EU resumes budget support to Tanzania, releases aid funding

Reuters News
Posted: Apr 16, 2015 3:40 AM

DAR ES SALAAM (Reuters) - The European Union has released 53.26 million euros ($56.7 million) in aid to Tanzania as part of a budget support package that had been suspended over corruption allegations in the east African nation.

Tanzania, one of Africa's biggest per capita aid recipients, has been dogged by accusations of graft within the energy sector as it prepares to start large-scale natural gas production from its big off-shore discoveries.

The EU is part of a donor group that withheld nearly $500 million in budget support to Tanzania last year over corruption allegations tied to the government's payments to independent power producer IPTL.

"This disbursement follows the recent decision by budget support development partners to resume disbursements before the end of the current financial year," the EU said in a statement on its website.

"The majority of these payments had so far been withheld pending the developments on the IPTL case. The EU welcomes the steps the government of Tanzania and all relevant institutions have taken to handle this case."

Three senior cabinet members in President Jakaya Kikwete's government lost their jobs over the IPTL scandal, while the country's anti-graft watchdog has filed corruption charges against several public officials.

Investors have long complained that graft is one of the main reasons for the high cost of doing business in Tanzania.

The donor group, which comprises Finland, Germany, Britain, Norway, Sweden, Denmark, the European Commission, Ireland, Canada, Japan, the World Bank and the African Development Bank, said in March it had agreed to resume aid disbursements to support Tanzania's 2014/15 budget.

Tanzania said the delay in the release of donor aid had affected budget execution and weakened its currency.

(Reporting by Fumbuka Ng'wanakilala; Editing by Edith Honan and Crispian Balmer)