Washington, DC: Today, the Executive Board of the
International Monetary Fund (IMF) completed the first review of the
Extended Credit Facility (ECF) Arrangement and the 2023 Article IV
Consultation
[1]
with Tanzania. The completion of the first review allows the immediate
disbursement of SDR 113.37 million (about US$ 153 million), bringing
Tanzania’s total access under the arrangement to about US$ 304.7 million.
Tanzania’s three-year
ECF Arrangement
for a total access of SDR 795.58 million (200 percent of quota- about US$
1,046.4 million at the time of program approval) was approved on July 18,
2022. The arrangement aims to support economic recovery, preserve
macro-financial stability, and promote sustainable and inclusive growth.
Reforms center on strengthening fiscal space to allow for much needed
social spending and high-yield public investment, enhancing the monetary
policy framework and improving financial sector supervision, and advancing
structural reforms.
Tanzania’s economic reform program is progressing. All quantitative
performance criteria and indicative targets for December 2022 were met. The
structural benchmarks to prepare and begin implementing a plan to clear all
expenditure arrears and to submit the amendments to the Banking and
Financial Institutions Act to Parliament were completed ahead of time. The
structural benchmark to complete and publish the post-crisis audit of
pandemic-related spending and to submit the FY2023/24 preliminary Budget to
the Parliament were completed with delay
The Executive Board also concluded the 2023 Article IV consultation with
Tanzania.
Spillovers from the war in Ukraine and domestic factors have weighed on
Tanzania’s economic recovery from the pandemic. After a modest recovery to
4.9 percent in 2021, real GDP growth is estimated to have slowed to 4.7
percent in 2022, reflecting the impact of global economic conditions and
shortfalls in rainfall. In 2023, growth is expected to recover to 5.2
percent as global commodity price shocks subside and the business
environment improves.
The authorities have responded to the spillovers from the war in Ukraine
with a combination of temporary fiscal support and monetary policy
tightening. Although Tanzania’s inflation is relatively low, partly
reflecting low passthrough, the authorities responded to the recent
increase in inflationary pressures with temporary fuel and fertilizer price
subsidies and tightening of liquidity in the financial system. The
authorities’ draft budget for FY2023/24 is appropriately based on
conservative revenue and expenditure projections and aims to achieve fiscal
consolidation while safeguarding priority social spending.
Following the Executive Board’s discussion, Ms. Antoinette Sayeh, Deputy
Managing Director and acting Chair, issued the following statement:
“Tanzania’s reform program supported by the Extended Credit Facility
(ECF) focuses on completing the pandemic health and economic response,
preserving macroeconomic stability, and addressing long-term challenges
to support sustainable and inclusive growth, drawing on the
government’s reform priorities articulated in their Five-Year
Development Plan.
“The Tanzanian authorities remain committed to their economic reform
program despite a challenging global economic environment. Program
performance has been strong. All quantitative performance criteria and
indicative targets for December 2022 were met, and two of the three
structural benchmarks for December 2022 were completed on time.
“Efforts to enhance domestic revenue mobilization and improve efficiency of
expenditures will help create the fiscal space needed to finance priority
investment and social spending while safeguarding debt sustainability.
Strengthening public finance management and oversight of state-owned
enterprises is critical to contain fiscal risks. Building on recent
progress in verifying domestic arrears, the authorities should clear
verified arrears and prevent accumulation of new ones by strengthening cash
management and commitment controls. While Tanzania's risk of debt distress
remains moderate, it is important to continue prioritizing concessional
financing and ensure that fiscal risks from contingent liabilities are
well-contained.
“While inflation remains below target, the Bank of Tanzania should stand
ready to tighten monetary policy as needed while allowing more exchange
rate flexibility against external shocks. Completing the ongoing transition
to an interest rate-based monetary policy is key to enhance the
effectiveness of monetary policy. Upgrading the financial supervision
framework, including by implementing FSAP recommendations will help
buttress financial sector stability and promote financial deepening.
“Structural reforms are essential to promote inclusive, resilient, and
sustainable growth. Business reforms should focus on streamlining
bureaucratic procedures, simplifying the business regulatory regime, and
enhancing regulatory transparency. Implementation and enforcement of the
authorities’ anti-corruption strategy and establishing a risk-based AML/CFT
supervisory approach would help improve governance and address deficiencies
in Tanzania’s AML/CFT framework. Tanzania’s high vulnerability to climate
change calls for increasing resilience through mitigation and adaptation
policies.”
Executive Board Assessment
[2]
Executive Directors welcomed the authorities’ policy response to the
spillovers of the war in Ukraine and commended the strong performance under
the ECF arrangement. While the economic recovery is expected to continue
and the medium-term outlook is favorable, downside risks and uncertainties
stem from global factors. In this context, the authorities’ continued
commitment to reforms under the program will be critical to strengthen the
economic recovery, preserve macroeconomic stability, and support
sustainable and inclusive growth. Continued engagement and capacity
development support by the Fund and other partners remain imperative.
