Tanzania adopted the river basin model in 1950s and declared it as an essential feature for economic development. Since 1990 management of water resources in Tanzania is based on the nine river basins that do not follow administrative boundaries as defined under the system of decentralized political structures. Water is a key resource in the river basin; however, it is not a driver of economic development. Drivers of economic development are outside the water sector such as energy, agriculture and mining. The non-water sectors fall under decentralized political structures from the central government ministries, regional administration to local government authorities. The system of political structures cut across different varieties of governance from central to local government levels. Variance in governance under these structures has intensified water scarcity and as an institutional and legal tool is more rhetorical rather than practical. Total water withdrawal in Tanzania is estimated to be 5,142 million m 3 out of which agriculture development consumes more than 85% and the rest accounts for the domestic sector, livestock development and industry. Water scarcity hinders the effectiveness of the adopted river basin model as competition of water use between hydropower production and irrigation is intense. This paper addresses the main questions as to what effectsthese structures have on institutional policy design and discourse in the river basin management. Do the structures promote or block institutional reforms? How is the sustainability of the reforms ensured? This paper suggests a mainstream institutional set up of a non-water sector into the river basin model from the central to local government levels.