The executive board of the International Monetary Fund (IMF) approved a $14.3 grant under its Catastrophe Containment and Relief Trust (CCRT) yesterday to assist Tanzania in servicing its debt to October 13, 2020.
According to the lender statement, further allocation of additional relief covering the period of October 14, 2020, to April 13, 2022, will be granted subject to the availability of resources in the CCRT, potentially bringing total relief on debt service to the equivalent of about $25.7 million.
Tanzania has been one of many countries in Africa where it’s the fast-growing economy was shaken by the coronavirus (COVID-19) pandemic.
As crucial sectors including tourism, travel and exports were hurt—the IMF equivocally noted that the debt service relief will aid “alleviating Tanzania’s balance of payment needs stemming from the COVID-19 pandemic,”
Tanzania’s closest lender also took the liberty to address various issues including debt service anticipated impacts on Tanzania’s economy.
“The IMF’s debt service relief under the Catastrophe Containment and Relief Trust will free up public resources to help address the pandemic. The authorities are committed to using the additional resources for their intended purposes and in a transparent manner, including through ex-post audits of COVID-related spending,” according to Mr. Tao Zhang, Deputy Managing Director and Chair.
Earlier this week, World Bank’s—another close development partner to Tanzania analysis showed GDP would slow sharply to 2.5 per cent in 2020, from 6.9 per cent in 2019.
While, the statement—highlighted that, the virus causes a drastic reduction in tourism receipts, budget pressures, and a projected deceleration of GDP growth from over 6 per cent to 4 per cent in the current fiscal year and to 2.8 per cent in the upcoming fiscal year (the fiscal year ends in June).
As Tanzania reopens its economy, including the tourism, and travel sector, still the IMF nails the vitality of appropriate funding, particularly in health.
“To deal with the remaining risks, it will be important to safeguard appropriate funding for health and other priority social spending in the FY2020/21 budget, as well as ensure close cooperation with the World Health Organization, multilateral agencies, and donors,” IMF chief said
However, the lender insisted that structural reforms remain crucial to support a robust economic recovery.
Highlighting where the focus should be, noting that “addressing arrears on VAT refunds and government expenditures, enhancing human capital and the business environment, and improving the affordability of bank credit” as crucial parts.