The Cost of Poverty

This paper was written at the end of 2004 at a critical time in the development of the education sector in Tanzania and of rapid changes in the wider picture of government / development partner relations - characterised by rapid moves towards harmonisation, the development of a Joint Assistance Strategy for Tanzania, and ‘Mkukuta’ the first of the ‘second generation’ Poverty Reduction Strategies. One of the most frequently quoted expectations of donor harmonisation is reduced transaction costs (TCs), as an early step towards increased aid effectiveness. This paper attempts to look at the different kinds of TC – administrative, tying and fiscal, to see how they play out through different funding instruments: projects, pooled fund support to the education sector, sector support, and what are their likely implications in the context of moves towards increased budget support.