US aid agency the MCC announced it would not go ahead with a new aid agreement, which was due to be signed this year.
According to an MCC statement carried on the Tanzanian government website, the deal would have provided $470m towards the “power sector, including investments in infrastructure as well as policy, regulatory and institutional reforms”.
A previous five-year deal signed in 2008 released $700m in financial support to improve energy, water and transport infrastructure.
The cancellation of the deal is likely to cause a serious headache for President John Magufuli (pictured below), who has been widely praised for his efforts to tackle corruption since coming to power last November.
The Tanzanian government has said the decision by American agency Millennium Challenge Corporation (MCC) to cancel $472 million (about Tsh1 trillion) in funding to the country did not come as a surprise.
Finance Minister Philip Mpango told The Citizen that the government had anticipated the move and was prepared with alternative funding.
The MCC funding was meant to implement various development projects in energy, road and water sectors.
The MCC board of directors which sat in Washington on Monday voted to suspend the agency’s partnership with the government of Tanzania over the Zanzibar election and application of the Cybercrimes Act run counter to this commitment.
Dr Mpango said the State is currently focussed on sourcing funding for its projects from domestic sources.
“We weren’t surprised at all because we were prepared for whatever the outcome. We will implement those project using local sources of fund and the support of from other development partners,” he said.
He added that since President John Magufuli took office, the government has put emphasis on revenue collection with the aim of cutting dependence on donor funds to implement of development projects.
However, the government said it is still waiting for official communication from MCC to determine the way forward.
“After receiving the official communication we will engage in discussion with MCC in order to know why the board has made that decision and what we (the government) should do in order to be reconsidered,” said Dr Mpango.
Meanwhile, Foreign Affairs and International Corporations minister Dr Augustine Mahiga said the government was disappointed by the MCC decision.
Dr Mahiga said “energy sector is very important for development of the community and now that MCC has suspended its funding wananchi most of projects to supply energy especially to rural areas will suffer.”