Press Release No. 24/470

IMF Executive Board Concludes Fourth Review Under the Extended Credit Facility Arrangement and First Review Under the Resilience and Sustainability Facility Arrangement with Tanzania

December 13, 2024

• The IMF Executive Board today completed the fourth review under the Extended Credit Facility arrangement with Tanzania, allowing for an immediate disbursement of about US$ 148.6 million (SDR 113.37 million), and the first review of the 23-month arrangement under the Resilience and Sustainability Facility (RSF) arrangement, allowing for an immediate disbursement of about US$ 55.9 million (SDR 42.62 million).
• Economic growth momentum is picking up in 2024 with improved external and fiscal balances, low inflation within the central bank’s target, and easing pressures in the foreign exchange market.
• Tanzania’s economic reform program supported by the ECF arrangement remained on track. The authorities are committed to continue implementing reforms to preserve macro-financial stability, promote sustainable and inclusive growth, advance structural reforms, and address the risks and challenges associated with climate change, supported by the ECF and RSF arrangements.

Washington, DC: The Executive Board of the International Monetary Fund (IMF) completed the fourth review of the Extended Credit Facility (ECF) Arrangement for Tanzania, which was approved in July 2022 (see press release 22/265) for a total access of SDR 795.58 million (200 percent of quota—about US$ 1,046.4 million at the time of program approval). The completion of the review allows the immediate access to US$ 148.6 million (SDR 113.37 million), bringing total disbursement to Tanzania under the arrangement to about US$ 754.3 million. The ECF aims to preserve macroeconomic stability, strengthen the economic recovery, and promote sustainable and inclusive growth.

The Executive Board also completed the first review under the Resilience and Sustainability Facility (RSF) arrangement that was approved in June 2024 with total access of US$791.6 million (SDR 596.7 million,150 percent of quota). The completion of the review allows the immediate disbursement of about US$55.9 million (SDR 42.62 million). The RSF supports Tanzania’s ambitious reform efforts to implement climate policy reforms that address risks and challenges associated with climate change and enhance the resilience of the Tanzanian economy.

Tanzania’s economic reform program under the ECF arrangement remained on track. All end-June 2024 quantitative performance criteria and indicative targets were met. Performance on structural benchmarks was mixed, with three structural benchmarks completed on time, and two completed with delays. Three structural benchmarks (two of which were due end-June 2024, and one end-September 2024) were not completed, and the authorities have requested to reset of these SBs to end-March 2025 to allow sufficient time for completion.

Economic growth has gained momentum, with real GDP growth picking up to 5.4 percent (year-on-year) in the first half of 2024, from 5.1 percent in 2023. Inflation remains within the central bank’s target and a growth-friendly fiscal consolidation is underway. The current account deficit narrowed in FY2023/24, driven by strong exports of services and a slowdown in imports. Pressures in the foreign exchange market have eased, reflecting seasonal current account flows, a tight monetary policy stance, and exchange rate flexibility.  

Growth is expected to continue strengthening over the medium term, but risks are tilted to the downside. Near-term policy priorities include implementation of fiscal consolidation as envisaged in the budget, while preserving priority social spending, strengthening monetary operations, and continuing to allow exchange rate flexibility. The medium-term outlook is positive contingent on the steadfast implementation of the authorities’ reform agenda, anchored by the ECF arrangement. Additionally, the RSF supports the authorities’ efforts to address climate policy challenges and advance their climate reform agenda. 

Following the Executive Board discussion, Mr. Li, Deputy Managing Director and Acting Chair, issued the following statement:

“Tanzania’s reform program supported by the Extended Credit Facility (ECF) remains on track, and the growth outlook is favorable. The ECF program focuses on strengthening macro-financial stability and supporting sustainable and inclusive growth. The authorities’ strong commitment to their reform agenda remains important amid downside risks, combined with continued engagement and capacity support by development partners.

“The ongoing growth-friendly fiscal consolidation will help to create fiscal space and safeguard debt sustainability. Efforts should be geared toward implementing reforms to enhance domestic revenue mobilization and strengthen management and commitment controls. Improving public financial and investment management will help contain fiscal risks and improve the efficiency of public investment. Continued increase in the allocation of funds to priority social spending is needed to close Tanzania’s human capital and social development gaps.

“Pressures in the foreign exchange market have eased, reflecting seasonal current account flows, a tight monetary policy stance, and increased exchange rate flexibility. The latter should remain the first line of defense against potential reemergence of FX market pressures. The Bank of Tanzania (BoT) should continue its efforts to improve liquidity and price discovery in the FX market.

“The launch of the interest rate-based monetary policy framework was an important achievement and should be supported by further efforts to improve monetary policy effectiveness. Implementing and developing the communication strategy, strengthening the analytical tools and capacity of the central bank, and supporting the development of money markets would help enhance the monetary policy framework.

“Upgrading the financial supervision and regulatory frameworks, including by implementing FSAP recommendations, will help to buttress financial sector stability and promote financial deepening and inclusion. Completing efforts to align Tanzania’s legal framework with FATF standards and improve its effectiveness will strengthen the AML/CFT framework.

“Structural reforms are essential to promote private sector development and inclusive, resilient, and sustainable growth. Business reforms should focus on removing obstacles to foreign investment, simplifying the regulatory regime, enhancing governance and regulatory transparency, and improving public policy predictability. Implementation and enforcement of the authorities’ anti-corruption legislation and strategies are central to enhancing governance. Closing gender gaps would also support growth and inclusion.

“The authorities have begun implementing their ambitious climate reform agenda supported by the Resilience and Sustainability Facility (RSF) arrangement, which is also expected to help catalyze official technical and financial assistance and private sector financing.”