IMF board okays $150.5m budgetary support for Tanzania

The International Monetary Fund (IMF) board has approved the disbursement of $150.5 million financing towards Tanzania’s budgetary support as part of its $1.04 billion Extended Credit Facility (ECF) that was approved in July 2022.

This follows the completion of the programme’s second review, bringing Tanzania’s total access under the arrangement to about $455.3 million.

The IMF crafted the 40-month financing package to help bolster Tanzania’s economic recovery, address the spillover effects from Russia’s invasion of Ukraine, help preserve macroeconomic stability, and support structural reforms toward sustainable and inclusive growth, drawing on the government’s priorities.

The fund described Tanzania’s economic reform programme as “broadly on track,” with the authorities showing great commitment to reforms that centre on strengthening fiscal space, enhancing the monetary policy framework, strengthening financial sector supervision and advancing structural reforms.

“Most end-June 2023 quantitative performance criteria and indicative targets were met. The authorities’ structural reform agenda is progressing well, with all end-June 2023 structural benchmarks completed on time, reflecting their commitment to the reform agenda,” the IMF said in a statement on December 13.

Tanzania’s economic recovery is expected to regain momentum going forward after slowing in 2022 but faces headwinds from the unfavourable global economic environment.

According to the IMF, Tanzania’s inflation has moderated and is within the Bank of Tanzania’s target while the authorities are committed to implementing fiscal consolidation to tame the widening fiscal deficit occasioned by shortfalls in revenue collections.

“The fiscal consolidation envisaged in the budget will help buttress fiscal sustainability. Efforts to enhance domestic revenue mobilisation and improve spending efficiency are important to create fiscal space, finance priority investment and social spending, and safeguard debt sustainability,” said Bo Li, IMF’s Deputy Managing Director and Acting Chair.

“Further, closing gaps in Tanzania’s human and social development will require prioritizing social spending during budget planning and execution. Strengthening public financial management and oversight of state-owned enterprises will help contain fiscal risks.”

Extended credit facility

The IMF notes that Tanzania’s business reforms should focus on streamlining bureaucratic procedures, simplifying the regulatory regime, and enhancing regulatory transparency.

In addition, implementation and enforcement of the’ anti-corruption legislation and strategies is central to enhancing governance.

Tanzania’s near-term policy priorities should include exchange rate flexibility combined with tightening of local currency liquidity and fiscal consolidation, while preserving priority social spending.

“The medium-term outlook is positive subject to steadfast implementation of the authorities’ reform agenda, anchored by the ECF arrangement,” the IMF said.

In October alone the IMF reviewed the economic, financial, and social and governance policies of about eight African nations with a view to opening its funding purse to strengthen their weakening forex reserves and offer budgetary support.

The funding was: Somalia ($100 million), Democratic Republic of Congo ($200.39 million), Rwanda ($262 million), Tanzania ($150 million) Gambia ($10.9 million), Comoros ($4.7 million) and Senegal ($276 million). And on November 3 the fund announced it had reached a staff-level agreement with Tanzania on second review of the extended credit facility.

“Tanzania’s high vulnerability to climate change calls for continued efforts to increase resilience through mitigation and adaptation policies,” the fund said.

Source: The East African

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