THE International Monetary Fund (IMF) has praised the government for prudent management, particularly on the part of Bank of Tanzania (BoT) for tightening monetary policy as well as progress in stabilizing the economy.
"The planned tightening of monetary policy is appropriate in view of the remaining inflationary pressures. The authorities are committed to taking additional measures if needed to attain the targeted decline in inflation," said the IMF Deputy Managing Director and Acting Chair, Mr Naoyuki Shinohara.
The remarks come following the IMF Executive Board's discussion on Tanzania that completed the Fifth Policy Support Instrument (PSI) Review and First Review Under the Standby Credit Facility (SCF) for Tanzania. In completing the SCF review the Board made available for disbursement an additional 57 million US dollars (about 91.2bn/-), bringing total resources under the arrangement to 114 million US dollars (about 182.4bn/-).
Mr Shinohara said the overall macroeconomic outlook remains favourable, with buoyant growth and declining inflation and that continued tight fiscal and monetary policies are crucial for securing sustainability. "The budget for 2012/13 appropriately balances the country's development and social spending needs with the debt-stabilizing objective," he added.
To preserve the fiscal consolidation path and avoid a build-up of arrears, any revenue shortfalls would be offset by cutbacks in recurrent and non-priority capital expenditures while safeguarding critical social spending. An action plan is being finalized to address the financial challenges facing the power utility, preventing costly power outages and large quasi-fiscal losses.
"Tanzania's large current account deficit and related vulnerabilities call for readiness to adjust policies in the event of external shocks, with a view to preserving macroeconomic stability and keeping the programme on track. "The floating exchange regime would continue to provide helpful flexibility in this regard," he added.
The Board also approved the Tanzanian authorities' request for a waiver of non-observance of the continuous assessment criterion on the ceiling on external non-concessional debt contracted or guaranteed by the government. The staff judged that the non-observance would not materially affect the country's debt sustainability.
The Board further approved the precautionary 18-month SCF arrangement in July 2012 in an amount equivalent to 228 million US dollars (about 364.8bn/-).