Tanzania's Finance minister on June 11 unveiled the most optimistic 2020/2021 budget of Tsh34.88 trillion ($15.09 billion) in the region, predicting a quick economic recovery, amid hope of fruitful discussions with external creditors.

The country recently declared itself free from Covid-19. President John Magufuli told a church congregation in Dodoma on June 7 that the coronavirus disease had been eliminated from the country thanks to prayers to God.

In his budget presentation in the capital Dodoma, Finance minister Philip Mpango said government evaluations show the country had not been too badly affected by the pandemic, allowing it to raise its growth forecasts and maintain a firm financing schedule for ongoing development projects.

"Our economic analysis for the period January to April indicates that the impact of Covid-19 on the country has been modest compared with most countries," Dr Mpango said.

According to the finance minister, real GDP growth is now projected to slow down to 5.5 per cent in 2020, from the previous month's estimate of four per cent but lower than an earlier projection of 6.9 per cent.

"The decline is due to heavy rains that destroyed transport infrastructure across the country along with the impact of Covid-19 on our trading partners around the world," he said.

He added that the improved situation meant the government no longer considered it necessary to reduce financing for ongoing development projects pegged at Tsh12.78 trillion ($5.53 billion), about 27 per cent of the total Tsh34.88 trillion ($15.09 billion) budget for 2020/2021.

In a new World Bank report released on June 8, the bank predicted that Tanzania's economic growth would drop sharply to 2.5 per cent in 2020 due to the effects of the pandemic.

"There are downside risks for even slower growth if additional health and economic policy measures to mitigate the negative impacts of the Covid-19 pandemic are delayed or not well-targeted, or the external environment does not markedly improve this year," the bank said.

Dr Mpango said the budget recognised emerging opportunities from the pandemic in falling world oil prices, which have helped reduce transport and manufacturing costs for industries, rising gold prices, and a growing market for locally produced health products to combat Covid-19.

More resources will be allocated to enable medical and virology research related to the pandemic as more bilateral creditors and international lending institutions are in negotiations with the government to provide financing aimed at helping deal with the pandemic effects, the minister said.

DEBT RELIEF

Earlier, the International Monetary Fund approved a $14.3 million debt relief package to cover up to October, and which could potentially rise to $25.7 million under the Fund's Catastrophe Containment Relief Trust.

The arrangement involves suspending debt servicing and using the savings to mitigate the various impacts of Covid-19 on the economy.

Dr Mpango said discussions are also ongoing with other potential external lenders including the World Bank through its Pandemic Emergency Financing Facility, the Economic Development Cooperation Fund run by the South Korea Exim Bank, the European Union's Covid-19 Response Package, and the IMF Rapid Credit Facility, which could provide up to $272 million in balance of payments support for the country.

The African Development Bank has also pledged a concessional loan of $50 million as budget support to be used in line with Tanzania’s priorities. According to the Finance minister, Tanzania has so far spent Tsh19.5 billion ($8.48 million) for Covid-19 interventions including medical supply purchases intended to curb the spread of the virus. It has also issued tax exemptions on various medical equipment for the same purpose.

The government also received Tsh3.3 billion ($1.43 million) worth of medical equipment and health commodities for protection against further Covid-19 spread. The government's assessment identified several areas more adversely affected by Covid-19 than others, such as traditional export crops like cotton, cashewnuts, coffee and tea which saw their world market prices drop with a fall in demand.

Wholesale and retail businesses also suffered, especially those relying on imports from China, India and some European countries, which were badly hit by the pandemic. Tax and non-tax revenues from tourism, sports and entertainment activities dropped along with credit to the private sector.