The
Executive Board of the International Monetary Fund completed the first
review of Tanzania's economic performance under the program supported by
the Policy Support Instrument (PSI)1 and granted a waiver for the
non-observance of the continuous assessment criterion on the
nonaccumulation of external arrears.
The
PSI for Tanzania was approved by the Executive Board on July 16, 2014
(see Press Release No. 14/350). Tanzania's program under the PSI
supports the authorities' medium-term objectives. These include: the
maintenance of macroeconomic stability, the preservation of debt
sustainability, and the promotion of more equitable growth and job
creation.
Following the Board discussion, Mr. Min Zhu, Deputy Managing Director and Acting Chair, made the following statement:
“Macroeconomic
developments in Tanzania remain favorable. Economic growth was strong
during the first half of 2014 and is expected to remain close to 7
percent. Inflation remains in midsingle digits, consistent with the
authorities' target of 5 percent by June 2015.
“Performance
under the Policy Support Instrument was satisfactory through June, but
has deteriorated since and risks have risen, stemming from delays in
disbursements of donor assistance and external nonconcessional
borrowing, and shortfalls in domestic revenues. Against this backdrop,
the authorities' commitment to keep the program on track is welcome, and
they have reaffirmed their intention to meet the budget deficit target
and will review revenues and adjust expenditures accordingly in the
context of the mid-year budget review. It will be critical to the
business environment to address the governance issues raised by the IPTL
case, which would also unlock donor assistance.
“It
will be important to strengthen the coordination between fiscal and
monetary policies. The conversion of monetary policy instruments to
financing papers facilitated the front-loading of capital expenditures
but complicated monetary policy implementation. It will be more
effective and less disruptive to accommodate the planned expenditure
through better planning to align spending and financing.
“The
issue of domestic arrears, which continued to accumulate, needs to be
addressed comprehensively and forcefully. Work to verify and eventually
clear arrears to suppliers already incurred is ongoing. The authorities'
plan to prevent future arrears accumulation is appropriately ambitious
and will require sustained implementation. Addressing arrears to pension
funds and making government relations with them more transparent is
also critical to their sustainability.”
The
PSI helps countries design effective economic programs that, once
approved by the IMF's Executive Board, signal to donors, multilateral
development banks, and markets the Fund's endorsement of a member's
policies.
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