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United Republic of Tanzania Staff Report for the 2016 Article IV Consultation and Fourth Review Under the Policy Support Instrument—Informational Annex

Author(s):
International Monetary Fund. African Dept.
Published Date:
July 2016
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Relations with the Fund

(As of May 31, 2016)

Membership Status: Joined: September 10, 1962;

Article VIII

General Resources Account:SDR Million%Quota
Quota397.80100.00
Fund holdings of currency338.0784.99
Reserve Tranche Position59.7315.01
SDR Department:SDR Million%Allocation
Net cumulative allocation190.51100.00
Holdings40.2021.10
Outstanding Purchases and Loans:SDR Million%Quota
ESF Arrangements161.1140.50
ECF Arrangements0.560.14
SCF Arrangements74.6018.75

Latest Financial Arrangements:

TypeDate of ArrangementExpiration DateAmount Approved (SDR Million)Amount Drawn (SDR Million)
SCFJul 06, 2012Apr 30, 2014149.1874.60
ESFMay 29, 2009June 14, 2010218.79218.79
ECF1Aug 16, 2003Feb 26, 200719.6019.60

Formerly PRGF.

Formerly PRGF.

Projected Payments to Fund1

(SDR Million; based on existing use of resources and present holdings of SDRs):

Forthcoming
20162017201820192020
Principal44.0460.6260.3444.4218.57
Charges/Interest0.040.500.350.280.16
Total44.0861.1260.6944.7018.72

Implementation of HIPC Initiative:

Commitment of HIPC assistanceEnhanced Framework
Decision point dateApril 2000
Assistance committed
by all creditors (US$ Million)12,026.00
Of which: IMF assistance (US$ million)119.80
(SDR equivalent in millions)88.95
Completion point dateNovember 2001
Disbursement of IMF assistance (SDR Million)
Assistance disbursed to the member88.95
Interim assistance26.68
Completion point balance62.27
Additional disbursement of interest income17.45
Total disbursements96.40

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Assistance committed under the original framework is expressed in net present value (NPV) terms at the completion point, and assistance committed under the enhanced framework is expressed in NPV terms at the decision point. Hence these two amounts cannot be added.

Under the enhanced framework, an additional disbursement is made at the completion point corresponding to interest income earned on the amount committed at the decision point but not disbursed during the interim period.

Implementation of Multilateral Debt Relief Initiative (MDRI):

MDRI-eligible debt (SDR Million)1234.03
Financed by: MDRI Trust207.00
Remaining HIPC resources27.03
Debt Relief by Facility (SDR Million)
Eligible Debt
Delivery DateGRAPRGFTotal
January 2006N/A234.03234.03

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

The MDRI provides 100 percent debt relief to eligible member countries that qualified for the assistance. Grant assistance from the MDRI Trust and HIPC resources provide debt relief to cover the full stock of debt owed to the Fund as of end-2004 that remains outstanding at the time the member qualifies for such debt relief.

Safeguards Assessments:

An update safeguards assessment of the Bank of Tanzania (BoT) was finalized in November 2012. Previous assessments were completed in December 2003, August 2008, and November 2009. The 2012 update assessment found a strengthened governance and safeguards framework at the BoT. Its Audit Committee continued to provide an active oversight of the audit, financial reporting, and control systems. The financial statements are prepared and audited in accordance with international standards. While the BoT has implemented most of the recommendations, progress in establishing a modern internal audit function has been slow.

Exchange Rate Arrangement:

The currency of Tanzania is the Tanzania shilling. Tanzania’s de jure exchange rate arrangement is free floating and its de facto exchange rate arrangement is classified as floating. The official exchange rate is determined in relation to the rate established in the interbank market for foreign exchange. The weighted average rate in the interbank market was TSh 2,193.43 per U.S. dollar as of June 7, 2016. The exchange system is free of restrictions on the making of payments and transfers for current international transactions.

Tanzania accepted the obligations of Article VIII, Sections 2, 3, and 4 of the IMF Articles of Agreement with effect from July 15, 1996.

Article IV Consultation:

The Executive Board concluded the last Article IV consultation on April 25, 2014 (Country Report No. 14/120).

Technical Assistance:

Tanzania assistance activities provided to Tanzania since 2012 are listed below.

