The controversial  2019 International Monetary Fund (IMF) Report on Tanzania is finally out. It has been circulated in Tanzania through Social Media by the Member of Parliament for Kigoma, Zitto Zuberi Kabwe.

The IMF said in an earlier statement the Tanzania Government had asked the Fund to NOT make the report public. Economists, including Tanzania’s Dr. Ibrahim Haruna Lipumba warned refusal to publish the report would carry negative  consequences.

The report describes Tanzania’s economic growth as weakening on account of  unpredictable policies.  The country’s Finance Minister, Dr. Philip Mpango told parliament the Government has not stopped the IMF from publishing the report but consultations were in progress to find ways of including Government views into the final report.  The IMF Report follows:

 

Context

In the past decade, Tanzania has experienced macroeconomic stability, relatively high

rates of economic growth, and improvements in a number of social indicators. However,

some recent initiatives have weighed on the business and investment climate, while

inefficiencies in fiscal management have led to a build-up of expenditure arrears and

delays in VAT refunds. This backlog has also contributed to higher non-performing

loans, rising financial sector vulnerabilities, and a slowdown of credit to the private

sector.

 

Outlook and risks

Looking ahead, the country faces significant development challenges: a large

infrastructure deficit, insufficient human capital, poverty, and underemployment. Rich in

natural resources and a potential gateway for trade in the region, Tanzania could

achieve robust economic growth if policies focus on growth-enhancing public

investments and on improving fiscal management and the business environment, all of

which could increase competitiveness and leverage much-needed private investments.

 

Alternatively, delays or little progress in implementing structural reforms, unpredictable

and interventionist policies, and a rushed scaling-up of public investments that may not

have a high rate of return will have a detrimental effect on growth and development.

Reforms to support inclusive, private sector-led growth and financial stability

Reforms should focus on nurturing the business climate by aligning laws and

regulations with those applied in competitive economies, implementing a schedule to

clear government spending arrears and VAT refunds, and ensuring that no new arrears

are incurred. In addition, there is a need to prioritize public investments with the highest

payoff as determined by high quality assessments, clear arrears in the electricity sector

and move forward with reforms that can increase distribution efficiency and

connectivity, increase private sector participation and reliance on market mechanisms in

agriculture, revisit education and visa policies to ensure the availability of required skills

in the labor force, reduce vulnerabilities to corruption, and close gender gap.

 

Lastly, it will be important to reduce vulnerabilities in the banking sector by following up on the recommendations of the recent Financial Sector Stability Analysis and ensure exchange rate flexibility to absorb shocks and support the transition to an interest rate-based monetary policy framework.  Download the Whole report here.