Tanzania has scope to raise spending on infrastructure projects in the fiscal year starting in July against a background of higher economic growth and slowing inflation, the IMF has said.
The east African nation’s economy is likely to expand by 6.2 percent in 2010 versus 5.5 percent last year, the fund said in a statement. It said inflation could fall to eight percent by June from 9.6 percent in February.
“Creating additional fiscal space to enable the desired scaling-up of infrastructure investment can be achieved through a combination of measures,” the IMF said, citing higher revenues, efficiency measures and new financing.
“Accessing new financing sources – there are a range of possibilities, including Public Private Partnerships, syndicated loans or Eurobonds – needs to be handled carefully and in the context of a strategy that comprehensively weighs the risks and returns,” the fund said.
Like neighbouring Kenya, Tanzania is taking another look at plans to issue a debut sovereign bond, which the global financial crisis forced it to shelve.
The IMF statement, which was issued at the end of an assessment mission to Tanzania, said the country had fared well in the face of the crisis, thanks to its policy responses and the pace of recovery of the world’s economy.
“A stronger-than-anticipated rebound in the global economy has helped offset the impact of disruptions from the regional drought, floods, and power outages, with the result that we have revised slightly upwards our growth forecasts for Tanzania to 5.5 percent in 2009 and to 6.2 percent in 2010,” the IMF said.
Like other economies in the region, Tanzania unveiled in June last year a fiscal stimulus programme aimed at cushioning growth from the second-round effects of the crisis, which included falls in foreign investment and tourist arrivals.
Although the growth was nascent and mainly in lightly-taxed areas, which caused government revenue collection to fall behind targets, a reversal in the revenues trend and the end of anti-slowdown measures could help in the next fiscal year, the IMF added.
It added that the country must balance fiscal and monetary policy to support growth of the economy that is mainly based on agriculture, mining, tourism and regional trade, while at the same time scaling back the fiscal stimulus.
Tanzanian banks had also weathered the global crisis well, helped by limited exposure to toxic assets and increased supervision by the central bank.
“However, the continued absence of a social security regulator is an important weakness in financial sector supervision,” the IMF said.