IMF Approves Next Phase of Tanzania’s Economic Support

TANZANIA – The International Monetary Fund (IMF) has signaled satisfaction with the pace of Tanzania’s economic programs, moving the country closer to obtaining an additional 150 million US dollars of funding.

According to NAM News Network, the IMF Mission Chief for Tanzania, the positive appraisal followed an intensive two-week review that culminated in a staff-level agreement on the country’s economic policies under its Extended Credit Facility (ECF). This recent development follows the initiation of Tanzania’s 40-month arrangement with the IMF.

Tsangarides announced that with the anticipated approval from the IMF management and its Executive Board, which is expected in the upcoming weeks, Tanzania will gain access to the said funds. This disbursement will elevate the total financial assistance under the ECF to approximately 452.7 million US dollars.

The economic reform program in Tanzania aims to bolster economic recovery, ensure macro-financial stability, and foster a resilient, inclusive, and sustainable growth path.

The IMF observed that Tanzania’s real Gross Domestic Product (GDP) growth slowed to 4.7 percent in 2022 from 4.9 percent in the prior year, influenced by a challenging global economic climate and subdued agricultural output linked to insufficient rainfall.

The fund forecasts a recovery for the Tanzanian economy starting in 2023, though it acknowledges potential challenges from international conditions such as fluctuating commodity prices, dampened global growth, and stringent financial environments.

The report from the IMF highlighted an easing inflation rate in Tanzania, which declined to 3.3 percent year-on-year in September, a decrease from January’s peak of 4.9 percent.

Tsangarides pointed out that the medium-term economic outlook remains promising, conditional on the continuous and rigorous implementation of the government’s reform initiatives, which are supported by the ECF program.

The IMF team noted fiscal pressures exemplified by a substantial current account deficit and external financial constraints, prompting the Bank of Tanzania (BoT) to increase its foreign exchange interventions. The BoT has also expressed its resolve to rejuvenate the forex interbank market and to shift towards a market-clearing exchange rate regime.

Moreover, the IMF commended the government’s commitment to fiscal discipline through a consolidation plan set for the 2023/24 fiscal year, focusing on realistic revenue generation and expenditure.

The government’s fiscal strategy includes enhancing tax policy and administration to create fiscal space for addressing significant capital needs, reallocating expenditure toward priority social sectors, and bolstering social safety networks.

Furthermore, the IMF emphasized the importance of business environment and governance reforms in unlocking Tanzania’s economic potential. The Tanzanian authorities have pledged to carry on with regulatory reforms aimed at simplifying regulations and improving governance practices.

The dialogue between IMF staff and Tanzanian officials during the meetings was centered on reviewing progress in reforms and policy priorities under the second review of Tanzania’s ECF-backed program. The program, which was approved by the IMF’s Executive Board on July 18, 2022, initially totaled 1.046 billion US dollars.