Public Service Reform Program in Tanzania (PSRP)

1
Public Service Reform Program in Tanzania (PSRP)

• Medium Term Pay Policy

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Tanzania - Few Facts

• Population 32,128,480
• GNP per capita 246
• Growth 4.6
• Inflation 7.9

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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

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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

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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 91
  to 211
• 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

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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

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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

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The Pay Policy (contd)

• Continue public service rationalization and
  efficiency measures
• Promote rationalization of donor compensation for
  public servants
• Improve personnel management practices

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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

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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

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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.

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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?