IMF sanctions Sh 40bn for poverty reduction
The International Monetary Fund (IMF) Executive Board has sanctioned $29.1 million (about Sh40.6 billion) disbursement after completing the seventh review of Tanzania’s economic performance.
A statement from IMF said yesterday that the Policy Support Instrument (PSI) was approved in 2007, which was extended to June 4, 2010.
According to the statement, the Board has also completed the second review of Tanzania’s performance an arrangement under the Exogenous Shocks Facility (ESF).
“The completion of the review will enable the third and final disbursement of $29.1 million,” reads the statement.
IMF said the new PSI for Tanzania aims at maintaining macroeconomic stability and supporting accelerated growth, creating additional fiscal space, including financing infrastructure investment, while enhancing the return on public spending.
It will also support the new poverty reduction and growth strategy (MKUKUTA II) covering 2010-15 that is expected to be approved this month.
The IMF’s framework for PSI is designed for low-income countries that may not need, or want, IMF financial assistance, but still seek IMF advice, monitoring, and endorsement of their policies.
Following the Executive Board’s discussion on Tanzania, Mr Murilo Portugal, Deputy Managing Director and Acting Chair, was full of praise for the country: “The Tanzanian economy is emerging from a slowdown associated with the global crisis and natural disasters. The authorities’ macroeconomic policy response, including temporary and targeted fiscal stimulus measures and supportive monetary policy, helped to mitigate the downturn.”
He said though inflation remained high throughout 2009, it has since abated to single digits in recent months with stronger-than-envisaged current account and frontloaded donor assistance which enabled maintenance of a comfortable reserve position.
Mr Murilo said that progress under Tanzania’s poverty reduction and growth strategy was to be commended, “with roughly half the Millennium Development Goals expected to be achieved by 2015.”
But he said continued prudent macroeconomic policies, progress on structural reforms, and improvements in the business climate will be important to sustain these achievements.
“The near-term policy challenge is to support the economic recovery, while gradually withdrawing the fiscal stimulus as growth strengthens. The central bank will need to monitor carefully the liquidity conditions to guard against the emergence of inflation or exchange rate pressures,” he said.
The new three-year Policy Support Instrument will support implementation of the authorities’ new poverty reduction and growth strategy (MKUKUTA II), to be finalised shortly.
The strategy reorients government spending towards infrastructure investment, while preserving priority social spending, in order to accelerate progress in reducing poverty.
“The authorities aim to create needed fiscal space through rationalising non priority spending, further enhancing revenue collection, limited non concessional borrowing, and greater use of public-private partnerships,” he said.
Source – The Citizen