A Rule-Based Medium-Term Fiscal Policy Framework for Tanzania

November 1, 2009

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Daehaeng Kim, and Mika Saito. A Rule-Based Medium-Term Fiscal Policy Framework for Tanzania, (USA: International Monetary Fund, 2009) accessed November 23, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

A zero net domestic financing (NDF) target has served Tanzania well in recent years, contributing to prudent expenditure policy, improved fiscal sustainability, and macroeconomic stability. Moving to a more flexible fiscal policy, however, may serve Tanzania better. The "diamond rule" proposed in this paper incorporates a permanent hard ceiling on debt and annual benchmark limits on NDF, expenditure growth, and nonconcessional external financing. This rule would provide flexibility for countercyclical policy and help define the fiscal space for infrastructure spending that is consistent with longrun fiscal sustainability. An illustrative simulation shows that Tanzania has considerable fiscal space for development spending.

Subject: Budget planning and preparation, Expenditure, Fiscal policy, Fiscal rules, Public debt

Keywords: Annual budget, Debt ceiling, Debt sustainability, Expenditure policy, Present value, Real GDP, WP

Publication Details

Pages:

29
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2009/244
Stock No:

WPIEA2009244
ISBN:

9781451873917
ISSN:

1018-5941

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