IMF: Tanzania's economy on the rebound with estimated growth of 6 per cent

Dar es Salaam. The International Monetary Fund (IMF) says Tanzania’s economy has rebounded - what with an estimated annual growth projection of six per cent in 2020 being made. This would be an improvement over the four percent growth the Fund had projected for the country last year.

However, this latest IMF projection is still below the seven per cent growth that is currently quoted in government reports.

The Washington, DC-based IMF also said yesterday that Tanzania had made prudent monetary and fiscal policies in recent times.

This was after the development partner completed its 2020 Article IV Mission to the country on Wednesday this week. The Mission noted some progress in private investment and jobs creation. However, it stressed that there is a pressing need for targeted economic reforms to be implemented soonest.

The Tanzania Finance and Planning minister, Dr Philip Mpango, was recently quoted as saying the economy would grow at seven percent. But he was not immediately available yesterday to comment on the latest developments, including IMF’s findings.

“The pace of economic activity appears to have increased in recent months, fueled by higher public investment, a rebound in exports, and an increase in credit to the private sector,” IMF says.

The Mission team - which was in the country since February 20 this year, and held discussions with the relevant Tanzanian authorities - commended the latter for their intention to improve governance in tax administration.

A member of the Mission, Mr Gelbard, called for tax reforms to improve the business climate, as well as increase government revenues.

The report also emphasized urgency in adhering to efficient means of tax collection and control, notably through the use of risk-based audits.

“This would ensure better compliance and timely payment of tax refunds, as well as improve companies’ cash flows,” he said in a statement posted on IMF’s website.

The report further says that 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.

The report also suggests 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.

This, the report says, will be essential to improve businesses’ cash flows, ensure that bank loans are repaid 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, as well as effectively addressing key infrastructure gaps.

Such expenditures would need to be carefully designed and prioritised in order to reap potential benefits in terms of better social conditions and high rates of economic growth, the report stresses.

Mr Gelbard also said that the government must always ensure that financial systems remain stable and the authorities plan to proceed with measures to further reduce nonperformingnon-performing loans, and improve banking supervision, to protect banks’ soundness.

He was of the view that costs of borrowing be lowered, access to credit be improved and the pool of acceptable collateral be broadened.

“It is important to improve the framework for credit information, and tackle judicial bottlenecks for the recovery of unpaid loans,” he said.

The report also counsels on the need to accelerate implementation of business environment reforms - in this case, referring in particular to the government’s Blueprint for Regulatory Reforms.

IMF also suggests wider publication of the action plan containing a timetable and a description of responsibilities, the rationalisation of agencies, licences and permits, and the removal of non-tariff barriers (NTBs) to trade.

“The economic prospects depend on enhancing the attractiveness for investing in Tanzania,” the report states.

“In the period ahead, a robust and decisive set of policies will be critical to increasing private sector investment and jobs creation, as well as support high economic growth even as it increases resilience against risks.”

Based on the preliminary findings of the IMF Mission, staff will prepare a report that is subject to management approval, before presenting it to IMF’s Executive Board for discussion and final decision.