A mission from the International Monetary Fund, led by Paolo Mauro, visited Dar es Salaam from October 23 to November 5, 2013; it conducted the biennial Article IV discussions, assessed performance under the Standby Credit Facility (SCF), and began discussions on a possible new Policy Support Instrument (PSI) program.
The mission met with Hon. Dr. William Mgimwa, Minister of Finance, Professor Benno Ndulu, Governor of the Bank of Tanzania, and other senior government officials.
The discussions also drew from inputs received during brainstorming meetings on medium-term economic policy priorities
held in August with the government, the central bank, parliamentarians, the private sector and civil society, and development partners. Mr. Mauro released the following statement at the end of the mission: “The economy has continued to perform well, growing by 7 percent in the first half of 2013. The economic outlook is promising, with growth projected to continue at a similar pace for the full year.
Overall inflation fell to 6.1 percent in September with core inflation (excluding food and fuel prices) at 5.8 percent. In light of broadly benign developments in domestic food prices and with a continued prudent monetary policy stance, inflation is projected to decline to the authorities’ medium term target of 5 percent by mid-2014. The current account deficit declined somewhat, but remained large, at 13½ percent of GDP in July 2012 – June 2013.
“Fiscal pressures emerged during the last fiscal year (FY 2012/13, July to June). Net domestic financing of the government was in excess of targets agreed under the government’s IMF-supported program, by about 1 percent of GDP. For the current fiscal year (July 2013 – June 2014), tax revenues are likely to fall short of initial projections. This is likely to require sizable adjustments to the budget in the upcoming mid-year review to align expenditure plans with the available resources. The government has reaffirmed its commitment to the agreed fiscal deficit target of 5 percent of GDP. To sustain economic growth and to stem fiscal pressures during the current and next fiscal year, priorities include mobilizing additional revenues by reducing and simplifying tax exemptions and bringing the power sector to financial sustainability.
“Key medium-term policy challenges include fostering continued strong growth through productive infrastructure investment, while preserving priority social spending, and maintaining debt sustainability; enhancing the institutional framework to ensure that possible future revenues from newly discovered natural gas deposits benefit all citizens; and improving the business climate.
“Discussions will continue in the coming weeks; the next IMF Executive Board meeting on Tanzania is tentatively planned in early 2014.
“The mission wishes to thank the authorities for their warm hospitality and for the constructive and open dialogue on policy issues.”