On Following the completion of the fifth review of Tanzania’s economic performance under the Policy Support Instrument (PSI), the Executive Board of the International Monetary Fund (IMF) has announced an additional US$57 million for disbursement to the East African country.
In a statement made available to PANA here Friday, the Fund said the amount brought total resources available for potential disbursement under the arrangement to about US$114 million.
The Board has also approved the Tanzanian authorities’ request for a waiver of non-observance of the continuous performance/assessment criterion on the ceiling on external non-concessional debt contracted or guaranteed by the government.
According to the statement, IMF staff judged that the non-observance would not materially affect the country’s debt sustainability.
Following the Executive Board’s discussion on Tanzania, IMF Deputy Managing Director and Acting Chair Mr. Naoyuki Shinohara said: “The Tanzanian authorities are to be commended for their prudent policy management and progress in stabilising the economy. The overall macroeconomic outlook remains favourable, with buoyant growth and declining inflation. Continued tight fiscal and monetary policies are crucial for securing sustainability.
“The planned tightening of monetary policy is appropriate in view of the remaining inflationary pressures. The authorities are committed to taking additional measures if needed to attain the targeted decline in inflation.”
In Shinohara’s view, Tanzania’s budget for 2012/13 appropriately balanced the country’s development and social spending needs with the debt-stabilising objective.
He observed that in order to preserve the fiscal consolidation path and avoid a build-up of arrears, any revenue shortfalls would be offset by cutbacks in recurrent and non-priority capital expenditures while safeguarding critical social spending.
Any financial support to the energy sector would be accommodated within the existing fiscal framework, he said, noting that an action plan was being finalised to address the financial challenges facing the power utility, preventing costly power outages and large quasi-fiscal losses.
“Structural reforms under the programme aim to secure fiscal sustainability and support a strong economic expansion in the medium term. Priorities include modernising the VAT regime, strengthening public financial management, and improving debt management.
“Tanzania’s large current account deficit and related vulnerabilities call for readiness to adjust policies in the event of external shocks, with a view to preserving macroeconomic stability and keeping the programme on track. The floating exchange regime would continue to provide helpful flexibility in this regard,” Shinohara added