The Executive Board of the International Monetary Fund (IMF) today concluded the third and final review of an arrangement under the Standby Credit Facility (SCF)1 with Tanzania. The SCF was approved in July 2012 (see Press Release No. 12/252). In February 2013, the authorities drew the full accumulated amount of US$114 million under the SCF arrangement through that date. No drawings have been made since then, and the authorities have indicated that they do not intend to make further drawings on the arrangement, which expires on April 30, 2014.
The Board also concluded the 2014 Article IV consultation; a press release will be issued separately.
Following the Executive Board discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, said: “The Tanzanian authorities are to be commended for the broadly satisfactory implementation of their economic program supported by the Fund’s Standby Credit Facility. Prudent macroeconomic policies have delivered buoyant economic growth and successful disinflation.
“Preserving macroeconomic stability is essential for continued strong growth. Yet, vulnerabilities may be building up, with pressures for additional fiscal expenditures and a large current account deficit. To safeguard the sustainability of the public finances, improved public financial management is a priority, going forward.
“A key objective for the remainder of this fiscal year is to contain expenditures within the limits set in the mid-year budget review and to strengthen revenue administration. Looking ahead, efforts will be needed to mobilize additional revenues, beginning with the VAT reform, while ensuring that revenue assumptions are realistic, so as to eschew the accumulation of new arrears and to avoid abrupt expenditure cuts during budget execution.
“A crucial medium-term challenge will be to set up appropriate institutional arrangements to ensure that the benefits from the exploitation of natural gas fields accrue to all Tanzanians. This will involve establishing a fair taxation regime, transparent contracts with the companies involved, and a framework to manage resource wealth that promotes inter-generational equity and is fully integrated with the budget process.
Tanzania is becoming increasingly interconnected with the global economy and greater focus on international competitiveness is warranted. Accordingly, the exchange rate should fully reflect market conditions, and a variety of reforms need to be undertaken to dismantle remaining impediments to trade, including infrastructure bottlenecks, and improve the business climate.”
1 The SCF supports low-income countries that have reached broadly sustainable macroeconomic positions, but may experience episodic, short-term financing and adjustment needs, including those caused by shocks. The SCF supports countries’ economic programs aimed at restoring a stable and sustainable macroeconomic position consistent with strong and durable growth and poverty reduction. It also provides policy support and can help catalyze foreign aid. (See http://www.imf.org/external/np/exr/facts/scf.htm.) Details on Tanzania’s SCF are available at http://www.imf.org/tanzania