Fiscal Affairs Department (FAD)Year of delivery
Tax Administration Diagnostic Assessment2016
Enhancing the Effectiveness of Commitment Controls2015
Fiscal Transparency Evaluation2015
Implementation of the Revised VAT Law2015
Natural Resource Management2015
Tax Policy2014
PFM Legal Framework2014
Fiscal Analysis and Reporting2014, 2016
Internal Audit2014
Resource Tax Administration2014
Improving the Management and Payment of VAT Refunds2014
Natural Gas: An Agenda of Fiscal Issues2013
Advancing Public Financial Management Reforms2012
Improving the Effectiveness of Tax Administration2012, 2014–15
Mining and Gas Fiscal Regimes and VAT Reform2012
Monetary and Capital Markets Department (MCM)
Insurance Supervision2016
Debt Management and Debt Market Development2015–16
Community Banks2015
A Code of Conduct for FX, Money and Repo Markets2015
Financial Stability Risk Assessment Framework2015–16
Financial Sector Regulations2015
Liquidity Management and Interbank Money Market2014
Consolidated Supervision2014–15
Basel II/III Regulations2014–15
Pension Supervision2014
Developing a Transitional Monetary Framework and Introducing Sukuk2014
Medium-Term Debt Management Strategy (jointly with The World Bank)2013
Supervisory Review of IFRS Compliance2013
Strengthening Crisis Management Framework2013
Legal Department (LEG)
Banking Law (EAC)2015
Fiscal Law2013–15
Natural Resources Tax2014
Statistics Department (STA)
Price Statistics2013–15
National Accounts2013–16
Government Finance Statistics2012, 2014–16
External Sector Statistics2012, 2016

Resident Representative:

Mr. Thomas Baunsgaard has been the Resident Representative since May 2012.

Statistical Issues

(As at May 31, 2016)

I. Assessment of Data Adequacy for Surveillance
General: Data provision is adequate for surveillance and program monitoring. The authorities – led by the National Bureau of Statistics (NBS) for the mainland and the Office of the Chief General Statistician (OCGS) for Zanzibar – have articulated a 5-year strategy under the Tanzania Statistical Master Plan. The Plan—a multipronged approach to improve collection and dissemination of statistics—is operationalized through a series of Annual Work Plans. The authorities will be focusing on carrying forward a number of ongoing initiatives, including ongoing efforts to update the legal framework governing statistical collection in Tanzania; improving the quality of national accounts data, especially from Zanzibar; rebasing the producer price index; and improving indicators of industrial production.
National Accounts: National accounts statistics for mainland Tanzania are prepared by the NBS. Separate accounts are compiled for Zanzibar by the OCGS. The data sources for estimating national accounts by expenditure category and the indicators used to extrapolate benchmark production levels suffer from deficiencies that complicate estimation of saving-investment. The accounts are based on the 1993 System of National Accounts (1993 SNA) and are published at current and constant (2007) prices.
Price Statistics: The NBS compiles a monthly consumer price index (CPI) for mainland Tanzania based on consumer expenditure in 21 urban centers. A separate price index is compiled for Zanzibar. An updated CPI with weights based on the 2011/12 HBS was released in February 2016. While the CPI basket has become more comprehensive, the geographical coverage of the index remains fairly narrow, focused on urban centers, whereas bulk of population live in rural areas. The producer price index (PPI) is compiled monthly and published quarterly and draws from surveys of business establishments with over 50 workers, with the basket based on the results of the 1999 Annual Survey of Industrial Production (ASIP). The NBS plans to improve and update the PPI, including by providing data for 2000–2006 and moving from the ISIC Rev. 2 classification to the newer ISIC Rev. 3.1. One key concern is the representativeness of the basket as it is based on a very old vintage of the ASIP.
Government Finance Statistics: The authorities provide Fund missions with monthly budgetary data on central government revenue, expenditure, and financing on a timely basis. Although the underlying concepts broadly follow the Government Finance Statistics Manual 1986, the reporting differs from international standards in coverage and the treatment of lending minus repayments, and transfer payments. Coverage of data on the budgetary operations of the central government refers to Tanzania mainland only –the Ministry of Finance of Zanzibar established a unit tasked with developing a fiscal reporting framework for Zanzibar. Data for general government are not available as no information is provided on the financial position of extra-budgetary funds and local governments, although the authorities have stated their intention to produce such reports over time.

