United Republic of Tanzania: Request for a Three-Year Policy Support Instrument

IMF Staff Country Reports, July 24, 2014

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Tanzania has enjoyed strong and stable growth, projected to remain at 7 percent next year and in the medium term.
Inflation is at 6 percent, gradually converging to the authorities’ 5 percent medium-term objective.
The external current account deficit is 14 percent of GDP this year.
Fiscal developments:
- The fiscal deficit rose to 6.8 percent of GDP in 2012/13 due to fiscal revenue shortfalls and overruns in domestically-financed spending.
- Revenue shortfalls in 2013/14 compared to the budget approved by parliament prompted the authorities to undertake expenditure cuts during the fiscal year to meet their 5 percent of GDP target.
Debt sustainability:
- Based on the debt sustainability analysis, Tanzania remains at low risk of debt distress.

Tanzania concluded its final review under a Standby Credit Facility (SCF) arrangement, together with its Article IV consultations, on April 25, 2014.
The SCF expired on April 30, 2014.

Step up needed investment in infrastructure while protecting critical social spending.
- These objectives will need to be pursued following careful prioritization to preserve government debt sustainability.
Prepare for natural gas.
- If recent discoveries of sizeable offshore natural gas deposits are confirmed as commercially viable, sizable fiscal revenues would need to be managed to bring benefits to all Tanzanians.

The authorities are requesting a three-year PSI to be in place by the start of FY2014/15.
Authorities’ objectives for the PSI:
- Underpin the close policy dialogue with staff.
- Provide a positive signal to donors and markets.
- Safeguard policy discipline.
IMF staff supports the authorities’ request for a PSI.