26 February 2013

Tanzania: Central Bank Defends Govt Move On IMF Credit

THE country's decision to take the IMF's Standby Credit Facility (SCF) of about 117 million US dollars was termed 'not unusual', the Bank of Tanzania (BoT) has said.

The BoT attributed the decision to assessment of balance of payment needs and external debt sustainability position, while concessionality of the loan was taken on board as well. BoT's Governor Prof Benno Ndulu told the 'Daily News' that the decision was not based to cushion the export-import deficit but to finance various development projects and programmes.

"This decision is based on our assessment of balance of payment needs, external debt sustainability position... in order to boost economic growth and expedite poverty reduction," Prof Ndulu said. He explained: "The disbursement of the external concessional loan does not deviate from the trends that have been observed in the recent past."

The amount was designed to expedite implementation of development projects, including transport infrastructure, power generation and the gas pipeline, hence decided to borrow from non-concessional sources. In 2011, the government borrowed 221.8 million US dollars for power generation. In 2012, 213.5 million US dollars was borrowed for construction of gas pipeline.

Official data from BoT shows that total external concessional loans from World Bank, IMF, Japan, African Development Bank (AfDB), France and others has descended considerably from 803.6 million US dollars in 2009 to 512.6 million US dollars in 2010 when the global economy went into crisis. But after the financial meltdown, the debt levels went down to 289.4 million US dollars in 2012.

The Governor assured the pubic that the 'decision (was) taken with careful consideration of the country's debt sustainability status.' Last week the IMF said Tanzania expressed the intention to draw 114.2 million US dollars to cushion against deterioration in external demand and access to global market financing. The fund is available through the 225 million US dollar Standby Credit Facility (SCF) arrangement for Precautionary Arrangement.

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