Despite improvements in the recording of government transactions, discrepancies remain between data on government operations and financing. These discrepancies are related to the lack of a fully integrated set of accounts and inconsistencies in the delineation of the general government and its sub-sectors, differing source data, and timing differences. In addition, there appear to be gaps in the IFMIS that allow exchequers to be issued for work without corresponding entries in the Accountant General’s system, leading to arrears. This primarily affects multi-year development projects, including in road construction.

The Ministry of Finance created a database of donor-funded projects in FY2001/02, the Aid Management Platform (AMP) with donor assistance. Since then, the number of foreign-financed projects reported by and channeled through the budget has increased significantly. The integrity of AMP data can be affected by late entry of data by major donors, which gives rise to discrepancies.

The government has completed the computerization of its accounting system for budgetary units. The authorities resumed reporting in the Government Finance Statistics Yearbook (GFSY); a relative consistent time series of data has been reported for 2006–2014 for inclusion in the 2015 GFSY.
Monetary Statistics: The monetary statistics are broadly adequate for policy and analytical purposes. In addition to monthly compilation of the Standard Report Forms (SRFs), which the BoT shares with the Fund, the authorities have also been sharing daily developments in reserve money through the program period. Key improvements going forward would be to complement the SRFs with more timely compilation of statistics for non-banks and Islamic banking. The authorities have been publishing quarterly data on financial stability, though with a lag, coinciding with the publication of the Financial Stability Report. These data are made available on a more timely basis to Fund staff.
Balance of Payments: The BoP data, compiled by the Bank of Tanzania, are broadly adequate for surveillance. Data for merchandise exports and imports are recorded on the basis of Customs returns and supplemented by data from mining companies and crop boards. For services transactions, the chief data sources are the financial records of depository corporations and foreign exchange bureaus, supplemented with information on merchandise trade (freight and insurance), revenue data from the TRA (other insurance), and other international service providers. Data on travel receipts are obtained from International Visitors’ Exit Surveys. Current transfers, capital transfers and official financial flows are provided by donors and the Ministry of Finance. Data for direct investment income are estimated based on information obtained from the Private Capital Flow Survey (PSFS). East AFRITAC has provided assistance in international investment position statistics, and developing price and volume indices for international trade. In 2015, a DFID project was launched aiming to harmonize external sector statistics of five EAC countries over the medium term focusing on goods, services, and reserves components.
II. Data Standards and Quality
Tanzania intends to participate in the Enhanced General Data Dissemination Standard (e-GDDS) initiative. Metadata are posted on the IMF’s Dissemination Standards Bulletin Board (DSBB) and were last updated in January 2014. Tanzania is participating in the successor project to the Fund’s GDDS Project for Anglophone Africa (funded by the U.K. Department for International Development (DFID)).A mission to prepare the data module for the Report on the Observance of Standards and Codes (ROSC) was completed in October 2002. The report was published in March 2004.
Table of Common Indicators Required for Surveillance(As of June 16, 2016)
Date of latest observation (all dates in table use mm/dd/yy format)Date receivedFrequency of Data7Frequency of Reporting7Frequency of Publication7Memo Items
Data Quality – Methodological soundness8Data Quality – Accuracy and Reliability9
Exchange rate6/16/166/16/16D,MD,MD,M
International Reserve Assets and Reserve Liabilities of the Monetary Authorities14/30/165/27/16D,MD,MM
Reserve/Base Money4/30/165/27/16D,MD,MMLO, LO, LO, LOLO, O, O, O, LO
Broad Money4/30/165/27/16MMM
Central Bank Balance Sheet4/30/165/27/16MMM
Consolidated Balance Sheet of the Banking System4/30/165/27/16MMM
Interest Rates26/9/166/10/16W, MW, MM
Consumer Price IndexApril 20165/10/16MMMO, LO, O, LOLNO, LNO, LNO, O, O
Revenue, Expenditure, Balance and Composition of Financing3 – General Government4NANALNO, LNO, LNO, LOLO, O, O, LO, O
Revenue, Expenditure, Balance and Composition of Financing3– Central GovernmentMarch 20165/17/16MMQ
Stocks of Central Government and Central Government-Guaranteed Debt54/30/20165/31/16MMM
External Current Account BalanceApril 20165/27/16MMMLO, LO, LO, LOLO, LNO, O, LNO, LNO
Exports and Imports of Goods and ServicesApril 20165/27/16MMM
GDP/GNP20155/10/16Q,AQ,AQ,ALO, LO, LO, LOLNO, LNO, O, LO, LO
Gross External Debt4/30/166/3/16MMM
International Investment Position612/31/155/13/16AAA

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

This reflects the assessment provided in the data ROSC or the Substantive Update (published on March 12, 2004 and based on the findings of the mission that took place during October 8–22, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning (respectively) source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Any reserve assets that are pledged or otherwise encumbered should be specified separately. Also, data should comprise short-term liabilities linked to a foreign currency but settled by other means as well as the notional values of financial derivatives to pay and to receive foreign currency, including those linked to a foreign currency but settled by other means.

