Front Matter Page
© 2008 International Monetary Fund
June 2008
IMF Country Report No. 08/178
United Republic of Tanzania: Third Review Under the Policy Support Instrument—Staff Report; Staff Statement; Press Release on the Executive Board Discussion; and Statement by the Executive Director for Tanzania
In the context of the second review under the second review under the policy support instrument with the United Republic of Tanzania, the following documents have been released and are included in this package:
Te staff report for the Second Review Under the Policy Support Instrument, prepared by a staff team of the IMF, following discussions that ended on March 12, 2008, with the officials of the United Republic of Tanzania on economic developments and policies. Based on information available at the time of these discussions, the staff report was completed on May 9, 2008. The views expressed in the staff report are those of the staff team and do not necessarily reflect the views of the Executive Board of the IMF.
A staff statement of May 28, 2008 updating information of recent developments.
A Press Release summarizing the views of the Executive Board as expressed during its May 30, 2008 discussion of the staff report that completed the review.
A statement by the Executive Director for the United Republic of Tanzania.
The documents listed below have been or will be separately released.
Letter of Intent sent to the IMF by the authorities of the United Republic of Tanzania*
Memorandum of Economic and Financial Policies by the authorities of the United Republic of Tanzania*
Technical Memorandum of Understanding*
*Also included in Staff Report
The policy of publication of staff reports and other documents allows for the deletion of market-sensitive information.
Copies of this report are available to the public from
International Monetary Fund • Publication Services
700 19th Street, N.W. • Washington, D.C. 20431
Telephone: (202) 623-7430 • Telefax: (202) 623-7201
E-mail: publications@imf.org • Internet: http://www.imf.org
Price: $18.00 a copy
International Monetary Fund
Washington, D.C.
Front Matter Page
INTERNATIONAL MONETARY FUND
UNITED REPUBLIC TANZANIA
Third Review Under the Policy Support Instrument
Prepared by the African Department (In consultation with other departments)
Approved by David Nellor and Michael T. Hadjimichael
May 9, 2008
Discussions on the third review under the Policy Support Instrument were held in Dar es Salaam during February 27–March 12, 2008. The staff team consisted of Roger Nord (head), David Dunn, Yuri Sobolev, Samar Maziad (all AFR), Alejandro Hajdenberg (FAD), and Niko Hobdari (PDR). The team met with the Minister for Finance and Economic Affairs (MOFEA), Mr. Mkulo, the Governor of the Bank of Tanzania, Prof. Ndulu, the Permanent Secretary of MOFEA, Mr. Mgonja, other senior officials, and representatives of the private sector and international community. Mr. Robinson, the Fund’s senior resident representative in Dar es Salaam, and Mr. Ndyeshobola, senior advisor to the Executive Director, participated in the discussions.
Contents
Executive Summary
I. Economic Backdrop, Program Performance, and Outlook
II. Policy Discussions and the PSI Program for 2008/09
Maintaining Fiscal Stability in the Face of Uncertainty
Returning Inflation to a Downward Trajectory
Increasing Public Accountability
Raising Productivity and Long-term Growth Potential
III. Program Monitoring
IV. Staff Appraisal and Risks
Boxes
The Special Audit of the Bank of Tanzania
Fiscal Impact of the EU-EAC Economic Partnership Agreement (EPA)
Tables
Selected Economic and Financial Indicators, 2005/06-2010/11
National Accounts, 2006-11
Central Government Operations, 2005/06-2010-11
Summary Accounts of the Bank of Tanzania, 2007/08-2008/09
Monetary Survey, 2007-08 - 2008/09
Financial Soundness Indicators, 2002-07
Balance of Payments, 2005/06-2010/11
Appendix
Letter of Intent
Attachment I: Memorandum of Economic and Financial Policies
Table 1. Quantitative Assessment Criteria and Indicative Targets Under the Policy Support Instrument, 2007/08-2008/09
Table 2. Implementation of PSI Structural Benchmarks Through April 2008
Table 3. PSI Assessment Criterion and Structural Benchmarks for 2008/09
Attachment II. Technical Memorandum of Understanding on Selected Concepts and Definitions Used in the Monitoring of the PSI-Supported Program
Executive Summary
Staff recommends completion of the third review. The Tanzanian economy continues to perform well and the PSI-supported program remains on track with all assessment criteria for the third review met. Economic growth exceeded 7 percent in 2007 and medium-term prospects are strong.
In the short term, Tanzania faces three key challenges: maintaining fiscal stability in the face of uncertain financing; dealing with inflationary pressures; and addressing governance weaknesses and strengthening public accountability.
The 2008/09 budget currently under preparation faces financing uncertainty as development partners look to the government to undertake agreed steps to address governance issues. The program provides some limited room for domestic financing in case of a temporary shortfall in foreign assistance.
Inflationary pressures in recent months reflect primarily developments in international fuel and food prices. Monetary policy will need to accommodate onetime shocks while containing broader inflationary risks with the objective of gradually bringing inflation down to its medium-term objective of 5 percent.
Addressing governance weaknesses is critical to restoring confidence of both development partners and private investors. Good progress has been made so far. Further steps should include strengthening the governance of the BoT, for which the planned voluntary safeguards assessment by the Fund will be helpful.
Looking ahead, structural and institutional reforms should aim at further raising Tanzania’s growth potential. Public priorities appropriately focus on improving infrastructure and strengthening public services in health and education.
Front Matter Page
INTERNATIONAL MONETARY FUND
UNITED REPUBLIC OF TANZANIA
Third Review Under the Policy Support Instrument—Informational Annex
Prepared by the African Department
May 9, 2008
Contents
Relations with the Fund 2
Relations with the World Bank Group 9
Statistical Issues 15
Front Matter Page
Press Release No. 08/129
FOR IMMEDIATE RELEASE
May 30, 2008
International Monetary Fund
Washington, D.C. 20431 USA
