Exchange Rates: £1 = Shs 1,970
$1 = Shs 1,100
Praise for Tanzania from the IMF
Sebastian Paschal writing in Dar es Salaam’s Financial Times (March 24) gave a detailed account of the IMF’s first review of Tanzania’s $29.3 million Poverty Reduction and Growth Facility (PRGF) arrangement. This is the IMF’s ‘concessional facility’ for low-income countries. PRGF loans carry an annual interest rate of 0.5% and are repayable over 10 years. The review, which contained much praise for the way in which the Government had been handling the economy, has enabled the release of a further $4.2 million, which will bring the total amount drawn under the arrangement to about $8.3 million.
Extracts from the article/review: ‘The Tanzanian authorities deserve credit for maintaining macroeconomic stability and making substantial progress with structural reforms, which have paved the way for a steady but modest increase in real per capita income combined with low inflation’ – IMF.
Reflecting its good track record in the implementation of its reform program, Tanzania has received steady financial support and technical assistance from the donor community. In particular, debt relief under the enhanced HIPC Initiative has helped Tanzania to undertake higher social sector spending and maintain debt sustainability. At a recent meeting between the IMF and the Government, the latter revealed its plan to achieve a comprehensive reform of tax policy and tax administration. This would include the forthcoming adoption of a new Income Tax Bill and the Tanzania Revenue Authority’s implementation of a new three-year corporate plan, which the IMF said was a good move. The IMF commended Tanzania’s position on the income tax Bill.
The fund observed also that the rationalisation of the tax regime for mining companies, imposing strict controls on tax exemptions, would be important steps to contain revenue leakages. It added that maintaining a sound fiscal position and debt sustainability would also require firm control over non-priority expenditure and prudent debt management policies. According to the IMF, the newly passed amendments to the Land Act would facilitate bank lending by permitting the use of land as collateral. The IMF also supported the privatisation of the National Microfinance Bank (NMB) saying it would help to broaden access to financial services.
It appears also, however, that during the recent meeting with the Government doubts were expressed on the seriousness of the rising fiscal pressures emanating from growing subsidies for the energy sector. The IMF proposed action including formulation of a short-term plan and a medium-term reform strategy, which would aim at providing a reliable power supply, while reducing the electricity utility’s dependence on fiscal subsidies.
During the discussions, the Government underlined its commitment to the full implementation of its updated national anti-corruption strategy and action plan for 2003-2005, which the IMF say would be a crucial step for strengthening governance and boosting business confidence.
Despite Tanzania’s achievements in macroeconomic stability, however, the IMF noted that poverty remained widespread, especially in rural areas, and economic development had been uneven across the country.’
Natural Gas
Electricity produced by the Songosongo gas project (SONGAS) will be connected to the National Power Grid on June 17, this year, the Managing Director of TANESCO, Rudy Huysen, announced on April 2. SONGAS would add 75 megawatts to the national grid.
Artumas Ltd of Canada will be investing $32 million to develop a new gas field at Mnazi Bay in Mtwara region. The project will generate 12.5 megawatts of electricity and provide cheap power for the southern regions of Mtwara, Lindi and Ruvuma. – Mwananchi.
Savings locally and abroad
According to the East African, quoting Central Bank Governor Daudi Ballali (15th December), Tanzanians have ‘stashed away’ $2.5 billion abroad compared with the $1.7 billion they have placed in local savings banks. However, he said that an even larger sum was held as foreign savings a decade ago. Some of this money had returned to the country as a result of the move away from a command to a private-sector-driven market economy and the reduction of the inflation rate from 35% to 4.5%.
Foreign exchange capacity and inflation
Tanzania’s economy has the foreign exchange capacity to finance imports for eight months and two weeks instead of the six months recorded last year, according to the Bank of Tanzania (BoT). Gross international reserves had increased from $1.5 billion to over $2 billion. As regards inflation, the BoT report said that, despite adverse drought condition coupled with food insecurity, inflation had been contained at 4.6% for three consecutive months since October 2003.
Cut flower exports
The BoT has also reported that Tanzania earned 1.1bn/- from the export of cut flowers in the last quarter of the year. The cut flower was said to be becoming an important non-traditional export. Most of the flowers are exported to European countries, especially Germany and Switzerland. Roses are the major element – East African