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IMF tells Tanzania to curb public spending, urges reforms

By Fumbuka Ng'wanakilala
Posted on Thursday, 21 July 2016 09:24

Tanzania’s new president, John Magufuli, wants to invest in a number of projects, including construction of a new standard gauge railway, ports, airport, roads and the revival of the cash-strapped national airline.

But the IMF warned that Tanzania needs to prioritise its development plans and avoid spending beyond its means.

“Careful prioritisation and implementation of expenditures will be required to ensure that spending does not exceed available resources and to avoid domestic arrears accumulation,” IMF deputy managing director Min Zhu said in a statement after the conclusion of a country review for Tanzania.

“Creating fiscal space for higher infrastructure investment through sustained efforts to raise domestic revenue and increasing spending efficiency, particularly in public investment, is imperative.”

Tanzania plans to raise spending by 31 percent to 29.53 trillion Tanzanian shillings for its 2016/17 fiscal year budget, focusing on infrastructure and industrial projects.

Zhu said despite significant progress in recent years, financial development remains low in Tanzania. Financial development will require further improving the access of businesses to loans and reducing high borrowing costs, he said.

“Vigorous reforms will be required to foster further structural transformation of the economy,” he said.

The IMF welcomed Tanzania’s “intention to postpone the launch of two large public investment projects until the next midyear budget review confirms the availability of revenue.”

Zhu praised Magufuli’s government for its anti-corruption campaign and efforts to improve the business environment and create jobs, but said more needs to be done to tackle poverty.

The IMF said Tanzania’s economic growth outlook remained positive, driven by the improved performance of construction, services and manufacturing sectors, but poverty levels remain stubbornly high.

“Tanzania’s macroeconomic performance has been strong … Growth has remained close to 7 percent and inflation is moderate,” he said.

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