IMF is pleased with Dar’s economic plan

…to access USD 150 million

Tanzania is moving closer to accessing about US$150 million after the International Monetary Fund (IMF) was pleased with the pace of the economic program in East Africa’s second largest economy.

The news comes nearly two weeks after Tanzania’s 40-month Extended Credit Facility (ECF) was reviewed and an agreement reached on economic policies.

At the end of the mission, Mr Charalambos Sankaraides, Head of the IMF Mission to Tanzania, said, „I am pleased to announce that we have reached a staff-level agreement on economic policies to complete the second review of Tanzania’s economic plan under the ECF arrangement.”

He said the staff-level agreement is subject to approval by IMF management and the Executive Board in the coming weeks.

„Once the Executive Committee review is complete, Tanzania will access approximately US$150 million, bringing the total IMF financial assistance under this arrangement to approximately US$452.7 million,” he said.

The country’s reform program aims to strengthen economic recovery, safeguard macro-financial stability and support resilient, sustainable and inclusive growth.

After a modest growth of 4.9 percent in 2021, real GDP growth has slowed to 4.7 percent in 2022, reflecting the impact of an unfavorable global economic environment and weak growth in agriculture due to low rainfall.

According to the International Monetary Fund, the recovery is expected to pick up from 2023, but faces headwinds from the global economy, including fluctuating commodity prices, subdued growth and tight financial conditions.

Inflation eased to 3.3 percent (year-on-year) in September, down from a peak of 4.9 percent in January this year.

„The medium-term outlook is positive on the concrete implementation of the authorities’ reform agenda anchored by the ECF arrangement,” the committee chairman said.

He said a wide current account deficit (about 6 per cent in the 2022/23 financial year) coupled with tight external financing conditions had put pressure on the forex market, but the Bank of Tanzania (BoT) had stepped up its forex interventions to provide liquidity to the market. , when allowing the exchange rate to depreciate faster than before since July.

The BoT reiterated its commitment to revive the foreign exchange interbank market, ensure price discovery that allows for market-clearing exchange rate regimes and limit foreign exchange interventions to counter erratic market conditions.

He said continued tightening of monetary policy would complement efforts to ease pressures on the foreign exchange market.

“In the financial sector, the government is committed to implementing the fiscal consolidation program envisaged in the 2023/24 financial year budget, which is based on more realistic revenue and expenditure projections,” he said.

Tax policy and revenue management initiatives will help open up fiscal space to meet substantial human and physical capital needs, Mr. Sangarides said.

In addition, he said the government is committed to realigning the mix of spending in favor of priority social spending to reduce gaps in the provision of education and health services and strengthen the social safety net.

„Business environment and governance reforms are important to unlock the potential of the Tanzanian economy. In this regard, the authorities will continue to implement the roadmap for regulatory reforms, focusing on streamlining regulations and strengthening governance,” he noted.

Efforts to reduce climate change risks by investing in mitigation and adaptation policies will help build a strong foundation for resilient and sustainable development.

The meetings between IMF staff and Tanzanian officials were aimed at discussing progress on reforms and officials’ policy priorities in the context of the second review of Tanzania’s forty-month program under the ECF.

The arrangement was approved by the IMF Executive Board on July 18, 2022, totaling USD 1.046 billion at that time.