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Tanzania: Macroeconomic Environment

Tanzania: Macroeconomic Environment. Presentation at DPG Induction August 25, 2009 David O. Robinson Senior Resident Representative IMF, Tanzania www.imf.org/external/country/tza/rr drobinson2@imf.org. Dispel the myths.

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Tanzania: Macroeconomic Environment

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  1. Tanzania: Macroeconomic Environment Presentation at DPG Induction August 25, 2009 David O. Robinson Senior Resident Representative IMF, Tanzania www.imf.org/external/country/tza/rr drobinson2@imf.org

  2. Dispel the myths The macro challenges facing Tanzania and much of Africa are very different from 5 or 10 years ago. Now: • High Growth • Low inflation • Manageable debt • Comfortable foreign exchange reserves

  3. Macro Perspective I

  4. Macro Perspective -- II

  5. Fiscal spending has increased sharply along with revenues and aid In last decade, fiscal spending has increased from US$38 per capita to US$ 150 per capita

  6. But challenges remain • Impact of global crisis – msukosuko. Stimulus package—fiscal and monetary easing • Food security – kilimo kwanza • Poverty reduction / improved living standards – MKUKUTA/MKUZA. Strong growth and large increase in public spending, but limited reduction in poverty index (as per latest HBS). Why?

  7. Policy response to Msukosuko? Presidential Task Force / Budget / MPS • Ease fiscal policy. 09/10 Budget has a significant increase in overall deficit and like 08/09 outturn relaxes previous zero NDF anchor • Discretionary interventions—VAT rate cut; expanded fertilizer subsidy; measures to ensure no disruption to credit flows. • Ease monetary policy

  8. As in most countries, inflation has been driven by food prices

  9. No Poverty Reduction without Growth Keys to sustained fast growth? • Engage global economy at some level • Avoid macro instability • Adopt some form of market economy • Conduct a responsible fiscal policy that does not borrow too much against the future • Avoid civil war REO box 2.2 summary of Growth Commission Report, Africa Economic Growth Project

  10. What are the Macro Questions? • What is needed to make growth both sustainable and pro-poor? • How much can fiscal spending be increased without causing inflation or crowding out the private sector or losing competitiveness or excessive debt? • How to ensure effectiveness of fiscal spending? • How to most effectively close the infrastructure deficit? Sovereign bond? PPPs? • How, over the medium-term, to reduce aid dependency? • How to deepen financial markets? • What are the implications of regional integration commitments in context of both EAC and SADC?

  11. IMF: www.imf.orgor ww.imf.org/external/country/tza/rr • Policy Support Instrument: Staff reports containing IMF assessment and letter from government detailing policy directions/priorities for year ahead. • Regional Economic Outlook for SSA. April and October • Africa-IMF conference • Working Papers • 08/256: Creating Sustainable Fiscal Space for Infrastructure: The Case of Tanzania • 08/138: Tanzania’s Equilibrium Real Exchange Rate • 08/81: High and Volatile Treasury Bond yields in Tanzania: Role of Strategic Bidding and Auction Microstructure • East AFRITAC. Regional TA center located at BoT. Public financial management, revenues, statistics, monetary operations, banking supervision.

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