A mission from the International Monetary Fund, led by Paolo Mauro, visited
Dar es Salaam from October 23 to November 5, 2013; it conducted the
biennial Article IV discussions, assessed performance under the Standby
Credit Facility (SCF), and began discussions on a possible new Policy
Support Instrument (PSI) program.1 The mission met with Hon. Dr. William
Mgimwa, Minister of Finance, Professor Benno Ndulu, Governor of the Bank of
Tanzania, and other senior government officials. The discussions also drew
from inputs received during brainstorming meetings on medium-term economic
policy priorities held in August with the government, the central bank,
parliamentarians, the private sector and civil society, and development
partners. Mr. Mauro released the following statement at the end of the
mission:
“The economy has continued to perform well, growing by 7 percent in the
first half of 2013. The economic outlook is promising, with growth
projected to continue at a similar pace for the full year. Overall
inflation fell to 6.1 percent in September with core inflation (excluding
food and fuel prices) at 5.8 percent. In light of broadly benign
developments in domestic food prices and with a continued prudent monetary
policy stance, inflation is projected to decline to the authorities’ medium
term target of 5 percent by mid-2014. The current account deficit declined
somewhat, but remained large, at 13½ percent of GDP in July 2012 – June
2013.
“Fiscal pressures emerged during the last fiscal year (FY 2012/13, July to
June). Net domestic financing of the government was in excess of targets
agreed under the government’s IMF-supported program, by about 1 percent of
GDP. For the current fiscal year (July 2013 – June 2014), tax revenues are
likely to fall short of initial projections. This is likely to require
sizable adjustments to the budget in the upcoming mid-year review to align
expenditure plans with the available resources. The government has
reaffirmed its commitment to the agreed fiscal deficit target of 5 percent
of GDP. To sustain economic growth and to stem fiscal pressures during the
current and next fiscal year, priorities include mobilizing additional
revenues by reducing and simplifying tax exemptions and bringing the power
sector to financial sustainability.
“Key medium-term policy challenges include fostering continued strong
growth through productive infrastructure investment, while preserving
priority social spending, and maintaining debt sustainability; enhancing
the institutional framework to ensure that possible future revenues from
newly discovered natural gas deposits benefit all citizens; and improving
the business climate.
“Discussions will continue in the coming weeks; the next IMF Executive
Board meeting on Tanzania is tentatively planned in early 2014.
“The mission wishes to thank the authorities for their warm hospitality and
for the constructive and open dialogue on policy issues.”
1 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.) 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 SCF are available at www.imf.org/tanzania.