By Vincent Owino, DAR ES
SALAAM Tanzania
Tanzanian authorities have
reached an agreement with the International Monetary Fund (IMF) for the
disbursement of a $151 million loan to help boost its recovery amidst headwinds
from global shocks that have slowed growth.Charalambos Tsangarides (3rd left) in discussion with Tanzania’s Finance Minister Mwigulu Nchemba (R)
The amount is subject to
approval by the lender’s executive board and will bring IMF’s total financial
support to Tanzania under the $1.04 billion 40-month extended credit facility
(ECF) agreed on last year July to $302 billion.
IMF said that although the
Tanzanian economy is showing signs of steady recovery – with its GDP growing at
4.7 percent last year – global economic conditions continue to weigh down
fiscal performance and inflation will likely surpass the Bank of Tanzania’s 5
percent threshold within the year.
“The economy is benefitting
from improvements in the business environment, but is also expected to continue
facing spill overs of the war in Ukraine in the near term,” said IMF’s Tanzania
mission chief Charalambos Tsangarides.
The rainfall shortage in the
region has also slowed down electricity production and agricultural activity in
the country, resulting in a continued rise in inflation rates – currently at
4.9 percent, the lender said.
At the same time, despite a
relatively stable currency, Tanzania’s foreign exchange reserves fell by $1.2
billion to $5.2 billion (4.3 months of imports) in 2022, which could mean a
growing current account deficit.
IMF has recommended
“temporary” fiscal and monetary policy measures to help “safeguard the economy
from the spill overs of the war in Ukraine”.
“Monetary policy will continue
to be tuned to developments in actual and expected inflation, while allowing
exchange rate flexibility to cushion the economy against external shocks,” Mr
Tsangarides said.
IMF lauded the implementation
of the reforms it had recommended when it first disbursed $151 million under
the ECF to Tanzania in November last year, including replacing subsidies with
targeted social spending to cushion those adversely affected by economic
shocks.
However, the multilateral
lender wants Dar to continue implementing other reforms, which it says will see
the country’s GDP growth rate rebound to at least 7 percent in the near term,
contain inflation within BoT’s target and moderate current account deficit.
The recommended changes
include structural reforms in the business environment and governance, improved
revenue mobilisation efforts, and “modernising the monetary policy framework
through the transition to an interest-rate based monetary policy,” which, the
lender says, will improve its effectiveness.
“Advancing structural reforms
will create enabling environment for sustainable and inclusive private
sector-led growth,” Tsangarides said after a series of consultative meetings
with Tanzania’s Finance Minister Mwigulu Nchemba and BoT Governor Emmanuel
Tutuba. – The EastAfrican
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