The first review of Tanzania's three-year extended credit facility was authorized by the International Monetary Fund's executive board on Monday, enabling an immediate distribution of around $153 million in budgetary support, the IMF said in a statement.
According to the IMF, Tanzania's economic reform program is making good progress despite the difficult global economic climate, but policymakers should seek to increase domestic revenue while accelerating structural reforms to reduce bureaucracy and fight corruption.
From February 8 to February 23, 2023, a staff team from the International Monetary Fund (IMF) led by Charalambos Tsangarides met in Dodoma and Dar es Salaam to discuss the state of reforms and the government's top policy priorities in the context of the first review of Tanzania's forty-month program under the Extended Credit Facility (ECF)-supported program.
“In the near-term, temporary fiscal support should continue to safeguard the economy from spillovers of the war in Ukraine. Monetary policy will continue to be tuned to developments in actual and expected inflation, while allowing exchange rate flexibility to cushion the economy against external shocks,” a statement from the IMF read in part.
The international lender also noted that the move raises the total amount disbursed under the $1.04 billion loan agreement agreed for Tanzania last year to around $305 million.
“Program performance has been strong. All quantitative performance criteria and indicative targets for December 2022 were met, and two of the three structural benchmarks for December 2022 were completed on time,” IMF Deputy Managing Director Antoinette Sayeh said.
Tanzania may fund critical investments and social expenditures with the support of increased domestic income collection and improved spending effectiveness, she noted.
“Strengthening public finance management and oversight of state-owned enterprises is critical to contain fiscal risks,” and authorities should clear domestic arrears and prevent accumulation of new ones by strengthening cash management and commitment controls, she said.
Tanzania's risk of financial distress is still minimal, according to Sayeh, but low-interest financing must continue to be prioritized, and risks from prospective liabilities must be well managed.