Both market-based and officially-determined, including discount rates, money market rates, rates on treasury bills, notes and bonds.

Foreign, domestic bank, and domestic nonbank financing.

The general government consists of the central government (budgetary funds, extra budgetary funds, and social security funds) and state and local governments.

Including currency and maturity composition.

Includes external gross financial asset and liability positions vis-à-vis nonresidents.

Daily (D); weekly (W); monthly (M); quarterly (Q); annually (A); irregular (I); and not available (NA).

This reflects the assessment provided in the data ROSC or the Substantive Update (published on March 12, 2004 and based on the findings of the mission that took place during October 8–22, 2002) for the dataset corresponding to the variable in each row. The assessment indicates whether international standards concerning concepts and definitions, scope, classification/sectorization, and basis for recording are fully observed (O); largely observed (LO); largely not observed (LNO); not observed (NO); and not available (NA).

Same as footnote 7, except referring to international standards concerning (respectively) source data, assessment of source data, statistical techniques, assessment and validation of intermediate data and statistical outputs, and revision studies.

Joint World Bank–Fund Work Program, 2016

TitleProductsProvisional timing of missions (if relevant)Expected delivery date
A. Mutual information on relevant work programs
Key elements of World Bank work program in next 12 monthsThe Systematic Country Diagnostics (SCD) for Tanzania will be submitted to the Board by September 2016. The SCD will inform the new Country Partnership Framework (CPF) starting from FY17.September 2016
The work program will continue to concentrate on areas within the existing portfolio. Currently there are four development policy operations (DPOs) under preparation.Continuous
The World Bank continues to lead and facilitate the Public Expenditure Review (PER) process in Tanzania with government and six other development partners. The focus will be on domestic revenue mobilization and business environment.Tax Workshop February 16, 2016Continuous
Analytical and TA work including: governance framework of extractive industries; ROSC; procurement value chain; macro-modeling TA (MACMOD); public expenditure review including revenue mobilization; urban review; poverty analysis; financial inclusion and financial sector deepening; skills; and environment and tourism; SDG monitoring.Continuous
IMF work program in next 12 monthsFourth PSI Review and Article IV ConsultationMarch 2016July 2016
Fifth PSI ReviewSeptember 2016January 2017
B. Requests for work program inputs
Fund requests to Bank1. Assessment of key infrastructure projects and sectoral programs.Continuous
2. Assessment of financial health of pension funds.Continuous
3. Assessment of the financial viability of the electricity utility.Continuous.
4. Inputs on the design of a social protection framework.Continuous
5. Inputs on sources of growth for private sector development and job creation.Continuous
Bank requests to Fund1. Monitoring of government contracting of non-concessional borrowing.Continuous
2. Monitoring of steps to strengthen corporate governance of the BoT and transition to interest-based monetary policy framework.Continuous
3. Sharing macro-framework updates.Continuous
4. Statement of fiscal risk and contingent liabilities.Continuous
C. Agreement on joint products and missions
Joint products in next 12 months1. Collaborate on a joint DSAMarch 2016July 2016
2. Continue to collaborate with other development partners on general and sector budget support, including ongoing discussions with Government about the future of the aid relationship.
3. Collaborate on PFM reform program in the context of multi-donor support of the Public Financial Management Reform Program and ongoing Open Government PFM DPO series from IDA.Continuous
4. Collaborate on supporting the government on the gas agenda, in particular follow up on the Petroleum Act 2015 and the Oil and Gas Revenue Management Act 2015 including collaboration in the areas related to fiscal regime, fiscal rules and public investment management in the gas sector.Continuous
5. Jointly provide technical assistance in developing domestic debt markets, following up from the first mission conducted in December 2015.
6. Jointly prepare and implement TADAP-tax policy work.

When a member has overdue financial obligations outstanding for more than three months, the amount of such arrears will be shown in this section.

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