Press Statement by the IMF Mission to TanzaniaPress Release 12/76
March 13, 2012
An International Monetary Fund (IMF) mission, led by Mr. Peter Allum, visited Dar es Salaam during March 1–14, 2012 to conduct discussions for the fourth review under the Policy Support Instrument (PSI).1 The mission met with Finance Minister Mkulo, Bank of Tanzania Governor Ndulu, and other senior officials, as well as representatives of the private sector, civil society, and development partners.
At the conclusion of the mission in Dar es Salaam, Mr. Allum issued the following statement:
“Tanzania’s recent economic performance has been favorable despite power shortages resulting from the severe drought of 2011. Real gross domestic product (GDP) grew by 6.3 percent in the first nine months of 2011 and is expected to have maintained the pace in the last quarter of the year. For 2012/13, growth is projected in the 6.5–7 percent range. Consumer price inflation was 19.8 percent year-on-year in December 2011, primarily because of higher international food and oil prices, and the pass-through from the depreciation of the shilling. Core inflation, which excludes volatile food and energy prices, reached 8.7 percent. Tax revenues performed well in the first half of 2011/12 fiscal year, and savings were realized in recurrent and investment spending. The overall deficit for the full fiscal year is expected to be in line with program projections.
“Good progress was made in implementing the IMF-supported program. All end-December 2011 quantitative targets under the program were met and structural reforms are advancing broadly as planned.
“The authorities and the mission reached understandings, ad referendum, on economic policies aimed at reducing inflation, stabilizing public debt, and strengthening the energy sector. To this end, it was agreed that the authorities will pursue further fiscal consolidation to achieve an overall budget deficit of 5.5 percent of GDP in 2012/13. The details of the fiscal program will be finalized in the coming weeks during the government’s budget exercise. Monetary policy will need to be tight over the near term to keep underlying inflation low. Based on a projected improvement in the food situation in the region, headline inflation is projected to return to single digits by end-2012.
“The emergency power plan (EPP), implemented by the authorities in 2011, has helped to address drought-related power shortages. The increase in electricity tariffs by 40 percent in January 2012 was an important step in covering the associated higher cost of power generation. It will be important to ensure that tariffs continue to reflect the cost of power generation.
“The authorities and the mission discussed the risks to the outlook, notably related to global growth prospects and in particular to developments in Europe. To mitigate these risks, the government has requested support from the IMF under precautionary Stand-by Credit Facility (SCF)2.
“The IMF's Executive Board is expected to consider the fourth PSI review and the request for the precautionary SCF in June 2012.
“The mission wishes to thank the authorities for their warm hospitality and the high quality of the technical discussions.”
1 The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF's Executive Board, signal to donors, multilateral development banks, and markets the Fund's endorsement of a member's policies (see http://www.imf.org/external/np/exr/facts/psi.htm.) Details on Tanzania’s current PSI are available at www.imf.org/tanzania.
2 The SCF supports LICs that have reached broadly sustainable macroeconomic positions, but may experience episodic, short-term financing and adjustment needs, including those caused by shocks. The SCF supports countries’ economic programs aimed at restoring a stable and sustainable macroeconomic position consistent with strong and durable growth and poverty reduction. It also provides policy support and can help catalyze foreign aid. (See http://www.imf.org/external/np/exr/facts/scf.htm.)