Washington DC, 10 June 2022 (TDI): The International Monetary Fund (IMF) came to a staff-level accord to extend a Credit Facility Arrangement (ECF) for Tanzania. Charalambos Tsangarides, Advisor for the African Department at the IMF, announced it.
After the IMF agreed on an ECF for Tanzania, IMF’s management and IMF’s executive board will revise to give it full approval. The IMF has already decided to give its approval but the formal procedures will take some time.
Economic Context in Tanzania
Even though Tanzania’s economy has grown steadily for the last twenty years, it is still in much need of monetary aid to continue its development.
For decades it has been labeled as a low-income country. A few years ago Tanzania became a lower-middle-income country. This improvement reflects the good economic practices the country has been applying.
The African nation has numerous issues to tackle. The main ones are corruption, a weak political system, and uneven wealth distribution.
Even though the economic figures have been positive in the last few years, most of the country’s wealth is kept by a small group hence a grand part of the population remains poor.
Lately, the country has been focusing on strengthening bilateral relations with strategic partners.
Additionally, it has reaffirmed the protagonism of the private sector in the quest for economic development. It has been fixing crucial previous restrictions that affected private investment.
General production continues to be at pre-pandemic levels. Even though most sectors have been reactivated thanks to the decline of the pandemic, it has been very hard to fully recover.
Naturally, employment has recovered and the poverty rate has slightly decreased. Nonetheless, the poverty rate continues to be high, affecting more than 25% of the population.
According to World Bank’s official figures, in the last year, Tanzania’s trade deficit grew moderately. Increasing commodity prices and the ongoing conflict in Ukraine have affected worldwide trade stability. Nevertheless, Tanzania’s inflation rate remains at healthy levels.
The objective of the Credit Facility Arrangement
The Credit Facility Arrangement intends to boost economic recovery. The credit to which Tanzania will have access allows the exercise of multiple actions in favor of the country’s development.
It promotes macroeconomic firmness and sponsors overall growth in the African country. The main policy measures will center on boosting fiscal opportunities to make up for much-required public investment.
Tanzania has the ambitious goal of becoming a middle-income country by 2025. The World Bank Group is supporting that goal through a strategy designed by its International Finance Corporation.
The master plan concentrates on the optimization of agribusiness and the development of the insurance market.
Additionally, it focuses on the reinforcement of the local business environment. In that sense, it is good news that the IMF agreed on an ECF for Tanzania.
In conclusion, the staff-level accord to extend a Credit Facility Arrangement for Tanzania is a crucial aspect of the country’s mid-term economic strategy. Even though it has been improving despite the unstable political environment and constant corruption, the country still needed this extra aid.