The Board of the International Monetary Fund (IMF) has approved a disbursement of $567.25 million to Tanzania to help the country finance its urgent balance of payments needs arising from the Covid-19 Pandemic.
The financing package comprises $189.08 million under the Rapid Credit Facility (RCF) and a purchase equivalent to $378.17 million under the Rapid Financing Instrument (RFI).
In a statement on Tuesday, the Fund said Tanzania is in urgent need of a balance of payment support that is equivalent to about 1.5 percent of the gross domestic Product (GDP) as the authorities implement a comprehensive plan to mitigate the effects of the pandemic and preserve macroeconomic stability in the face of a reported third wave of the virus.
The disbursement under the RCF and purchase under the RFI will help finance the interventions needed to mitigate the severe socio-economic impacts of the pandemic and help catalyse support from development partners.
“The Covid-19 pandemic has negatively impacted Tanzania’s macroeconomic outlook, and the health and wellbeing of its population. Growth decelerated in 2020 and is expected to remain subdued in 2021, increasing poverty and negatively affecting employment,” said Bo Li, IMF Deputy Managing Director and Chair of the Board.
“Tanzania’s risk of external and public debt distress increased to moderate, mainly due to the pandemic’s effect on tourism exports.”
According to the IMF, Tanzania’s macroeconomic outlook hinges on satisfactorily addressing the pandemic, although significant downside risks remain due to uncertainties surrounding the course of the pandemic.
According to the Fund, Tanzanian authorities have indicated that they are committed to pursuing economic policies appropriate for addressing the impact of the pandemic and are committed to strengthening coordination and transparency to ensure that RCF and RFI resources are spent on fighting the pandemic.
These measures include publishing reports of RCF and RFI resources spent and undertaking a post-crisis audit of all pandemic-related spending.
Authorities also committed to strengthening governance and transparency to ensure that the financial resources are efficiently spent on addressing the crisis.
Maintaining fiscal and debt sustainability, and preserving financial stability while supporting the economy will also be important. Closely monitoring the banking system’s health in light of increased vulnerabilities will be key, the IMF added.
“Once the crisis abates, the authorities appropriately intend to resume implementing reforms to achieve sustainable and inclusive growth. Their broader policy and reform agenda includes fiscal reforms to avoid domestic arrears and pay tax refunds on time, increasing support for education and health spending, and improvements to the business climate,“ the statement says.
The country’s economic outlook has deteriorated due to the impact of the Covid-19 pandemic, with the growth expected to remain subdued in 2021.
Last year the economy reportedly decelerated to 4.8 percent growth largely due to the collapse in tourism activities in the wake of travel restrictions.