United Republic of Tanzania: Request for a Three-Year Policy Support Instrument-Staff Report; and Press Release

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Release Date: © July, 2014
ISBN : 978-1-49838-587-9
Stock #: 1TZAEA2014003
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Description

KEY ISSUES
Economic background and outlook. Tanzania has enjoyed strong and stable growth, projected to remain 
at 7 percent next year and in the medium term. Inflation is at 6 percent, gradually converging to 
the authorities’ 5 percent medium-term objective. The external current account deficit remains 
among the largest in the region, at 14 percent of GDP this year. Fiscal revenue shortfalls and 
overruns in domestically-financed spending led the deficit to rise to
6.8 percent of GDP in 2012/13. Revenue shortfalls in 2013/14 compared to the budget approved by 
parliament have prompted the authorities to undertake expenditure cuts during the fiscal year in an 
effort to meet their 5 percent of GDP target. Based on the debt sustainability analysis, Tanzania 
remains at low risk of debt distress.

Recent program engagement. Tanzania concluded its final review under a Standby Credit Facility 
(SCF) arrangement, together with its Article IV consultations, on April 25, 2014. The SCF expired 
on April 30, 2014.

Key challenges. Over the next three years, policymakers will face several challenges, including the 
following:
• Step up needed investment in infrastructure while protecting critical social spending. These 
objectives will need to be pursued following careful prioritization, to preserve government debt 
sustainability.

• Prepare for natural gas. If recent discoveries of sizeable offshore natural gas deposits are 
confirmed as commercially viable, sizable fiscal revenues would need to be managed to bring 
benefits to all Tanzanians.

Against this background, the authorities are requesting a three-year PSI to be in place by the 
start of FY2014/15. They see the PSI as an appropriate instrument to underpin the close policy 
dialogue with staff, provide a positive signal to donors and markets, and safeguard policy 
discipline.

Staff supports the authorities’ request for a PSI.




More publications in this series: IMF Staff Country Reports