On 7th Septemebr 2021, the International Monetary Fund (IMF) approved USD 567.25 million in emergency financial assistance to support Tanzania’s efforts in responding to the Covid-19 pandemic by addressing the urgent health, humanitarian, and economic costs.
The IMF stresses that Tanzania’s economic outlook has deteriorated due to the impact of the Covid-19 pandemic. With the collapse in tourism in the wake of travel restrictions, the economy reportedly decelerated to 4.8% growth in 2020, and growth is expected to remain subdued in 2021.
Tanzania faces an urgent balance of payment need of about 1.5% of GDP as the authorities implement a comprehensive plan to mitigate the effects of the pandemic and preserve macroeconomic stability in the face of a reported third wave of the virus.
This is why the Executive Board of the IMF approved a disbursement of SDR 132.6 million (USD 189.08 million) under the Rapid Credit Facility (RCF) and a purchase equivalent to SDR 265.2 million (USD 378.17 million) under the Rapid Financing Instrument (RFI), for a total of SDR 397.8 million (US D567.25 million or 100% of quota).
This emergency financing will help finance Tanzania’s urgent balance of payment needs stemming from the outbreak of the Covid-19 pandemic.
The disbursement under the RCF and purchase under the RFI will help finance the interventions needed to mitigate the severe socio-economic impacts of the pandemic and help catalyze support from development partners.
The Tanzanian authorities have indicated that they are committed to pursuing economic policies appropriate for addressing the impact of the pandemic and are committed to strengthening coordination and transparency to ensure that RCF and RFI resources are spent on fighting the pandemic.
These measures include publishing reports of RCF and RFI resources spent and undertaking a post-crisis audit of all pandemic-related spending.
Following the Executive Board’s discussion, Mr. Bo Li, Deputy Managing Director and Chair of the IMF, issued the following statement: “Tanzania’s macroeconomic outlook hinges on satisfactorily addressing the pandemic, but significant downside risks remain due to uncertainties surrounding the course of the pandemic. The authorities are implementing a comprehensive pandemic response plan—Tanzania Covid-19 Socioeconomic Response Plan (TCRP) —to address the fallout of the Covid-19 shock. Tanzania requires urgent financial assistance to implement the plan and avert the severe health, social and economic consequences of a reported third wave of the virus. Emergency support under the Rapid Credit Facility and Rapid Financing Instrument will substantially contribute to filling immediate external financing needs and help catalyze donor support. Temporarily loosening macroeconomic and financial policies will mitigate the pandemic’s adverse impact, by deploying a vaccination campaign, increasing health and social spending, and supporting the private sector. Maintaining fiscal and debt sustainability, and preserving financial stability, while supporting the economy, will also be important. Closely monitoring the banking system’s health in light of increased banking sector vulnerabilities will be key. Once the crisis abates, the authorities appropriately intend to resume implementing reforms to achieve sustainable and inclusive growth. Their broader policy and reform agenda includes fiscal reforms to avoid domestic arrears and pay tax refunds on time, increasing support for education and health spending, and improvements to the business climate.”
Already in June 2020 the IMF approved a grant to cover Tanzania’s debt service falling due to the IMF from 12th June to 13th October 2020, for the equivalent of USD 14.3 million.
And in October 2020 the IMF approved a second six-month tranche of USD 11.6 million debt service relief to cover the debt service of Tanzania from October 14th, 2020 to April 13th, 2021.