IMF tells Tanzania low debt allows for more borrowing
DAR ES SALAAM, TANZANIA---THE Tanzanian government has been given the greenlight by the International Monetary Fund (IMF) to borrow more money for new infrastructure since its debt obligations are well under control.
An IMF team lead by Mauricio Villafuerte, visited Tanzania last month, to conduct a review. In its report it states, ‘It is noted the importance of mobilizing external financing to step up the pace of planned capital spend- ing. Tanzania is at low risk of external debt distress and has room to borrow externally on concessional and nonconcessional terms to meet its financing needs’.
The IMF team was in Dar es Salaam to talk with the authorities on the fifth review under the Policy Support Instrument (PSI) program that was approved on July 16, 2014.
The PSI is an instrument of the IMF designed for countries that do not need balance of payments financial support. The PSI helps countries design effective economic programs that, once approved by the IMF’S Executive Board, signal to donors, multilateral development banks, and markets the Fund’s endorse- ment of a member’s policies
The IMF Mission said in a statement ‘Notable progress has been made in stepping up revenue collections and, based on data for the first quarter, the ambitious program target for the 2016/17 fiscal year is within reach. However, current spending has been lower than programmed.
‘Together with the customarily slow pace of project implementation at the beginning of the fiscal year, this has led to a fiscal surplus in the first quarter. In addition, liquidity conditions have been tight contributing to upward pressure on borrowing costs in the economy’.
Tanzanian authorities were commended for improving the efficiency of spending, but cautioned about not compromising service delivery.
Options for easing liquidity were offered, including liberalizing further the capital account in line with commitments under the East African Monetary Union Protocol; acquiring a sovereign credit rating to expand Tanzania’s opportunities to borrow abroad; and widening the range of monetary policy tools. ‘The mission welcomed the adoption of the second Five-year Development Plan. The mission noted that it was essential to improve the dialogue with the private sector and accelerate reforms to bolster the business environment’.