THE country’s macroeconomic performance remains robust while the medium-term outlook stays favourable, International Monetary Fund (IMF) said yesterday.
The Breton Wood institution said in the Policy Support Instrument (PSI) six months outlook to this month that the performance under the instrument “has been satisfactory” despite some challenges. Thus in completing the review, the IMF approved the country’s request for a six-month extension of the current PSI arrangement to next January.
The Fund also granted a waiver for the non-observance of the end-December 2016 assessment criterion on tax revenues because the slippage was minor. However, Mr Tao Zhang, Deputy Managing Director and acting Chair, said at the end of the review that sound macroeconomic policies and advance structural reforms are essential.
“Going forward, continued sound macroeconomic policies and increased efforts to advance structural reforms will be essential to sustain macroeconomic stability and high economic growth, and deliver on the devel opment agenda,” Mr Tao said.
The team pointed out some challenges as 2016/17 budget execution, more predictable business environment and overoptimistic revenue projections. The team said recently efforts to step up external financing mobilization and ease the liquidity situation should help enhance budget implementation.
The move would help to avoid further accumulation of domestic payment arrears, and support credit to the private sector. IMF observed that the 2017/18 budget reaffirms the authorities’ objective of scaling up public investment while preserving fiscal sustainability.
“However,” Mr Tao said, “potentially overoptimistic revenue projections call for its prudent implementation, including by delaying some large projects until the availability of revenues is confirmed during the mid-year budget review.”
According to IMF, the government is committed to pursue further public financial management reforms, including strengthening commitment controls to limit the accumulation of new domestic payment arrears.
“Recent measures to loosen the monetary policy stance are appropriate given the benign in flation outlook and decelerating credit growth. “Going forward, the duration and extent of monetary loosening should be coordinated with fiscal developments,” Mr Tao said.
Also, plans to foster credit standards and increase capital buffers are key initiatives to ensure the banking system’s soundness. “To achieve the [country’s] development agenda and maintain high economic growth… more predictable business environment, is critical,” he said.
The PSI programme has been instrumental for Tanzania in sustaining macroeconomic stability. It is against this background that the extension was approved from July 2017 to January 2018 to cover the period of negotiations for a successor PSI.