IMF projects 5.4 pc growth

DAR ES SALAAM: THE International Monetary Fund (IMF) has said Tanzania’s economy is expected to pick up to 5.4 per cent in 2024, supported by improvements in the business environment and subsiding global commodity prices.

The IMF unveiled the country’s economic outlook over the weekend, saying it was optimistic with the growth. A staff team from the IMF led by Charalambos Tsangarides, IMF mission chief for Tanzania, held meetings in Dodoma and Dar es Salaam from May 2 to 17, this year, for the third review under the Extended Credit Facility (ECF).

The mission met with Minister for Finance, Dr Mwigulu Nchemba, Bank of Tanzania (BoT) Governor, Mr Emmanuel Tutuba, other senior officials, development partners and private sector representatives.

Subject to approval by the IMF Executive Board the review will make available 150 million US dollars (about 387bn/-), bringing the total IMF financial support under the arrangement to 604.2 million US dollars (about 1.56tri/-).

The team also discussed the authorities’ request to access under the Resilience and Sustainability Facility (RSF) in the amount of 150 per cent of quota 789.6 million US dollars (about 2tri/-).

“I am pleased to announce that we have reached staff-level agreement on the policies needed to complete the third review of Tanzania’s ECF-supported programme, and on the request to access financial resources from the RSF. The IMF’s Executive Board will discuss these requests in the coming weeks,” said Mr Tsangarides at the conclusion of the mission.

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Recently in the statement, the Bank of Tanzania (BoT) projected the country’s economic growth to reach 5.5 per cent this year also driven by improved business climate and public investment in infrastructure, while the World Bank forecasted a 5.6 per cent growth.

The country’s economic growth stood at 4.6 per cent in 2022. More notably, the IMF noted that last year the economy grew by 5.1 per cent despite headwinds from power outages and strained foreign exchange liquidity that dampened manufacturing and trade activities, the IMF has said.

According to the global financial body the country’s year on year inflation remained 3.1 per cent although the core inflation ticked up to 3.9 per cent in April 2024. Furthermore, the IMF observed that the current account deficit is expected to narrow to 4.3 per cent of GDP this fiscal year (FY) from 6.5 per cent in the 2022/23 FY.

However, it noted that the external financial conditions are expected to remain tight and pressures in the foreign exchange market are likely to persist.

According to the IMF, the BoT has reiterated its commitment to allow more exchange rate flexibility to revitalise the foreign exchange (FX) interbank market and ensure a market determined exchange rate, while limiting the FX interventions to avoid disorderly market conditions, in line with its intervention policy.

“To enhance the transparency of its interventions, the BoT will publish the results of its FX auctions. Maintaining a moderately tight monetary policy stance will complement efforts to ease pressures in the FX market, while preserving price stability” IMF pointed out.

Nevertheless, IMF disclosed that intensification of regional conflicts, increased commodity price volatility, abrupt global slowdown, prolonged liquidity issues in the FX market and intensification of floods from El Nino, could weigh negatively on economic outlook. Currently, IMF observed that the government continues to implement its growth-friendly fiscal consolidation plan envisaged in the FY2023/24 budget.

“This effort is expected to continue in FY2024/25, supported by tax policy and revenue administration efforts to help create fiscal space,” read the statement. Adding that “the government is committed to increase priority social spending and contain the impact of the recent floods on the most vulnerable.” The country’s structural reform agenda aims to support a resilient, sustainable and inclusive growth through improving the business environment and strengthening governance.