Key Questions on Tanzania

Last Updated: August 5, 2022

Read answers to key questions regarding Tanzania and the IMF

Back to Top

What are the goals of Tanzania's Extended Credit Facility (ECF) program?

The immediate priority of the 40-month, $1.046 billion ECF program will be to help Tanzania complete the COVID-19 health and economic response and growth recovery, maintain macroeconomic stability, and assist in coping with spillovers from the war in Ukraine (including disrupted tourist flows and increased prices of oil, wheat, and fertilizers). Over the medium term, the ECF arrangement will support  reforms to revitalize the economy and promote sustainable and inclusive growth while safeguarding macroeconomic and fiscal stability.

A strong multi-year approach to improving revenue collection and the quality and composition of public spending; greater transparency in public accounts; a stronger anticorruption framework; and higher financial sector resilience are needed to achieve these goals.

As background, the ECF provides financial assistance to countries facing protracted balance of payments difficulties, with the aim of restoring macroeconomic stability and reducing poverty through strong growth. It carries a zero-interest rate, with a grace period of 5½ years, and a final maturity of 10 years. Semi-annual disbursements are subject to reviews, which are scheduled, at most, six months apart. These reviews assess the government’s progress in implementing its economic reforms. The first tranche of about $151.7 million was disbursed when the program was approved by the IMF Executive Board on July 18, 2022.

Back to Top

Tanzania already received emergency assistance from the IMF in 2021. Why is further Fund financing needed now?

Emergency assistance to Tanzania under the IMF’s Rapid Credit Facility (RCF) in 2021 (about 0.8 percent of GDP) helped the country address the immediate fallout of the COVID-19 pandemic. It supported the authorities to step-up the pandemic response and build and equip ICUs and emergency facilities, improve sanitation, and reduce congestion in schools. In addition to ongoing needs to complete the pandemic recovery, Tanzania is now facing further difficulties resulting from the effects of the war in Ukraine on international commodity prices and tourist flows. Further Fund assistance is therefore needed to help address Tanzania’s development and reform challenges and assist in unleashing the country’s economic potential.

Back to Top

How is Tanzania’s economy affected by higher international food and energy prices and how does the program incorporate these shocks?

An increase in international energy and food prices is already pushing up local prices for these goods in Tanzania, increasing inflation and posing hardships on Tanzanian households. Tightening global financial conditions could also increase borrowing costs in the economy.

To reduce vulnerability to such shocks, under the ECF program Tanzania is implementing temporary and targeted subsidies on selected fuel imports, subsidizing domestic fertilizer production, strengthening social assistance programs including through transfers, and implementing structural reforms to boost economic resilience including to improve the business environment.

The ECF-supported program has built-in flexibility, allowing targets to be modified—notably reserves and fiscal objectives—at the time of semi-annual reviews.

Back to Top

Is Tanzania’s debt sustainable?

Tanzania’s risk of external debt distress remains moderate, mainly due the pandemic continuing to affect export receipts (including tourism receipts), which has marginally weakened Tanzania’s ability to service its external debt.

In this context, it is important for Tanzania to access, to the greatest extent possible, concessional external financing. Further, the program involves a credible, multi-year effort to mobilize domestic revenues, and reduce deficits and fiscal risks, while also improving spending quality and efficiency. This will help maintain fiscal and debt sustainability and pave the way for durable and inclusive growth in the years to come. The program will also help to catalyze other donor support.

Back to Top

How does the program balance spending on Tanzania’s large physical infrastructure projects with needs for social spending to protect the most vulnerable?

The ECF program pays particular attention to the need for higher priority social spending to meet Tanzania’s substantial needs in this area. The Tanzanian authorities have committed to raise spending on health and education, through hiring additional health workers and primary and secondary teachers, and equipping schools and health care facilities. The existing cash-transfer system will also be expanded. Improving health and social assistance will contribute to improving the quality and quantity of human capital ,poverty reduction, and will be crucial to promote sustainable and equitable growth and development.

At the same time, the program also emphasizes improving revenues and spending quality, including by reducing fiscal risks and improving public investment management, to facilitate further progress in key physical infrastructure projects which underpin the authorities’ development plan.

Back to Top

How are Tanzania’s governance commitments progressing? How does the new program advance the anti-corruption and governance agenda in Tanzania?

Tanzania’s governance commitments are progressing well. These include the tracking of COVID-19 related expenditures; the publishing of the first two quarterly reports of spending under the RCF; ongoing disclosure of beneficial ownership information for COVID-19 procurement contracts; and the publishing of the audit of pandemic-related spending financed with debt relief under the IMF’s Catastrophe Containment and Relief Trust in July 2022. The Tanzanian authorities have also undertaken some steps to correct deficiencies in Tanzania’s framework for Anti-money Laundering/Combatting the Finance of Terrorism (AML/CFT), which were identified by the Financial Action Task Force.

During the ECF program, the Tanzanian authorities will continue the publication of quarterly reports of RCF spending, complete the disclosure of pandemic-related spending contracts, and publish an audit of all pandemic-related spending. The government will also work to improve the effectiveness of the AML/CFT framework, including amending relevant laws and strengthening implementation and enforcement of a comprehensive anti-corruption strategy.