Financing the Urban Expansion in Tanzania

This paper seeks to develop estimates of
the net cost of the urban expansion in Tanzania. The paper
focuses on developing estimates of the cost of planning and
servicing land for new residential urban settlement. It does
not attempt to develop detailed estimates of the cost of
addressing infrastructure backlogs which would include the
retrofitting of basic urban infrastructure to unplanned
areas. On the revenue side, estimates of current spending in
urban areas takes into account urban Local Government
Authority (LGA) budgets as well as sectoral spending in
urban areas (e.g., in the water sector). A number of
assumptions were made to estimate both costs and revenues.
These assumptions have been set conservatively, therefore,
estimates of the net cost of the urban expansion are
considered to be on the lower end of the possible range.
These estimates can inform discussions on future investment
needs of urban LGAs. They may also serve as the basis for
analyzing options for financing each type of infrastructure;
for determining what might be financed publicly versus
privately, what might be financed with current funds versus
credit, what might be financed with local versus national
funds; and to determine the spatial arrangement of
infrastructure to maximize efficiency, equity and
sustainability. This paper focuses on estimating the cost of
providing a basic package of urban infrastructure to service
new residential neighborhoods. While urban population growth
will multiply demands for infrastructure spanning
commercial, industrial and residential areas of the city,
this paper focuses on residential areas only. Additionally,
while urban population growth can potentially lead to the
densification of existing (planned and unplanned) urban
areas as well as the growth of new urban settlements, this
paper focuses on infrastructure provision in new urban
settlements, with cost estimates based on the assumption
that these areas will be planned. This is a significant
simplifying assumption since in Tanzania the majority of
urban development is unregulated.