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IMF Staff Completes 2020 Article IV Mission to Tanzania

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Via IMF (Den Internationale Valutafond)

IMF Staff Completes 2020 Article IV Mission to Tanzania







March 5, 2020







End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.





  • Supported by prudent monetary and fiscal policies, Tanzania’s economic conditions remain stable, with economic growth estimated at about 6 percent, inflation at under 5 percent, an adequate level of foreign reserves, and manageable public debt.
  • In the period ahead, a robust and decisive set of policies will be critical to increase private sector investment, job creation, and support high economic growth and increase resilience against risks.
  • The discussions centered on measures to mobilize domestic revenue, resolve government arrears on VAT refunds and expenditures, increase spending in education and health while improving the efficiency of such spending as well as that of public investment projects, remove barriers and regulations affecting the business climate, and build skills in the labor force.

An International Monetary Fund (IMF) team, led by Mr. Enrique Gelbard,
visited Tanzania from February 20 to March 4, 2020. The mission held
discussions with the authorities on the 2020 Article IV Consultation. At
the end of the visit, Mr. Gelbard, issued the following statement:

“The pace of economic activity appears to have increased in recent months
prompted by higher public investment, a rebound in exports, and an increase
in credit to the private sector. As a result, real GDP growth is estimated
to be close to 6 percent, with activity buoyant in the construction and
mining sectors. Other economic indicators point to a benign economic
environment, with annual inflation at 3.7 percent, a stable exchange rate,
foreign exchange reserves equivalent to near 5 months of imports, and
public debt at below 40 percent of GDP.

“Prudent fiscal and monetary policies have delivered economic stability. To
sustain these gains, increase private investment, and create jobs, there is
a pressing need to proceed with targeted economic reforms.

“First, tax reforms are needed to improve the business climate and increase
government revenues. The mission team commended the authorities for their
intention to improve governance in tax administration and emphasized the
urgency to adhere to efficient means of tax collection and control, notably
through the use of risk-based audits. This will ensure better compliance
and timely payment of tax refunds and improve companies’ cash flows.
Although a comprehensive review of tax exemptions and their further
rationalization (particularly of income tax incentives) is also needed,
there is a significant and immediate revenue potential from the expansion
in the number of taxpayers together with improvements in tax administration
and compliance in line with established protocols and regulations.

“Second, regarding government spending, the implementation of planned
measures to clear the backlog of expenditure arrears, account for them on a
timely basis, and prevent the accumulation of new ones will be essential to
improve businesses’ cash flows, ensure that bank loans are paid back on
time, and sustain economic activity. In addition, spending on health and
education will need to be scaled up in coming years while ensuring quality
of education and medical services and addressing key infrastructure gaps.
Such expenditures will need to be carefully designed and prioritized in
order to reap potential benefits in terms of better social conditions and
high rates of economic growth.

“Third, the financial system remains stable and the authorities plan to
proceed with measures to further reduce non-performing loans and improve
banking supervision to protect banks’ soundness. To lower the costs of
borrowing and improve access to credit, broadening the pool of acceptable
collateral, improving the framework for credit information, and tackling
judicial bottlenecks for the recovery of unpaid loans will be particularly
important.

“Fourth, the economic prospects also depend on enhancing the attractiveness
for investing and producing in Tanzania and increasing the skills of the
labor force. On the former, in addition to the authorities’ anti-corruption
stance, there is a need to accelerate the implementation of business
environment reforms (the Blueprint for Regulatory Reforms) starting with
the publication of the action plan containing a timetable and a delineation
of responsibilities, the rationalization of agencies and licenses and
permits, and the removal of nontariff barriers to trade. On the latter,
following up on the regular dialogue with the private sector and investing
in education and expanding training and vocational programs will be
critical, together with a more flexible and expeditious system of visa/work
permits for specialized foreign workers.

“Lastly, the authorities’ commitment to take steps to improve the quality
and timeliness of indicators of economic activity and of GDP (through
improvements in economic surveys and publication of high-frequency
indicators and surveys’ results) as well as of the fiscal accounts are
particularly welcomed.

”The IMF Executive Board is expected to discuss the 2020 Article IV
Consultation report by May 2020.

“The IMF team met with Hon. Dr. Philip Mpango, Minister of Finance and
Planning, Professor Florens Luoga, Governor of the Bank of Tanzania, other
senior government officials, and representatives of the business and
banking sectors and development partners. The team thanks the authorities
for constructive and open dialogue during the visit.”


IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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