18 April 2017

Tanzania: IMF Projects 2.5 % Fiscal Deficit This Year

Photo: The Citizen
President John Magufuli and Deputy Director of the International Monetary Fund, Tao Zhang.

The International Monetary Fund (IMF) has said the overall fiscal deficit to Gross Domestic Product (GDP) in 2016/17 is projected to be below the targeted figure by almost half.

The Breton Wood Institution said the fiscal deficit to GDP expected to be 2.5 per cent of GDP, compared to 4.5 per cent in the budget.

The IMF Team led by Mauricio Villafuerte was broadly satisfactory as preliminary data indicate that most targets for end-December 2016 were met except one, tax revenue that was missed by a small margin. Tanzania's GDP growth has been robust, with some fluctuations driven mostly by variations in the stance of macroeconomic policies.

The IMF Team was concluding the 10-day visit to Tanzania last week that the projection based on anticipating financing constraints easing in the second half of the year.

"Thus, there was a small surplus of about a 0.3 percent of GDP during the first half of the fiscal year... ," Villafuerte said in the brief report. Revenue collections during the 2016/17 fiscal year have picked up over the previous year, although they are likely to fall short of the ambitious target.

"The level of government spending is likely to fall well short of budgeted levels because of tightly controlled recurrent spending and delays in securing external financing," Villafuerte said.

The team held discussions with the authorities on the sixth review under the Policy Support Instrument (PSI) programme that was approved on July 2014.

"Liquidity conditions remain tight, but are expected to ease in coming weeks, including through a decision to lower the statutory minimum reserve requirement," Villafuerte said.

The team further noted that for Tanzania to meet its medium-term growth objectives would require a vibrant private sector and that ample scope remained to improve the business environment.

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