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Monetary Fund Commends Tanzania On Economy

May 6, 2014

The International Monetary Fund (IMF) has commended Tanzania for the broadly satisfactory implementation of her economic program supported by the Fund's Standby Credit Facility.

The commendation came recently when the Executive Board of the IMF last week concluded the third and final review of an arrangement under the Standby Credit Facility (SCF) with Tanzania.

The SCF was approved in July 2012. In February 2013, the authorities drew the full accumulated amount of $114 million under the SCF arrangement through that date.

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

According to the Executive Board Deputy Managing Director Min Zhu, the Board also concluded the 2014 Article IV consultation; a press release will be issued separately.

Zhu said: "The Tanzanian authorities are to be commended for the broadly satisfactory implementation of their economic program supported by the Fund's Standby Credit Facility. Prudent macroeconomic policies have delivered buoyant economic growth and successful disinflation."

He said 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.

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

He said: "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. Efforts will be needed to mobilize additional revenue, beginning with the VAT reform, and ensure revenue assumptions are realistic, so as to eschew the accumulation of new arrears and avoid abrupt expenditure cuts during budget executio."

A crucial medium-term challenge will be to set up appropriate institutional arrangements to ensure 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."

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."

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Source: AllAfrica

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