[stop-imf] IMF Plans for Tanzania

[Robert Weissman]

For accompanying charts, see
http://www.imf.org/external/np/sec/pr/2000/PR0025.htm

Press Release No. 00/25 
April 5, 2000International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA

IMF Approves Poverty Reduction and 
Growth Facility Loan for Tanzania

The International Monetary Fund (IMF) approved a three-year loan for
Tanzania under the Poverty Reduction and Growth Facility (PRGF)1
equivalent to SDR 135 million (about US$181.5 million) to support the
government's 2000-2002 economic program. The first annual loan, equivalent
to SDR 60 million (about US$80.7 million), will be available in 3
installments, with the equivalent of SDR 20 million (about US$26.9
million) available immediately.
In commenting on the Executive Board discussion on Tanzania, Shigemitsu
Sugisaki, Deputy Managing Director of the IMF, made the following
statement:
"The Tanzanian authorities are to be commended for the strong record in
stabilizing the economy under the 1996-99 program supported by a previous
three-year arrangement under the PRGF. The large decline in inflation from
close to 30 percent in 1995 to little more than 6 percent in February 2000
and the strengthened external position are the result of strong
macroeconomic policies, which have been implemented despite setbacks due
to adverse weather conditions in recent years. 
"While growth has increased, it has fallen short of the objectives because
of the adverse weather and poor infrastructure, as well as delays in
structural reforms and the unfinished reform agenda. The authorities
intend to address the remaining structural reform issues during the coming
three years. Poverty remains widespread in Tanzania and the authorities
are placing increased emphasis on poverty reduction policies, which are
being developed in a broad-based consultative process. The authorities
have already prepared an interim Poverty Reduction Strategy Paper (PRSP)
and a full PRSP is scheduled to be completed later this year. 
"Tanzania intends to make further rapid progress in completing the
transition to a private sector-led economy in the context of the new PRGF
arrangement. Important aspects of this are the transfer to private
management of most of the larger parastatals, but also continuing the
civil service reform and improving transparency and eliminating
corruption. With the reforms that are now being undertaken, Tanzania will
be well placed to move onto a path of sustained high growth and poverty
reduction. Nevertheless, there will be a continued need for large amounts
of highly concessional international assistance," Sugisaki said.
ANNEX
Program Summary
Since renewing its adjustment efforts at the beginning of 1996, Tanzania
has made major progress in macroeconomic stabilization and has carried its
far-reaching program of structural reform substantially further. Monetary
restraint has brought inflation to less than 7% and kept real interest
rates positive. Annual economic growth has fallen short of the targeted
6%, partly because of erratic weather; it nonetheless averaged 4.2% during
the last few years, resulting in a rise in per capita incomes.
With macroeconomic stability largely achieved, Tanzania's economic program
for 2000-2002 focuses on removing impediments to higher growth, with the
aim of reducing poverty. To this end, the key objective is to achieve
economic growth of at least 6% annually. At the same time, expenditure
control mechanisms and tax administration are being strengthened, while
monetary policy is designed to further reduce inflation. Structural
reforms to deepen financial and capital markets are expected to provide
additional resources for private sector investment. 
With the progress in stabilization, the government should no longer need
to repay domestic financing, freeing fiscal resources for the priority
sectors. In addition to the completion of the tax reform and further
improvements in tax administration and a focus of expenditures on the
priority sectors in the context of a medium-term framework, an important
aspect of fiscal policies in the next few years will be the strengthening
of expenditure control through the full implementation of a new integrated
financial information and management system.
The structural reform agenda includes the restructuring and privatization
of utilities and other parastatal monopolies and the implementation of
regulatory frameworks. Other public sector reforms will be based on the
recently approved Public Service Reform Program, which includes further
rationalization of the civil service and the continuing improvement of
salaries, resources permitting, to competitive levels.
Poverty Reduction Strategy
By August 2000, the government intends to prepare a Poverty Reduction
Strategy Paper (PRSP), outlining its policies to reduce poverty by raising
growth and involving the poor in development. The strategy will be based
on a consultative process. The PRSP will provide a basis for monitoring
the implementation and evaluating the impact of poverty reduction
programs, and facilitate the development of baseline data for assessing
the status of poverty and welfare. During 2000, a household budget survey,
a pilot labor force survey, and a large part of the district-based school
mapping survey will be carried out. The results will be used to further
develop monitoring indicators, following short and medium-term targets
that can be set. Immediate actions to improve the health of the population
will include increased immunization of children, as well as the launching
of campaigns to raise awareness of HIV/AIDS. 
Tanzania joined the IMF on September 10, 1962. Its quota2 is the
equivalent of SDR 198.9 million (about US$267.5 million). Its outstanding
use of IMF financing currently totals the equivalent of SDR 223.3 million
(about US$300.3 million).