Tanzania to receive Sh2.4 trillion IMF loan

Dar es Salaam. Tanzania will receive a total of $1.046 billion (Sh2.4 trillion) from the International Monetary Fund (IMF) over 40 months in an effort to help the country’s economy to cope with consequences of war in Ukraine as it recovers from the effects of the global Covid-19 pandemic.

“Spillovers from the war in Ukraine are stalling the Tanzanian economy’s gradual recovery from the Covid-19 pandemic, exacerbating the country’s development and reform challenges to unleash its economic potential,” the IMF said in a statement that was availed to The Citizen yesterday.

During the past few months, Tanzania, just like many other countries in the world, has seen a rise in prices of a number of products, including fuel, wheat, fertilizer and cooking oil among others, primarily due to a rise in demand as the global economy recovers from the Covid-19 pandemic and a disruption of commodity delivery channels due to the war in Ukraine.

This has forced President Samia Suluhu Hassan’s administration to come up with a raft of measures in an effort to strike a balance between bringing down the spiralling cost of living and maintaining its tempo of investing in mega infrastructure projects while simultaneously creating an enabling environment for the private sector to thrive.

Though there was no immediate reaction from the government, it is common knowledge that the President Samia’s administration was subsidizing fuel prices to make it affordable to motorists and manufacturers.   

In light of the developments, the IMF exuded its support to Tanzania’s economic stimulation plan, with its [IMF’s] experts saying the country will need help to carry out reforms and unleash its economic potential.

Tanzania is to immediately receive the equivalent of $151.7 million (about Sh349 billion). It had already received a loan of $567 million (about Sh1.3 trillion) at the end of 2021 to meet its most urgent needs, when the Covid-19 pandemic had hampered its economic development, particularly in the tourism sector.

The project – which was announced on Monday - is part of the Extended Credit Facility (ECF) and is intended to help finance reforms to improve Tanzania's financial stability, carry out public investments and support the private sector.

"Recognizing Tanzania's strong track record in reform implementation, directors supported the authorities' requests for an ECF arrangement to meet pressing financing needs," the IMF deputy managing director and acting chairman of the executive board, Mr Bo Li, said in the statement.

He said the IMF board arrived at the decision after realizing that the IMF-supported program would help catalyze additional external financing, support a gradual recovery while increasing social and development spending, and anchor Tanzania’s National Development Plan.

 “Directors welcomed the authorities’ commitment to rebalance expenditure towards social spending and improve its efficiency and execution. They highlighted that creating additional fiscal space for priority spending requires raising government revenue, improving spending quality, and containing fiscal risks from state-owned enterprises, public private partnerships and local governments….,” the statement reads.