The International Monetary Fund’s (IMF) board has approved the disbursement of $150.5m for Tanzania’s budget support, as part of its $1.04bn Extended Credit Facility (ECF) that was approved in July 2022.
This comes after the completion of the programme’s second review, which increased Tanzania’s total access under the arrangement to about $455.3m. The IMF designed the 40-month financing package to help Tanzania’s economic recovery, address the spillover effects from Russia’s invasion of Ukraine, preserve macroeconomic stability, and support structural reforms for sustainable and inclusive growth, based on the government’s priorities. The fund said Tanzania’s economic reform programme was “broadly on track,” with the authorities showing a strong commitment to reforms that focus on strengthening fiscal space, enhancing the monetary policy framework, strengthening financial sector supervision, and advancing structural reform.
“The authorities’ structural reform agenda is progressing well, with all end-June 2023 structural benchmarks completed on time, reflecting their commitment to the reform agenda,” the IMF said in a statement this week.
Tanzania’s economic recovery is expected to regain momentum after slowing in 2022 but faces headwinds from the unfavorable global economic environment. The IMF said Tanzania’s inflation has moderated and is within the Bank of Tanzania’s target, while the authorities are committed to implementing fiscal consolidation to reduce the widening fiscal deficit caused by revenue shortfalls. “The fiscal consolidation in the budget will help support fiscal sustainability. Efforts to increase domestic revenue and improve spending efficiency are important to create fiscal space, finance priority investment and social spending, and safeguard debt sustainability,” said Bo Li, IMF’s Deputy Managing Director and Acting Chair.
Additionally, closing gaps in Tanzania’s human and social development will require prioritizing social spending in budget planning and execution. Strengthening public financial management and oversight of state-owned enterprises will help contain fiscal risks.
