News Briefs

Tanzania and the IMF

Heavily Indebted Poor Countries -- A Factsheet

The IMF's Poverty Reduction and Growth Facility (PRGF) -- A Factsheet





News Brief No. 01/26
March 14, 2001
International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Completes Tanzania Review under PRGF Loan
and Approves US$26 Million Disbursement and US$17 Million in Additional Interim HIPC Assistance

The Executive Board of the International Monetary Fund (IMF) today completed the second review of Tanzania's performance under the Poverty Reduction and Growth Facility (PRGF)1 arrangement. The decision will enable Tanzania to draw SDR 20 million (about US$26 million) immediately.

The three-year arrangement under the PRGF was approved on March 31, 2000, in a total amount of SDR135 million (about US$174 million). So far, SDR 40 million (about US$51 million) have been disbursed.

The Executive Board also approved additional interim assistance under the enhanced Heavily Indebted Poor Countries Initiative (HIPC)2 of SDR 13.34 million (about US$17 million). Tanzania had reached the decision point under the enhanced HIPC Initiative in early April 2000, and received US$18 million in interim debt relief from the IMF for the period April 2000-March 2001.

Following the Executive Board discussion on Tanzania, Shigemitsu Sugisaki, Deputy Managing Director and Acting Chairman, said:

"Tanzania's economy continues to perform well. Real GDP growth increased and inflation declined further, even against a backdrop of higher oil prices. Despite sharply lower international prices for most traditional products, exports grew and the external position improved. By end-2000, gross official reserves had reached the equivalent of 5.3 months of imports of goods and nonfactor services. Fiscal developments have also been encouraging. Tax revenue rose significantly in the first half of 2000/01 (July-June) and, despite unforeseen election costs in October 2000, spending was contained. However, although there was substantial repayment of budgetary arrears from previous years, continuing weaknesses in public spending control led to some new arrears.

"Policies are geared to support a continuation of Tanzania's strong macroeconomic performance in 2001. Real GDP is projected to grow by 5.4 percent; monetary policy will aim to lower inflation to 4.5 percent by the end of the year; and the fiscal deficit will be limited to the available concessionary foreign resources. In addition, the government intends to make further progress in tax reform, strengthening tax administration, reducing tax exemptions, and improving public expenditure control. Structural reforms will also continue, notably to address difficulties in the power sector, to improve the environment for private sector investors, and to raise the efficiency and accessibility to the population of the financial sector.

"Regarding implementation of Tanzania's Poverty Reduction Strategy Paper (PRSP), public spending in priority areas—education, health care, water, agriculture, rural roads, the judiciary, and the fight against HIV/AIDS—will be increased considerably in the budget for 2001/02, with the benefit of donor assistance and debt relief under the enhanced Initiative for the Heavily Indebted Poor Countries. The IMF will continue to provide interim debt relief to Tanzania for a further year. The government of Tanzania intends to prepare a progress report on the PRSP by mid-2001, which will include new poverty data from the ongoing household budget survey as well as policies, now being developed, for education and agriculture," Mr. Sugisaki said.


1 On November 22, 1999, the IMF's concessional facility for low-income countries, the Enhanced Structural Adjustment Facility (ESAF), was replaced by the Poverty Reduction and Growth Facility (PRGF), and its purposes were redefined. It was intended that PRGF-supported programs will in time be based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and development partners, and articulated in a Poverty Reduction Strategy Paper (PRSP). This is intended to ensure that each PRGF-supported program is consistent with a comprehensive framework for macroeconomic, structural, and social policies to foster growth and reduce poverty. Tanzania's PRSP was endorsed by the Boards of the World Bank and IMF on November 30 and December 1, 2000. PRGF loans carry an annual interest rate of 0.5 percent, and are repayable over 10 years with a 5 ½ year grace period on principal payments.
2 The HIPC Initiative entails coordinated action by the international financial community, including multilateral institutions, to reduce to sustainable levels the external debt burden of heavily indebted poor countries that pursue IMF and World Bank-supported adjustment and reform programs, but for whom traditional debt relief mechanisms are insufficient.


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