IMF Staff Holds Review Mission to Tanzania

IMF News, October 31, 2016

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IMF team led by Mauricio Villafuerte visited Tanzania from Oct 18–28, 2016 to conduct the fifth review under the Policy Support Instrument (PSI) program approved on July 16, 2014.
End-of-mission statement conveys preliminary findings; staff will prepare a report for management approval and submission to the IMF's Executive Board.
The IMF Executive Board is tentatively expected to discuss the review in early-2017.

Projected growth of 7% in 2016 is still within reach.
Preliminary data for the first half of 2016 indicate that economic growth was strong and that the projected growth rate of around 7 percent for the year as a whole remains within reach.
Inflation declined to 4.5 percent in September, below the authorities’ target of 5 percent.
The current account balance has improved significantly due to lower capital goods imports as externally-financed investment has slowed down and exports of gold and manufactured goods increased.
The Bank of Tanzania’s foreign exchange reserves have strengthened in recent months.
Tanzania remains at low risk of external debt distress.

Implementation of the PSI-supported program has been satisfactory.
Preliminary data indicate that most quantitative assessment criteria for end-June 2016 were met.
Notable progress has been made in stepping up revenue collections; based on data for the first quarter, the ambitious program target for the 2016/17 fiscal year is within reach.
Current spending has been lower than programmed, and together with the customarily slow pace of project implementation at the beginning of the fiscal year, this has led to a fiscal surplus in the first quarter.
Liquidity conditions have been tight, contributing to upward pressure on borrowing costs in the economy.

The pace of implementing structural reforms has been slow, but has picked up recently.
The mission welcomed the adoption of the second Five-Year Development Plan.
It noted the importance of improving dialogue with the private sector and accelerating reforms to bolster the business environment.
The mission welcomed steps taken to clear existing domestic arrears and prevent their further incurrence.
Slow pace of implementation of public investment is a downside risk to economic growth.

Mobilize external financing to step up the pace of planned capital spending; Tanzania has room to borrow externally on concessional and nonconcessional terms to meet its financing needs.
Continue efforts to improve the efficiency of spending while ensuring delivery of essential services.
Take steps to ease liquidity conditions in the economy; possible measures noted include:
- liberalizing further the capital account in line with commitments under the East African Monetary Union Protocol;
- acquiring a sovereign credit rating to expand Tanzania’s opportunities to borrow abroad;
- widening the range of monetary policy tools.

Discussions will continue in the coming weeks to reach final understandings on an economic policy framework that can underpin completion of the fifth review under the PSI.
The mission met with Minister Philip I. Mpango, Governor Benno Ndulu, Permanent Secretary Doto M. James, and other senior officials of the government and the Bank of Tanzania.
“The IMF team is appreciative of the constructive and open policy dialogue and thanks the authorities for their hospitality during the visit.”

IMF staff statement, Oct 31, 2016.