Press Release No. 24/378

IMF Reaches Staff-Level Agreement with Tanzania on the Fourth Review of the Extended Credit Facility and the First Review of the Resilience and Sustainability Facility

October 17, 2024

• The Tanzanian authorities and the IMF have reached staff-level agreement on the fourth review under the Extended Credit Facility (ECF) and the first review under the Resilience and Sustainability Facility (RSF).
• Economic growth momentum is picking up in 2024 with improved external and fiscal balances and low inflation. Policy priorities continue to be focused on enhancing exchange rate flexibility, strengthening the monetary policy framework, continuing to implement growth-friendly fiscal consolidation, enhancing domestic revenue mobilization, and expediting structural reform implementation.
• The RSF is supporting the authorities’ efforts to advance structural reforms and investments in adaptation and mitigation to address risks and challenges associated with climate change.

Washington, DC: A staff team from the International Monetary Fund (IMF) led by Mr. Charalambos Tsangarides, IMF mission chief for Tanzania, visited Dodoma and Dar es Salaam from October 2 to 17, 2024, to hold discussions with the authorities on the fourth review under the Extended Credit Facility (ECF) and the first review under the Resilience and Sustainability Facility (RSF). Subject to approval by the IMF Executive Board,  the review will make available SDR198.61 million (about US$265.78 million), bringing the total IMF financial support under the ECF arrangement to SDR568.84 million (about US$758.11 million), and SDR85.24 million (about US$114.07 million) under the RSF.

At the conclusion of the mission, Mr. Tsangarides issued the following statement:

“I am pleased to announce that the IMF team and the Tanzanian authorities have reached a staff-level agreement on the policies needed to complete the fourth review under Tanzania’s ECF-supported program, and the first review of the RSF arrangement. The IMF’s Executive Board will discuss these requests in the coming weeks.

“The momentum in Tanzania’s economy is continuing in 2024 with economic activity growing at about 5.4 percent in the first half of 2024 after an annual growth of 5.1 percent in 2023. Inflation in September remained stable at 3.1 percent (yoy), well within the Bank of Tanzania (BoT) target. Earlier headwinds to the economy have subsided, and improved liquidity in the foreign exchange market has alleviated some of the shortage in the formal market, although pressures remain. The outlook is favorable, with growth expected to pick up to 5.4 percent in 2024; however, risks are tilted to the downside as intensification of regional conflicts, increased commodity price volatility, a global slowdown, reemergence of FX pressures in the first half of 2025, and climate related disasters, could weigh negatively on the economy.

“The current account deficit improved markedly to about 3.1 percent of GDP in FY2023/24 from 6.5 percent of GDP the previous year, on the back of strong service exports growth and a slowdown in imports of goods and services helped by lower commodity prices. Improvements in the current account balance year-on-year, a 13 percent exchange rate depreciation over the same period, and the seasonal inflows of dollars in the second half of the year have helped ease some of the foreign exchange market pressures. The BoT remains committed to continue to allow exchange rate flexibility to ensure a market determined exchange rate, while limiting FX interventions to avoid disorderly market conditions, in line with its intervention policy. Maintaining a moderately tight monetary policy stance will complement efforts to ease pressures in the FX market, while preserving price stability.

“Fiscal consolidation in FY2023/24 was achieved through improvements in tax revenue collections and adjustments in current spending. The FY2024/25 budget envisages continued growth-friendly consolidation, supported by tax policy and revenue administration efforts. The government is committed to increase priority social spending to protect the most vulnerable. The authorities’ structural reform agenda aims to support a resilient, sustainable, and inclusive growth through improving the business environment and strengthening governance.

“At its meeting in October, the BoT Monetary Policy Committee maintained the policy rate, the Central Bank Rate, at 6 percent, to contain emerging inflationary pressures. The BoT will continue to calibrate its monetary policy to maintain low and stable prices, while safeguarding the recovery of economic activities from the impacts of global economic shocks and unfavorable weather conditions.

“Supported by the RSF, the authorities are implementing their climate reform agenda to address climate policy challenges and enhance the resilience and sustainability of the Tanzanian economy. Efforts are underway to clearly define the institutional framework for climate change related policies and strengthen public investment management in line with climate impacts and risks. Progress on the implementation of the RSF reforms continues, and the authorities are mobilizing technical and financial assistance from development partners.

“The mission met with Minister of Finance, Dr. Mwigulu Nchemba, Bank of Tanzania Governor, Mr. Emmanuel Tutuba, other senior officials, development partners, and private sector representatives. The IMF team would like to thank the Tanzanian authorities and other counterparts for their hospitality, and the candid and productive discussions.”