27 April 2014

Tanzania: IMF Lauds Country's Economic Performance

THE International Monetary Fund has commended Tanzania for its broadly satisfactory implementation of economic programme supported by the fund's Standby Credit Facility.

A statement issued by IMF said the country's prudent macroeconomic policies had delivered buoyant economic growth and successful disinflation.

"Preserving macroeconomic stability is essential for continued strong growth.

Yet, vulnerabilities may be building up, with pressures for additional fiscal expenditures and a large current account deficit.

To safeguard the sustainability of public finances, improved public financial management is a priority, going forward.

"A key objective for the remainder of this fiscal year is to contain expenditures within the limits set in the mid-year budget review and to strengthen revenue administration.

Looking ahead, efforts will be needed to mobilize additional revenues, beginning with the VAT reform, while ensuring that revenue assumptions are realistic, so as to eschew the accumulation of new arrears and to avoid abrupt expenditure cuts during budget execution," Mr Min Zhu, Deputy Managing Director and Acting Chair of the IMF, said.

The statement said the Executive Board of the IMF concluded the third and final review of an arrangement under the Standby Credit Facility (SCF) 1 with Tanzania. The SCF was approved in July 2012.

In February 2013, authorities drew the full accumulated amount of 114 million US dollars under the SCF arrangement through that date.

According to the statement, no drawings have been made since then, and authorities have indicated that they do not intend to make further drawings on the arrangement, which expires on April 30, 2014.

"A crucial medium-term challenge will be to set up appropriate institutional arrangements to ensure that the benefits from the exploitation of natural gas fields accrue to all Tanzanians.

This will involve establishing a fair taxation regime, transparent contracts with the companies involved, and a framework to manage resource wealth that promotes inter-generational equity and is fully integrated with the budget process.

"Tanzania is becoming increasingly interconnected with the global economy and greater focus on international competitiveness is warranted.

Accordingly, the exchange rate should fully reflect market conditions, and a variety of reforms need to be undertaken to dismantle remaining impediments to trade, including infrastructure bottlenecks, and improve the business climate," the statement further read.

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