IMF staff has advised Tanzania authorities that implementation of the Policy Support Instrument program continues to be broadly satisfactory and GDP growth has been robust, though with some fluctuations driven mostly by variations in the stance of macroeconomic policies.
Compiled by Alpha Bedoh Kamara
The team from the International Monetary Fund (IMF), led by Mauricio Villafuerte, visited Tanzania from April 3-13, 2017 and held discussions with the authorities on the sixth review under the Policy Support Instrument (PSI) program that was approved on July 16, 2014.
The team noted that for Tanzania to meet its medium-term growth objectives would require a vibrant private sector and that ample scope remained to improve the business environment. The team also 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.
The team advises the authorities to resolve the outstanding issues that would allow Tanzania to secure a sovereign credit rating and commended efforts being put in place to reorient toward development spending but urged the authorities to avoid accumulating new domestic arrears.
The team also discussed the broad parameters of the 2017/18 budget, noted that spending levels must be underpinned by realistic revenue and financing assumptions, and to address concerns about the payment of VAT refunds negatively affecting exporting companies.
“Economic growth, estimated at about 7 percent, remained strong in 2016. More recently though, the economy has hit a soft patch in the context of slow budget implementation, a 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.
“Rising food prices have pushed headline 12-month inflation to 6.4 percent in March 2017. However, core inflation remains well anchored at 2.2 percent. Good rains in Tanzania’s southern region and easing of drought conditions in its neighbors should relieve pressures on food prices. The external current account deficit is estimated to have narrowed and the Bank of Tanzania’s stock of external reserves remains at a comfortable level,” The team noted.