Directors commended the authorities’ plan for fiscal consolidation starting
in FY2023/24, while continuing to protect the vulnerable. They noted that
creating additional fiscal space and prioritizing concessional financing
will allow much needed priority investment and social spending—including on
health and education to build human capital—while safeguarding debt
sustainability. In this context, Directors encouraged the authorities to
enhance domestic revenue mobilization; improve efficiency of expenditures,
particularly public investments; strengthen public finance management and
transparency, including for effective management of future gas revenues;
and contain fiscal risks from SOEs. While welcoming recent progress in
addressing the long-standing domestic arrears problem, Directors
underscored that strengthening cash management and commitment controls will
be key to prevent accumulation of new arrears. Directors also looked
forward to the implementation of recommendations from the audit of
pandemic-related spending.
Directors welcomed the authorities’ data-dependent monetary policy and
encouraged the Bank of Tanzania (BoT) to stand ready to tighten further
should second-round inflation effects emerge. They noted progress in
modernizing the monetary policy framework and emphasized the importance of
limiting budget financing by the BoT. Directors also called for
strengthening financial supervision to promote financial stability and
deepening. Against the backdrop of global economic uncertainties, Directors
underscored the importance of allowing more exchange rate flexibility,
enhancing transparency in FX operations, and maintaining adequate reserve
buffers.
Directors noted that structural reforms are essential to promote inclusive,
resilient, and sustainable growth. They emphasized that streamlining
bureaucratic procedures, simplifying the business regulatory regime, and
enhancing regulatory transparency would support private sector development.
They also underscored that implementing and enforcing the authorities’
anti-corruption strategy and establishing a risk-based AML/CFT supervisory
approach would help improve governance and address deficiencies. In light
of Tanzania’s high vulnerability to climate change, Directors called for
increasing resilience through mitigation and adaptation policies supported
by a broad financing strategy. They took note of the authorities’ interest
in the Resilience and Sustainability Facility.
[1]
Under Article IV of the IMF's Articles of Agreement, the IMF holds
bilateral discussions with members, usually every year. A staff
team visits the country, collects economic and financial
information, and discusses with officials the country's economic
developments and policies. On return to headquarters, the staff
prepares a report, which forms the basis for discussion by the
Executive Board.
[2]
At the conclusion of the discussion, the Managing Director, as
Chairman of the Board, summarizes the views of Executive Directors,
and this summary is transmitted to the country's authorities. An
explanation of any qualifiers used in summings up can be found
here:
http://www.IMF.org/external/np/sec/misc/qualifiers.htm
.
|
Tanzania: Selected Economic Indicators,
FY2020/21-2023/24
|
|
2020/21
|
2021/22
|
2022/23
|
2023/24
|
|
|
Act.
|
Prel.
|
Proj.
|
Proj.
|
|
Output
|
|
|
|
|
|
Real GDP growth (%)
|
4.9
|
4.8
|
5.0
|
5.7
|
|
Calendar year real GDP growth (%) 1
|
4.9
|
4.7
|
5.2
|
6.1
|
|
Prices
|
|
|
|
|
|
Inflation - average (%)
|
3.3
|
4.0
|
5.0
|
4.4
|
|
Central government finances
|
|
|
|
|
|
Revenue (% GDP)
|
13.6
|
14.8
|
15.0
|
15.5
|
|
Expenditure (% GDP)
|
17.0
|
18.2
|
18.2
|
18.1
|
|
Fiscal balance (% GDP)
|
-3.8
|
-3.5
|
-3.1
|
-2.7
|
|
Public debt (% GDP)
|
41.3
|
42.0
|
40.9
|
39.2
|
|
Money and credit
|
|
|
|
|
|
Broad money (% change)
|
11.7
|
6.5
|
10.7
|
11.0
|
|
Credit to private sector (% change)
|
3.6
|
19.4
|
19.8
|
12.0
|
|
Balance of payments
|
|
|
|
|
|
Current account (% GDP)
|
-2.1
|
-4.6
|
-4.4
|
-3.2
|
|
Reserves (in months of imports)
|
4.6
|
4.0
|
3.8
|
4.0
|
|
External public debt (% GDP)
|
29.2
|
27.9
|
26.9
|
25.8
|
|
|
|
|
|
|
|
Exchange rate
|
|
|
|
|
|
REER (% change)
|
2.6
|
2.3
|
...
|
...
|
Sources: Tanzanian authorities and Fund staff
calculations.
1
Fiscal year 2020/21 corresponds to calendar year 2021.
|