March 14, 2001
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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.
