The recent efforts by Tanzania to step up external financing mobilization and ease the liquidity situation should help enhance 2016/17 budget implementation, International Monetary Fund (IMF) advised.
The move would help to avoid further accumulation of domestic payment arrears, and support credit to the private sector. IMF observed that the 2017/18 budget reaffirms the authorities’ objective of scaling up public investment while preserving fiscal sustainability.
“However,” Mr Tao Zhang, Deputy Managing Director and acting Chair said, “potentially overoptimistic revenue projections call for its prudent implementation, including by delaying some large projects until the availability of revenues is confirmed during the mid-year budget review.”
According to IMF, the East African country is committed to pursue further public financial management reforms, including strengthening commitment controls to limit the accumulation of new domestic payment arrears.
“Recent measures to loosen the monetary policy stance are appropriate given the benign inflation outlook and decelerating credit growth. “Going forward, the duration and extent of monetary loosening should be coordinated with fiscal developments,” Mr Tao said.
Also, plans to foster credit standards and increase capital buffers are key initiatives to ensure the banking system’s soundness. “To achieve the [country’s] development agenda and maintain high economic growth… more predictable business environment, is critical,” he said.
According to IMF, the Tanzania’s macroeconomic performance remains robust while the medium-term outlook stays favourable.
The Breton Wood institution said in the Policy Support Instrument (PSI) six months outlook to this month that the performance under the instrument “has been satisfactory” despite some challenges. Thus in completing the review, the IMF approved the country’s request for a six-month extension of the current PSI arrangement to next January.
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