|
|
Tanzania: Dar Uncertain of Donor Budget Support
 |
 |
|||||||||
|
||||||||||
|
|
|||||||||
|
||||||||||
The East African (Nairobi)
24 March 2008
Posted to the web 24 March 2008
Nairobi
Just how much foreign aid will the annual budget of the Tanzanian government absorb in the next financial year?.
Despite the fact that the country's budget reading for 2008-9 is only three months away, it is still unclear how much foreign aid Tanzania will get in the new fiscal year.
A report by a mission of the International Monetary Fund that visited Dar es Salaam recently has this to say, "Some uncertainty prevails regarding the scale of foreign assistance available to support the 2008/09 budget," indicating that the government may have to cut public spending until foreign financing has been assured.
The IMF predicts that Tanzania's economy is likely to continue performing well, maintaining the current strong growth rate of 7.5 per cent of GDP.
This growth has been fuelled by robust expansion in the manufacturing, construction and services sectors.
On the fiscal side, spending programmes have remained high, mainly due to strong growth in domestic revenue generation and public spending in line with the budget.
The IMF has praised the country for maintaining a sound monetary policy. According to the IMF, monetary targets for 2007 have been met, mainly due to improvements in the Bank of Tanzania's conduct of open market operations.
The report says that monetary policy will need to strive to return inflation to its target level, while ensuring sufficient liquidity to allow further healthy growth in bank credit to the private sector.
While welcoming the decisive action taken by Tanzanian authorities to address the recommendations of the special audit of the external payment arrears account at the Bank of Tanzania (BoT), the IMF says that the government should transfer the role of managing the country's external arrears from the Treasury to the central bank.
The BoT should be left to focus on its core functions of inflation control and financial supervision, says the report.
Tanzania has been running a tight fiscal programme. But looking ahead, the IMF sees several fiscal risks.
It says that government guarantees - such as the one provided last year for the recent syndicated loan by domestic financial institutions to the Tanzania Electric Supply Company (Tanesco) for Tsh250 billion ($238 million) - come to about 1 per cent of GDP, and credit guarantee schemes operated by BoT on behalf of the government, could give rise to future liabilities.
Moreover, the government is considering expanding the use of public-private partnerships (PPPs) in the area of infrastructure.
The IMF stressed that in evaluating the use of PPPs, value for money must be a top criterion. A strong legal and regulatory framework and the ability to assess fiscal risks are also essential.
On the energy sector, the IMF says that a sizeable tariff increase will be needed to restore the financial viability of the state-owned Tanesco.
As part of its financial recovery plan, a proposal to increase the tariff by 40 per cent is pending with the Energy and Water Utilities Regulatory Authority, the regulator.
Moreover, the government is pursuing broader reforms in the power sector so that energy is produced and distributed more efficiently and reliably.
In particular, it is discussing a new Electricity Act that will promote competition and attract greater private investment to the sector.
In the financial sector, Tanzania is in the process of implementing "second-generation financial-sector reforms" aimed at improving access to financial services and strengthening prudential supervision.
The IMF said prudential supervision needs to be geared increasingly toward overseeing a fast-growing and diversifying financial system.
"More also needs to be done to introduce risk-based supervision of commercial banks," it adds.
It says that, in the medium term, one of the priorities will be to strengthen the regulatory framework for non-bank financial institutions, especially pension funds, which are growing rapidly.
The IMF notes that the government is currently preparing a unified legal and regulatory framework for the financial supervision of pension funds, including investment guidelines, as part of the forthcoming proposal to amend the Social Security Act.
|
The IMF's Poverty Support Initiative (PSI) is designed for low-income countries that may not need IMF financial assistance, but still seek close co-operation with the IMF in preparation and endorsement of their policy frameworks.
PSI-supported programmes are based on country-owned poverty reduction strategies adopted in a participatory process involving civil society and the country's development partners.
The three-year PSI for Tanzania was approved by the IMF executive board on February 16, 2007, and two reviews have been concluded so far - the first on June 27, last year, and the second on December 21.
| |||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Copyright © 2008 The East African. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections -- or for permission to republish or make other authorized use of this material, click here. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Make allAfrica.com your home page | RSS Feed | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Top | Site Guide | Who We Are | Advertising | Search | Subscribe | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
| Questions or Comments? Contact us. Read our Privacy Statement. | |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
