THE International Monetary Fund Deputy Managing Director, Mitsuhiro Furusawa, has said Tanzania’s macroeconomic performance is strong and medium-term prospects are favourable.
Furusawa’s remarks came at the time when the executive board of
Fund completed the third review of the country’s economic performance
under the programme supported by the Policy Support Instrument (PSI)1.
In completing the review, the board, which said it was satisfied
with the performance, also approved modification of the December 2015
assessment criteria on net international reserves and tax revenue.
This was taken as a waiver for the missed June 2015 assessment
criterion on tax revenue, and modification of programme design
consistent with the new debt limits policy.
The PSI for Tanzania was approved by the Executive Board on July
16, 2014. Tanzania’s programme under the PSI supports the authorities’
medium-term objectives which include maintenance of macroeconomic
stability, preservation of debt sustainability, and promotion of more
inclusive growth and job creation.
The IMF official said: “Tanzania’s performance under the Policy Support Instrument, however, has been mixed.”
“While most assessment criteria for June 2015 were met, programme
implementation slowed ahead of the October 2015 elections,” he said,
adding:
“The overall deficit for 2014/15 exceeded the programme target once
the significant accumulation of expenditure arrears is taken into
account, reflecting shortfalls in revenue and financing, and weak
expenditure commitment controls.”
He said that the incoming authorities have taken action to
strengthen controls and sanctions against accounting officers that
breach rules, in order to contain the accumulation of new arrears.
“The authorities also plan to complete the settlement of existing verified arrears, including those to pension funds,” he said.
“Budget implementation in 2015/16 faces challenges arising from
possible shortfalls in financing and revenue, unbudgeted expenditures
carried forward from 2014/15, and the need to make space for the new
government’s priorities. Against this backdrop, early action to adjust
the budget is welcome and will help prevent further arrears
accumulation. Changes to programme design will provide more flexibility
in debt management and should be accompanied by continued efforts to
enhance debt and public investment management capacity,” he added.
“The current monetary policy stance should bring inflation down to
the authorities’ 5 percent target by the end of 2016. The use of foreign
exchange intervention should be limited to liquidity management and
smoothing volatility in the foreign exchange market, with higher
reliance on domestic-currency instruments to address excess liquidity.
Better coordination of fiscal and monetary policy would make it easier
for the Bank of Tanzania to focus on its main inflation objective.
“Putting Tanesco, the power utility, on a sound financial footing
is critical for the development of the energy sector, making the
completion of the authorities’ strategy to address Tanesco’s arrears a
priority.”
The PSI is an instrument of the IMF designed for countries that do
not need balance of payments financial support. The PSI helps countries
design effective economic programmes that, once approved by the IMF's
Executive Board, signal to donors, multilateral development banks, and
markets the Fund's endorsement of a member's policies.
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