## IMF Staff Completes Visit to Tanzania

_IMF News, April 14, 2017_

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## Bibliographic details
- Published: April 14, 2017

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### Mission and context
- Mission led by Mauricio Villafuerte, visited Tanzania from April 3-13, 2017.
- Discussions covered the sixth review under the Policy Support Instrument (PSI) program that was approved on July 16, 2014.
- End-of-mission press release conveying preliminary staff findings; views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.

### Macroeconomic developments and outlook
- Economic growth
  - "Economic growth, estimated at about 7 percent, remained strong in 2016."
  - More recently the economy "has hit a soft patch" due to slow budget implementation, slowdown in monetary aggregates and credit to the private sector, and the impact of a drought.
  - These factors are expected to ease in the second half of the year and "the growth momentum to strengthen."
- Inflation and prices
  - Headline 12-month inflation was "6.4 percent in March 2017" driven by rising food prices.
  - Core inflation "remains well anchored at 2.2 percent."
  - Good rains in Tanzania’s southern region and easing of drought conditions in neighbors are expected to relieve pressures on food prices.
- External sector
  - "The external current account deficit is estimated to have narrowed."
  - "The Bank of Tanzania’s stock of external reserves remains at a comfortable level."

### Fiscal developments and public finances
- Program implementation
  - "Implementation of the PSI-supported program has been broadly satisfactory."
  - Preliminary data indicate most targets for end-December 2016 were met except the one on tax revenue "that was missed by a small margin."
- Revenue and spending
  - "Revenue collections during the 2016/17 fiscal year have picked up over the previous year, although they are likely to fall short of the ambitious target."
  - "The level of government spending is likely to fall well short of budgeted levels because of tightly controlled recurrent spending and delays in securing external financing."
  - Fiscal balances:
    - "There was a small surplus of about a 0.3 percent of GDP during the first half of the fiscal year."
    - The overall fiscal deficit in 2016/17 is projected to be "2.5 percent of GDP, compared to 4.5 percent in the budget."
- Financing and arrears
  - Mission welcomed progress in finalizing non-concessional borrowing agreements, which would help budget implementation.
  - Advised authorities to resolve outstanding issues that would allow securing a sovereign credit rating.
  - Commended efforts to reorient toward development spending, but "urged them to avoid accumulating new domestic arrears."
  - Urged authorities to address concerns about the payment of VAT refunds "negatively affecting exporting companies."

### Monetary and financial sector
- Liquidity and reserves
  - "Liquidity conditions remain tight, but are expected to ease in coming weeks, including through a decision to lower the statutory minimum reserve requirement."
- Banking sector soundness
  - As the pace of economic activity slowed, "non-performing loans of the banking system have risen."
  - The mission welcomed steps the Bank of Tanzania was taking "to modernize the monetary policy framework."

### Structural reforms, private sector, and business climate
- Structural reform pace
  - "The pace of structural reforms remains slow, but some progress has been made recently towards the implementation of key measures."
- Private sector role and dialogue
  - For Tanzania to meet medium-term growth objectives, "would require a vibrant private sector and that ample scope remained to improve the business environment."
  - The mission "welcomed the initiation of the national dialogue with the business community, and encouraged the authorities to ensure that regular exchange of views become the norm."

### Meetings and acknowledgments
- The team 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 thanks the authorities for their hospitality and constructive dialogue during the visit."

*Press Release No. 17/134 — April 14, 2017.*

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## References

- [United Republic of Tanzania and the IMF](http://www.imf.org/external/country/TZA/index.htm)
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_Source: https://www.imf.org/en/news/articles/2017/04/14/pr17134-tanzania-imf-staff-completes-visit_