Tanzanian Aid Back on Track After Air Control System Row

Clare Short has released a £10m grant to the government of Tanzania which was frozen during the cabinet row about the sale of a £28m military air traffic control system to one of the world's poorest countries.

Earlier this week the Tanzanian president, Benjamin Mkapa, gave Ms Short guarantees in Dar es Salaam that no more British aid money would be wasted on white elephant projects.

Ms Short, the international development secretary, lost a cabinet battle to refuse BAE Systems an export licence after Tony Blair stepped in to back the sale.

She was vindicated last month when an independent report commissioned by the World Bank described the equipment as "dated technology and said that Tanzania could have bought a better system for a fifth of the price.

After extracting promises from Mr Mkapa that future public spending decisions would be carefully scrutinised, Ms Short unblocked the outstanding payment to Tanzania and agreed to give the country £45m aid a year for six years.

A spokeswoman for her department said both sides had agreed that "lessons had been learned".

Although she was defeated on the BAE sale, Ms Short won a victory when the government agreed that future export licences must include sustainable development as one of the criteria.

The department believes that this will prevent a repeat of the BAE deal.

But aid agencies believe that demands by the Department of Trade and Industry for the sustainable development cri teria to be watered down have left loopholes in the bill

Justin Forsyth, policy director of Oxfam, said: "The Arms Export Control Bill has some improvements, but there is still a get-out clause in the bill which could very easily allow arms sales to poor countries [to happen] again."

Tanzania is still negotiating with BAE in the hope of reducing the price of the system.

Britain is one of the biggest donors to Tanzania and the suspension of the aid threatened to disrupt relationships between the two governments.

But Ms Short, who is a strong supporter of Mr Mkapa's anti-poverty strategy, is said to be satisfied that a memorandum of understanding signed during her visit will obviate any future difficulties.

"It's the best way forward," the spokeswoman said.