Tanzania may have to delay the construction of some of its major infrastructure projects because its revenue expectations for 2017/18 are "potentially over-optimistic", the International Monetary Fund said on Monday.
The country plans to increase spending in its budget for the fiscal year ending June 2018 by 7.3 per cent to Tsh31.71 trillion ($14.21 billion), with a key focus on infrastructure.
Like neighbouring Kenya, Tanzania wants to take advantage of its long coastline and upgrade outdated railways, ports and roads to serve growing economies in land-locked parts of Africa.
"The 2017/18 budget reaffirms the authorities' objective of scaling up public investment while preserving fiscal sustainability," IMF Deputy Managing Director Tao Zhang said in a statement.
"However, potentially over-optimistic revenue projections call for its prudent implementation, including by delaying some large projects until the availability of revenues is confirmed."
In the coming fiscal year, Tanzania plans to borrow Tsh6.17 trillion (about Sh285 billion) from domestic sources and expects Tsh3.97 trillion (Sh183 billion) from external concessional loans and grants.
It is also seeking an additional Tsh1.59 trillion (about Sh73 billion) from external non-concessional loans and raise tax revenue to 14.2 per cent of gross domestic product in 2017/18, up from an estimated 13.3 per cent previously.
Big gas discoveries in the country and oil finds in Kenya and Uganda have turned East Africa into an exploration hotspot for oil firms but transport infrastructure in those countries has suffered from decades of under-investment.
In 2015, Tanzania said it planned to spend $14.2 billion to construct a new standard gauge rail network over the next five years, mostly financed with loans.
It also wants to invest in a new $10 billion port and special economic zone under a project backed by China and Oman.
The IMF's Zhang urged the government to tone down its revenue collection expectations after budget execution in 2016/17 was hit by external financing shortfalls, leading to dismal implementation of capital spending plans and a tight liquidity situation.
"To achieve the authorities' development agenda and maintain high economic growth, sustained implementation of reforms, including to create a better and more predictable business environment, is critical," he said.