New Delhi :A staff team from the International Monetary Fund (IMF) led by Charalambos Tsangarides held meetings in Dar es Salaam, Dodoma, and Zanzibar during May 4–19, 2022, and virtually during May 22–June 6, 2022, to discuss a forty-month program under the Extended Credit Facility (ECF) arrangement.
At the conclusion of the mission, Mr. Tsangarides issued the following statement:
“IMF staff reached agreement with the Tanzanian authorities on a medium-term program that could be supported by IMF resources of about $1.071 billion under the ECF. The staff-level agreement is subject to IMF management approval and Executive Board consideration.
“Tanzania’s economy is gradually recovering from the negative effects of the COVID-19 pandemic but spillovers from the war in Ukraine are stalling the recovery. After decelerating to 4.8 percent in 2020, growth reached 4.9 percent in 2021 supported by the recovery in tourism, a pickup in public infrastructure spending, and strong performance of the agriculture sector. The fiscal situation has been affected through a large reduction of tax revenue, turning the overall balance to a deficit of about 3.9 percent of GDP in FY2020/21, while the current account deficit widened to 3 percent in 2021. Monetary policy accommodation, which has supported the economy and helped private sector credit growth recover, has started to be reduced in response to rising domestic prices. IMF emergency assistance under the Rapid Credit Facility (RCF), and additional support from other development partners, supported the authorities efforts to step-up the pandemic response, address fiscal pressures engendered by the pandemic response, and close financing needs.
“The authorities’ medium-term program is centered on supporting the economic recovery from the scarring effects of COVID-19 and coping with spillovers from the war in Ukraine, preserving macroeconomic stability, and advancing the structural reform agenda toward sustainable and inclusive growth, drawing from the key priorities of the Five-Year Development Plan. In this context, the program aims at mobilizing domestic revenue and creating fiscal space for much-needed investment in human and physical capital and increased social spending, advancing the authorities’ structural reform agenda, including to improve the business environment and competitiveness, and strengthening financial deepening and stability. IMF financial support is also expected to help stimulate private sector investment and catalyze financial support from development partners.
“The program’s fiscal policy will focus on enhancing growth while maintaining fiscal and debt sustainability. Key priorities include increasing domestic revenues to create fiscal space through credible medium-term revenue mobilization plans and a comprehensive revenue strategy. Efforts will continue to redress the decline in priority social spending and help address increasing demands for public services in education and health, as well as improve the quality of spending, including by reducing fiscal risks and improving public investment management.
“The program will resume the structural reform agenda which will focus on enhancing conditions for sustainable and inclusive growth. Enhancing the business environment is essential to unleash the growth potential.
“The authorities will continue implementing the Blueprint for Regulatory Reforms emphasizing the streamlining of permits and licenses and rationalizing the number of regulatory institutions and take necessary measures to address the long-standing priority to clear existing arrears and prevent new accumulation. The authorities aim to pursue reforms to strengthen the monetary policy framework to transition to interest targeting and strengthen financial sector stability. A tighter monetary policy stance may be needed to maintain the BOT’s inflation target while addressing heightened inflationary pressures stemming from the war in Ukraine and the global tightening cycle. In the context of elevated uncertainty in pandemic and global conditions, more exchange rate flexibility can be used to absorb external shocks.
“The mission met with Zanzibar President Hussein Ali Mwinyi, Minister of Finance and Planning Mwigulu Nchemba, Bank of Tanzania Governor Florens Luoga, other senior officials, development partners, and private sector representatives. The mission would like to thank the Tanzanian authorities for their cooperation, hospitality, and constructive discussions.”