth: 4.6% • Inflation: 7.9%

3. Tanzania an interesting case for pay reform • Classic collapse of the state • Cost containment phase • Serious effort at civil service reform incorporating structural reform • Addressing pay issue as a key feature of its civil service reform

4. What was the situation in Tanzania before the civil service reform (late 80s)? • Public expenditure framework expanded far beyond what GOT could afford • Public administration overstaffed/underfunded • Establishment/payroll control fell into disuse • Wage bill was out of control • Civil servants demotivated: • downward trends in real incomes • political interference in appointments and pay decisions • growing informality

5. What did the first phase of the reform achieve? (1993-1999) • Medium term pay policy approved • Total number of employees reduced from 355,000 to 260,000 • Pay structure rationalized/decompressed from 9:1 to 21:1 • 75 % increase in average public service pay in real terms • Control on employment, wage bill institutionalized • central personnel database • computerized payroll system • ad hoc and non transparent allowances consolidated in basic salary

6. The agenda for the Public Service Reform Program(2000-2004...)- Remaining issues • Workforce still too big for resources available • Cost containment issues not yet fully addressed • Capacity and performance undermined by low pay (informality continues) • The take home pay has not improved. Why? • New salary levels (1997) were below total monetary benefits enjoyed by the upper-middle and top levels • Changes in tax rates for personal income reduced net salary incomes • Annual salary adjustment too low

7. Afocus on the Public Service Pay Policy • Primary Policy Goal: • long term: to raise the minimum base salary to the level of the minimum living wage (MLW) • minimize use of non-salary benefits • Implement performance-related pay system • Medium Term Policy Objectives: • enhance pay for technical and professional staff • develop core professional and managerial cadre

8. The Pay Policy (cont’d) • Continue public service rationalization and efficiency measures • Promote rationalization of donor compensation for public servants • Improve personnel management practices

9. What has been done so far • Pay reform implementation study: • wage-bill to GDP ratio of 4.9% to be adopted over the medium term • linkages pay/performance based on transparent appraisal system • new grade structure (fewer bands, multiple steps) • Local authorities to be strengthened to manage resources and personnel functions • new approach to donor supplementation of salaries or “local cost compensation”

10. Local Cost Compensation or “donor supplementation” • Extent of donor supplementation: $50-100 million/FY99-00 • Effects of donor supplementation: • Unsustainable • Does not promote long term capacity • Reported as development expenditure therefore does not reflect true cost of delivering services

11. How does Tanzania intend to deal with this issue? A proposal • Scheme to complement pay policy and to support an accelerated pace of salary enhancement for managerial, professional and technical personnel.

12. Where does that leave Tanzania? • Pay reform is a slow process - need to target • Pay has improved but is still too low • How to finance local cost compensation? • HIPC? • MDRF? • Separate fund?