October 30, 2014

Development projects in Tanzania threatened by aid cuts

Tanzania may have to postpone some of its development program following a decision by foreign donors to withhold aid.

Earlier this month, donors including the UK, Germany, and Japan suspended nearly US$500m in aid, around four-fifths of the group’s total commitment, following allegations of corruption in the energy sector.

Prime Minister Mizengo Pinda said this decision may in turn lead to banks refusing loans to the country.

Tanzania is planning to invest US$25.2bn in new ports, roads, and power stations as part of its goal to become a middle-income economy by 2025. The Prime Minister has not specified which projects could be suspended.

Economic development in Tanzania has been further hindered by power shortages and corruption. However, it is currently expected to become a leading gas exporter in the next decade, following the discovery of significant gas reserves in the country.

Our author Laura Zimmermann has written about the effect of infrastructure and construction projects on developing economies, and specifically their role in alleviating poverty.

This evening, IZA World of Labor and the London School of Economics will hold a conference to discuss the impact of aid on economic development. Our authors Klaus F. Zimmermann and David A. Robalino will take part in a panel discussion to assess the long-term impacts of aid, and whether it can pave the way for other sustainable models of development.

You can follow live updates from the event on our Twitter page, or by searching #DoesAidWork.

Related articles:
Public works programs in developing countries have the potential to reduce poverty, by Laura Zimmermann
Designing unemployment benefits in developing countries, by David A. Robalino