IMF approves $567mn emergency support for Tanzania

The International Monetary Fund's executive board has recently given the green light to provide Tanzania with $567 million in emergency financial support. The funds are specifically aimed at aiding the country in combating the adverse effects of the COVID-19 pandemic, which have significantly impacted various sectors of the economy, most notably the tourism industry. Lawrence Mlaqi, an economist and financial consultant, highlighted that the travel restrictions imposed due to the pandemic led to a sharp decline in tourism receipts, resulting in a shortfall of around $118 million in export earnings from services related to tourism. The approved funds are expected to bolster the balance of payments and aid in the recovery of the tourism sector, along with supporting other industries like mining. Mlaqi emphasized the importance of focusing on sectors beyond tourism and mining to further boost the country's GDP. He pointed out the construction sector as a key area of focus, citing major infrastructure projects such as the standard gauge railway and the Stiglas Gorge hydroelectric project, which are crucial for economic growth and energy export opportunities. Despite the planned borrowing of 10.8 trillion Tanzanian shillings for the upcoming financial year, concerns surrounding rising debt levels were dismissed by Mlaqi, who stated that Tanzania's debt-to-GDP ratio remains below the recommended threshold of 45%. In terms of policy measures, Mlaqi highlighted the government's efforts to maintain liquidity in banks and ease access to credit for the private sector through a range of monetary policies. The Monetary Policy Committee has been actively reviewing and adjusting policies to support economic recovery, with a focus on stimulating credit growth and increasing money circulation. These measures are expected to contribute to the overall economic resilience and growth. Despite recording a slightly lower economic growth rate of 4.9% in the first quarter of the year compared to the same period in 2020, Mlaqi expressed optimism regarding the country's economic performance in the second half of 2021. He projected a growth rate of around 5% by the year's end, citing the gradual global economic recovery as a positive indicator for Tanzania's economic prospects. As Tanzania gears up to participate in the African Continental Free Trade Area, Mlaqi emphasized the potential benefits of increased trade and market access. By leveraging the opportunities presented by the free trade agreement, Tanzania aims to expand its export markets and enhance economic performance through the facilitation of cross-border trade. Overall, the approved emergency support from the IMF, coupled with strategic focus on diverse sectors and sound policy interventions, is expected to strengthen Tanzania's economic recovery efforts amidst the ongoing challenges posed by the COVID-19 pandemic. With a multifaceted approach to economic revitalization, Tanzania is positioned to navigate through the current uncertainties and drive sustainable growth in the coming months.