TZ waits IMF approval on 1.2tri/- financing

TANZANIA: THE International Monetary Fund (IMF) has announced a staff-level agreement with Tanzanian authorities that would grant the country access to approximately 441 million US dollars, equivalent to 1.2tril/- in financing.

The agreement, pending approval by the IMF Executive Board, is expected to provide a significant boost to Tanzania’s economy and support its efforts to strengthen fiscal and economic resilience.

IMF said in a statement on Thursday that the agreement marks the successful completion of the fifth review under the IMF’s Extended Credit Facility (ECF) and the second review under the Resilience and Sustainability Facility (RSF).

These arrangements are integral to Tanzania’s broader strategy aimed at maintaining macroeconomic stability and accelerating sustainable development amidst ongoing global economic headwinds. An IMF staff team, led by Mr Nicolas Blancher, conducted a mission to Tanzania from April 2-17, 2025, to hold discussions on the 2025 Article IV consultation, the fifth review under the ECF and the second review under the RSF.

Subject to approval by the IMF Executive Board, completing these reviews will unlock SDR 326.47 million (about 1.1tril/- or 440.8 million US dollars). SDRs, or Special Drawing Rights, are an international reserve asset used by the IMF, based on the value of major world currencies.

This will bring the total IMF financial support under the ECF arrangement to SDR 682.21 million (about 907.4 million US dollars) and SDR 255.72 million (about 343.6 million US dollars) under the RSF.

“I am pleased to announce that the IMF team and the Tanzanian authorities have reached a staff-level agreement on the policies needed to complete the fifth review under Tanzania’s ECF-supported programme and the second review of the RSF arrangement. The IMF’s Executive Board will discuss these reviews in the coming weeks,” Mr Blancher said at the conclusion of the mission.

Mr Blancher highlighted Tanzania’s strong economic performance, noting that real GDP growth reached 5.5 per cent in 2024 and is projected to increase to 6 per cent in 2025.

Inflation has remained subdued at 3.3 per cent in March (year-on-year), staying below the Bank of Tanzania (BOT) target of 5 per cent.

While acknowledging a favourable economic outlook, Mr Blancher cautioned that risks are tilted to the downside due to an uncertain external environment, including potential slowdowns in the global economy and trade, geoeconomics fragmentation, further conflict intensification in the Democratic Republic of Congo and reduced foreign development assistance.

Domestically, the upcoming General Election could increase risks of fiscal pressures or a slowdown in reforms.

The IMF noted that fiscal consolidation is expected to pause in the current fiscal year 2024/2025 following the adoption of a supplementary budget in February 2025, which aims to increase public spending by about 0.4 per cent of GDP on education, health, clearance of domestic arrears and other priority areas.

The Fund stressed the importance of resuming growth-friendly fiscal consolidation in 2025/2026 fiscal year to preserve debt sustainability and rebuild fiscal space, particularly given pressing social spending needs.

Tanzanian authorities have committed to reducing the domestic primary deficit by 0.4 percentage points of GDP to 0.8 per cent in 2025/2026 through revenue measures yielding 0.9 per cent of GDP, while safeguarding priority social spending at 7.1 per cent of GDP.

The IMF mission concurred with BOT’s decision to maintain the Central Bank Rate (CBR) at 6 per cent, considering inflation remains below the 5 per cent target. They believe this stance will help preserve price stability.

The mission also underscored the importance of continuing to allow exchange rate flexibility and conducting foreign exchange interventions in line with the BOT’s policy.

Increased tolerance for exchange rate flexibility and reforms to improve the functioning of the foreign exchange market have successfully attracted foreign exchange flows into the formal market, increasing liquidity and reducing the parallel market premium.

The current account deficit is estimated to have narrowed to 2.6 per cent of GDP in calendar year 2024, down from 3.8 per cent in 2023.

This improvement was attributed to strong exports of minerals and agricultural products, as well as record tourist arrivals, offsetting a moderate increase in capital goods imports and declining oil imports.

High gold prices are expected to further support export momentum and reduce the current account deficit in 2025.

Gross international reserves stood at an adequate level of 5.7 billion US dollars (about 3.8 months of imports) in March 2025. During the Article IV consultation, the IMF mission also engaged in discussions on longer-term prospects for the Tanzanian economy with various government and other stakeholders.

To achieve the ambitious goals outlined in the Tanzania Vision 2050, the IMF stressed the critical need to dedicate sufficient resources to education and health for a young and rapidly growing population and to foster an enabling environment for private sector-led growth and job creation.

Key structural reform priorities identified include further efforts to improve access to finance, streamline business regulations and strengthen judicial and anticorruption institutions.

The IMF also highlighted the importance of continuing the implementation of climate reforms, supported by the RSF, to enhance climate resilience and sustainability.

The government has already begun strengthening the institutional framework for climate policies and public investment management in line with climate risks.

Accelerating the implementation of RSF reforms, with technical and financial assistance from the IMF, the World Bank and other development partners, will be crucial in building resilience and catalysing support for Tanzania’s climate agenda.

The IMF mission held meetings with the Minister for Finance, Dr Mwigulu Nchemba, the Governor of the Bank of Tanzania, Mr Emmanuel Tutuba, other senior officials, development partners, private sector representatives and civil society organisations.