Incentive is a basic concept in economics, and indeed in life. Incentives can be negative or positive. Reaching your sales targets, if you are a vodacom sales manager, may lead to a bonus. Favouring a particular supplier in return for a ten percent kickback may lead to loss of your job (assuming you are caught – it is so common).
So how do incentives operate in the relationship between Tanzania and its donors? With the last post, we saw that the IMF was happy to recommend that the final tranche of the Poverty Reduction and Growth Facility (worth over two million Special Drawing Rights) be paid despite the, ahem, “alleged impropriety” of up to USD250 million going missing from the External Arrears Account of the Bank of Tanzania.
Similarly, the government of Norway recently announced that it would release TZS50 Billion in Direct Budget Support direct to the Tanzanian treasury. This equates to just under USD40 million or 225,000 Norwegian Kroner. This is about 35 percent greater than the amount they committed to giving in October of last year.
So, you make a certain commitment to support the Tanzanian government. You then discover that there is likely to have been theft of Tanzanian people’s money on a grand scale by officials of that same government, and the results of the promised inquiry are a long way away. You then decide to go ahead with your donation, and increase it by 35 percent. You then say
The disbursement was contingent upon Tanzania’s observation of the underlying principles of the agreement between Norway and Tanzania. The fundamental principles include good governance, fight against corruption, democracy, macroeconomic stability, and commitment to implementation of Mkukuta
Contingent on the fight against corruption?