Boost for economic stability
DAR ES SALAAM: THE International Monetary Fund (IMF) Executive Board on Friday completed the fourth review under the Extended Credit Facility arrangement with Tanzania, allowing for an immediate disbursement of about 148.6 million US dollars (equivalent to 352.2bn/).
The disbursement brings a total disbursement to Tanzania under the ECF arrangement to about 754.3 million US dollars. (equivalent to 1.8tri/-).
The ECF aims to preserve macroeconomic stability, strengthen the economic recovery and promote sustainable and inclusive growth.
The board has also completed the first review of the 23-month arrangement under the Resilience and Sustainability Facility (RSF) arrangement, allowing for an immediate disbursement of about 55.9 million US dollars (equivalent to 132.5bn/-).
According to IMF, the RSF supports Tanzania’s ambitious reform efforts to implement climate policy reforms that address risks and challenges associated with climate change and enhance the resilience of the Tanzanian economy.
The IMF statement issued on Friday said Tanzania’s economic reform programme under the ECF arrangement remained on track. All end-June 2024 quantitative performance criteria and indicative targets were met.
Performance on structural benchmarks was mixed, with three structural benchmarks completed on time and two completed with delays. Three structural benchmarks (two of which were due end-June 2024 and one end-September 2024) were not completed and the authorities have requested to reset these SBs to end-March 2025 to allow sufficient time for completion.
Economic growth has gained momentum, with real GDP growth picking up to 5.4 per cent (year-on-year) in the first half of 2024, from 5.1 per cent in 2023. Inflation remains within the central bank’s target and a growth-friendly fiscal consolidation is underway.
Following the Executive Board discussion, Mr Bo Li, Deputy Managing Director and Acting Chair, said Tanzania’s reform programme supported by the Extended Credit Facility (ECF) remains on track and the growth outlook is favourable.
He said the ECF programme focuses on strengthening macro-financial stability and supporting sustainable and inclusive growth. The authorities’ strong commitment to their reform agenda remains important amid downside risks, combined with continued engagement and capacity support by development partners.
“The ongoing growth-friendly fiscal consolidation will help to create fiscal space and safeguard debt sustainability. Efforts should be geared toward implementing reforms to enhance domestic revenue mobilisation and strengthen management and commitment controls,” he said.
“Improving public financial and investment management will help contain fiscal risks and improve the efficiency of public investment. Continued increase in the allocation of funds to priority social spending is needed to close Tanzania’s human capital and social development gaps,” Mr Li said.
He noted that pressures in the foreign exchange market have eased, reflecting seasonal current account flows, a tight monetary policy stance and increased exchange rate flexibility. The latter should remain the first line of defence against potential reemergence of FX market pressures. The Bank of Tanzania (BoT) should continue its efforts to improve liquidity and price discovery in the FX market.
“The launch of the interest rate-based monetary policy framework was an important achievement and should be supported by further efforts to improve monetary policy effectiveness,” he noted.
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He advised that implementing and developing the communication strategy, strengthening the analytical tools and capacity of the central bank and supporting the development of money markets would help enhance the monetary policy framework.
Mr Li further said upgrading the financial supervision and regulatory frameworks, including by implementing FSAP recommendations, will help to buttress financial sector stability and promote financial deepening and inclusion. Completing efforts to align Tanzania’s legal framework with FATF standards and improve its effectiveness will strengthen the AML/CFT framework.
He said structural reforms are essential to promote private sector development and inclusive, resilient and sustainable growth, adding that business reforms should focus on removing obstacles to foreign investment, simplifying the regulatory regime, enhancing governance and regulatory transparency and improving public policy predictability.
Mr Li said implementation and enforcement of the authorities’ anti-corruption legislation and strategies are central to enhancing governance. Closing gender gaps would also support growth and inclusion.
“The authorities have begun implementing their ambitious climate reform agenda supported by the Resilience and Sustainability Facility (RSF) arrangement, which is also expected to help catalyse official technical and financial assistance and private sector financing,” he said.
