Tanzania is one of the world's poorest countries
Mr Blair confirmed that Britain has written off £100m of Tanzania's debts.
But he did not say whether he supported the sale of a state-of-the-art military air traffic control system - which opponents claim is four times more expensive than necessary - to the impoverished African country.
Responding to a question from Labour backbencher Valerie Davey, Mr Blair told MPs: "We must follow the proper licensing conditions throughout and we will do so."
Cabinet 'split'
Opponents claim the BAE Systems hardware will add to Tanzania's debt burden just as Western nations - led by the UK - are attempting to relieve it.
The country - which has just eight military jets - has been urged to opt for a much cheaper civil aviation system.
The controversial sale has been referred back to the Department of Trade and Industry for further examination, reportedly at the insistence of International Development Secretary Clare Short and Chancellor Gordon Brown, who has been instrumental in relieving Tanzania's debts.
The Cabinet is reportedly split on the issue.
But the sale is thought likely to go ahead after it emerged that the majority of the equipment has already been built - on reassurances from the Ministry of Defence that the deal would be nodded through.
'Stern test'
Earlier, Mr Blair came under fire from Christian Aid over his apparent support for the BAE Systems deal.
Andrew Pendleton, of Christian Aid, told BBC Radio 4's Today programme said the row was a "a fairly stern test for Mr Blair's kaleidoscope agenda that he laid out at the Labour Party conference, where he made a big play of tackling global poverty".
He added: "This appears to be an inappropriate project.
"We are about to sell Tanzania a Rolls-Royce when they probably could do with a Ford Mondeo.
"If we are really serious about tackling poverty, we should have nothing to do with projects like this and Mr Blair should cancel it."
Job risk
But Isle of Wight MP Andrew Turner said that cancellation would risk 250 of the 900 BAE Systems jobs at Cowes.
"Commitments have been made, people have been working on it and it would be a tragedy and disaster for Cowes and the island if the government were not to grant the export licence at this late stage."
'Grown up'
Mr Turner said that a less advanced air traffic control system would be unable to deal with the problems of smuggling and poaching, which the Tanzanian government wished to tackle.
We must allow them to make their own decisions about what is right for their country.
"If we don't, somebody else will sell it to them and we will lose jobs on the island."
However Patrick Smith of Africa Confidential told the BBC's World Business Report that this sale needs to be investigated in more depth.
"Sales of military equipment around the world, particularly between developed western countries and poor countries in the third world, are usually accompanied with a number of financial and other inducements to the purchasing government," he said.
"At the very least this case demands that there should be a detailed enquiry into who is selling this equipment, on what terms it is being sold, and the competitive nature of the contract," he added.
'Waste of money'
The World Bank has claimed the BAE equipment is four times more expensive than the civil air traffic control system actually needed by Tanzania.
In a report, the bank condemns the British-made equipment as a waste of money for a country with a per capita income of just £170 per year.
At this year's Labour Party conference, Mr Blair said the "state of Africa is a scar on the conscience of the world.
"But if the world focused on it, we could heal it."