News Brief: IMF Completes First Review of Tanzania under PRGF-Supported Program and Approves US$26.3 Million Disbursement

August 1, 2000

The Executive Board of the International Monetary Fund (IMF) today completed the first review of Tanzania’s arrangement under the Poverty Reduction and Growth Facility (PRGF)1 (See Press Release 00/25). The completion of this review enables the release of SDR 20.0 million (about US$26.3 million), which brings total disbursements under the three-year program to SDR 40 million (about US$52.6 million).

In commenting on the Executive Board’s discussion on Tanzania, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, made the following statement:

“Tanzania is to be commended for the strong implementation of its macroeconomic program, which resulted in annual real growth of 4.7 percent in 1999 and a decline in the inflation rate to less than 6 percent in June 2000. The authorities also made important progress in structural reform in the financial, petroleum, and telecommunications sectors.

“While the budgetary problems that arose in 1999 have been addressed with determination, the fiscal revenue-to-GDP ratio remains low. To address this issue, the government has implemented further tax reforms in the budget for 2000/01. Of particular importance has been the elimination of the VAT exemption for petroleum products, which also applies to government purchases; this is to be followed by the complete removal of tax exemptions for the government in next year’s budget. The implementation of the authorities’ plans to take further steps in reducing smuggling and evasion, especially in the petroleum sector, will also be important for increasing revenue. To strengthen expenditure control, further improvements to the financial management system will be important, as will the full implementation of the new government accounting system and speedy adoption of legislation and regulations for government finances.

“Tanzania’s budget is being directed more toward poverty reduction, and the authorities are to be commended for the substantial increase in allocations to the social sectors in the budget for 2000/01. The preparations for a broad-based Poverty Reduction Strategy Paper are well advanced.

“Continuing progress in structural reform, including in the areas of privatization, financial sector reform, and external liberalization will be necessary for achieving sustained growth and poverty reduction. It will be equally important to address governance issues and to press ahead with the full and prompt implementation of the country’s anti-corruption strategy,” Mr. Sugisaki said.

1 On November 22, 1999, the IMF’s concessional facility for low-income countries, the Enhanced Structural Adjustment Facility, was renamed the Poverty Reduction and Growth Facility, and its purposes were redefined. It was intended that the PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a poverty reduction strategy paper. This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5½-year grace period for principal payments.


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