Eco­nomic per­for­mance in Tan­za­nia re­mains strong: IMF

The Pak Banker - - COMPANIES/BOSS -

The Ex­ec­u­tive Board of the In­ter­na­tional Mon­e­tary Fund com­pleted to­day the third re­view of Tan­za­nia's eco­nomic per­for­mance un­der the pro­gram sup­ported by the Pol­icy Sup­port In­stru­ment (PSI).

In com­plet­ing the re­view, the Board also ap­proved mod­i­fi­ca­tion of the De­cem­ber 2015 as­sess­ment cri­te­ria on net in­ter­na­tional re­serves and tax rev­enue, a waiver for the missed June 2015 as­sess­ment cri­te­rion on tax rev­enue, and mod­i­fi­ca­tion of pro­gram de­sign con­sis­tent with the new debt lim­its pol­icy.

The PSI for Tan­za­nia was ap­proved by the Ex­ec­u­tive Board on July 16, 2014. Tan­za­nia's pro­gram un­der the PSI sup­ports the au­thor­i­ties' medium-term ob­jec­tives. Th­ese in­clude: the main­te­nance of macroe­co­nomic sta­bil­ity, the preser­va­tion of debt sus­tain­abil­ity, and the pro­mo­tion of more in­clu­sive growth and job cre­ation.

Fol­low­ing the Board dis­cus­sion, Mr. Mit­suhiro Fu­ru­sawa, Deputy Man­ag­ing Di­rec­tor and Act­ing Chair, said, macro- eco­nomic per­for­mance in Tan­za­nia re­mains strong and medium-term prospects are fa­vor­able. Per­for­mance un­der the Pol­icy Sup­port In­stru­ment, how­ever, has been mixed. While most as­sess­ment cri­te­ria for June 2015 were met, pro­gram im­ple­men­ta­tion slowed ahead of the Oc­to­ber 2015 elec­tions.

"The over­all deficit for 2014/15 ex­ceeded the pro­gram tar­get once the sig­nif­i­cant ac­cu­mu­la­tion of ex­pen­di­ture ar­rears is taken into ac­count, re­flect­ing short­falls in rev­enue and fi­nanc­ing, and weak ex­pen­di­ture com­mit­ment con­trols.

The in­com­ing au­thor­i­ties have taken ac­tion to strengthen con­trols and sanc­tions against ac­count­ing of­fi­cers that breach rules, in or­der to con­tain the ac­cu­mu­la­tion of new ar­rears. The au­thor­i­ties also plan to com­plete the set­tle­ment of ex­ist­ing ver­i­fied ar­rears, in­clud­ing those to pen­sion funds.

"Bud­get im­ple­men­ta­tion in 2015/16 faces chal­lenges aris­ing from pos­si­ble short­falls in fi­nanc­ing and rev­enue, un­bud­geted ex­pen­di­tures car­ried for­ward from 2014/15, and the need to make space for the new govern­ment's pri­or­i­ties. Against this back­drop, early ac­tion to ad­just the bud­get is wel­come and will help pre­vent fur­ther ar­rears ac­cu­mu­la­tion. Changes to pro­gram de­sign will pro­vide more flex­i­bil­ity in debt man­age­ment and should be ac­com­pa­nied by con­tin­ued ef­forts to en­hance debt and pub­lic in­vest­ment man­age­ment ca­pac­ity.

"The cur­rent mon­e­tary pol­icy stance should bring in­fla­tion down to the au­thor­i­ties' 5 per­cent tar­get by the end of 2016. The use of for­eign ex­change in­ter­ven­tion should be lim­ited to liq­uid­ity man­age­ment and smooth­ing volatil­ity in the for­eign ex­change mar­ket, with higher re­liance on do­mes­tic-cur­rency in­stru­ments to ad­dress ex­cess liq­uid­ity. Bet­ter co­or­di­na­tion of fis­cal and mon­e­tary pol­icy would make it eas­ier for the Bank of Tan­za­nia to fo­cus on its main in­fla­tion ob­jec­tive.

"Putting TANESCO, the power util­ity, on a sound fi­nan­cial foot­ing is crit­i­cal for the de­vel­op­ment of the en­ergy sec­tor, mak­ing the com­ple­tion of the au­thor­i­ties' strat­egy to ad­dress TANESCO's ar­rears a pri­or­ity."

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