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Tanzania : IMF Executive Board Approves Three-Year Policy Support Instrument for Tanzania

July 17, 2014

The Executive Board of the International Monetary Fund (IMF) today approved a new three-year Policy Support Instrument (PSI) for Tanzania. The IMF recently concluded the final review of the country s economic performance under a Standby Credit Facility (SCF) arrangement, together with the Article IV consultation with Tanzania on April 25, 2014. The SCF expired on April 30, 2014.

The PSI for Tanzania aims to support the authorities medium-term objectives. These include: the maintenance of macroeconomic stability, the preservation of debt sustainability, and the promotion of more equitable growth and job creation.

Following the Executive Board discussion, Mr. Naoyuki Shinohara, Deputy Managing Director and Acting Chair, said:

Tanzania is expected to sustain its recent positive macroeconomic performance over the medium term, leading to a gradual reduction relative to Gross Domestic Product (GDP) of its still large current account deficit. This positive outlook is predicated in part on the authorities intention to undertake further reforms to improve the investment climate and diversify the economic base.

The current budget appropriately targets a smaller deficit than in the previous fiscal year. Going forward, the authorities will need to continue the fiscal adjustment underway while opening up room for badly needed spending on infrastructure and social services. Steps to mobilize additional revenues and improve public financial management, including by addressing domestic arrears, will be critical, in this regard. Although Tanzania remains at a low risk of debt distress, fiscal risks, including those arising from public enterprises and social security funds, need to be better monitored and managed.

Tanzania stands to benefit from potential revenues from offshore extraction of natural gas, likely to start in the early 2020s. In approving the PSI, the IMF Executive Board stressed the need for a comprehensive framework to manage natural resource wealth. Such a framework should ensure full integration of resource revenues in the budget, and institutionalize the transparency and accountability of spending decisions.

The authorities failed to provide accurate information to the Fund with respect to the accumulation of new external arrears by the government within the context of completion of several reviews under the recent PSI. The inaccurate reporting of arrears data, associated with a government-guaranteed lease contract with a public enterprise, also gave rise to a non-complying disbursement under the SCF arrangement.

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Source: TendersInfo (India)

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