IMF says Tanzania economic performance remains strong
A team from the International Monetary Fund (IMF), led by Hervé Joly, visited Tanzania from March 10-23, 2016. The mission initiated the fourth review under the Policy Support Instrument (PSI) program that was approved on July 16, 2014. also held discussions with the authorities on the 2016 Article IV Consultation. Mr. Joly on the occasion said, "Economic performance has remained strong. Preliminary estimates suggest that GDP grew by 7 percent in 2015, with activity particularly buoyant in the construction, communication, finance, and transportation sectors. Economic growth is expected to remain close to 7 percent in 2016. Inflation remained in single digits throughout 2015, averaging 5.6 percent, despite the significant exchange rate depreciation in the first half of the year. The tightening of monetary policy in May 2015 and the decline in global commodity prices, especially oil prices, helped keep inflation at moderate levels. Inflation is expected to decrease further in the coming months, remaining close to the authorities' medium-term target of 5 percent.
The Article IV discussions focused on how to sustain high growth and implement the new government's priorities while preserving fiscal sustainability. Vigorous reforms will be needed to foster further structural transformation of the economy and sustain high productivity gains and investment.
There was a broad convergence of views on the priority reform areas and on the key role of the government in facilitating private sector-led growth. Modernizing agriculture, which employs a large share of the population, would raise rural incomes and contribute to poverty reduction. It would also free labor resources for other sectors of the economy and could foster the development of certain industries, such as food processing. Improving the business environment is also a priority; this includes, among others, better energy and transportation infrastructure and improving access to land and finance. Further improving the financial sustainability of the public electricity utility, TANESCO, and settling outstanding arrears on gas and electricity supplies are critical to facilitating continued private sector investment in energy. Tanzania could significantly benefit from the completion of the East African Community (EAC) common market, which would help attract capital and foster competition and efficiency. The mission welcomed the efforts being made by the authorities in their strong drive against corruption, noting that it would help address the perception that governance had deteriorated in recent years, as suggested by a number of surveys.