By NJIRAINI MUCHIRA

More by this Author

The International Monetary Fund is worried that Tanzania’s economic growth could be clouded by growing investor concerns over government policies.

IMF said that although gross domestic product data point to continued strong growth, other high frequency data suggest a weakening of economic activity.

“There are downside risks to economic growth in the short term stemming from slow budget implementation, a challenging business environment and private sector concerns about authorities’ enforcement of rules,” noted the IMF.

This is attributed to dwindling tax revenue collections and credit growth stagnation that is reflected in ballooning of non-performing loans in commercial banks.

“Tanzania’s recent economic performance has been mixed and the outlook is subject to emerging risks,” said the IMF in a statement following the completion of the seventh and last review of Tanzania’s economic performance under the Policy Support Instrument (PSI) programme.

Best performing economy

Tanzania is the best performing economy in East Africa, posting a GDP growth of 7.7 per cent in the first half of 2017 fiscal compared with Kenya and Uganda, which recorded a growth of 4.9 per cent and 4.7 per cent respectively.

Projections show that in 2017, Tanzania’s economy grew by seven per cent compared with Kenya’s five per cent and Uganda’s 5.1 per cent.

According to the IMF, apprehension among foreign investors and the private sector due to government policies pose threats to Tanzania’s growth in the immediate future.

Far-reaching reforms

Over the past two years, President John Pombe Magufuli’s administration has instituted far-reaching reforms, some of which have rattled investors particularly in the mining sector.

Some of the reforms, particularly on taxation, have seen multinationals and private companies opt to scale down their operations on the basis that they are punitive.

The Tanzanian government has been seeking to increase revenue collection to finance its mega infrastructure projects.

The need to collect more revenues has become more pressing because other sources of financing like official aid are declining while commercial borrowing remains restricted according to the World Bank.

Falling tax revenue

In the 2014/15 financial year, tax revenue in Tanzania stood at $6 billion but declined to $4.5 billion in 2015/16. This financial the country is targeting to increase collection to $6.6 billion.

“Additional domestic revenue needs to be mobilised through tax policy and administration reforms, while improving the functioning of the value added tax refunds system,” stated the IMF.

The three-year PSI for Tanzania, which expires this month, was aimed at supporting the country’s medium-term objectives that include maintenance of macroeconomic stability, preservation of debt sustainability and promotion of more equitable growth and job creation.