AfricaPress-Tanzania: PRESIDENT John Magufuli’s appeal to financial institutions to provide relief to developing countries for the battle against Covid-19 has started to pay off as the International Monetary Fund (IMF) executive board has approved a debt relief amounting 14.3 million US dollars (about 33 billion shillings) to Tanzania over the next four months.
The debt relief will potentially rise to 25.7 m US dollars over the next 23 months, the aim being to help free up resources for public sector health needs and other emergency spending, as well as mitigate the balance of payments shock resulting from the Covid-19 pandemic.
According to a statement issued by IMF, under Catastrophe Containment and Relief Trust (CCRT), the grant (14.3 million US dollars) would cover Tanzania’s debt service falling due to the IMF from June 10, to October 13, this year.
The debt service relief will contribute to alleviate Tanzania’s balance of payment needs stemming from the pandemic.
“Additional relief covering the period from 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 m US dollars,” read part of the statement issued by Mr Tao Zhang, IMF’s Deputy Managing Director.
In his quick response yesterday, President Magufuli thanked the IMF for the support, saying the relief would help the country in strengthening the measures against the corona virus.
“The relief has come at a right time. On behalf of all citizens of Tanzania, I would like to thank the Managing Director of IMF for recognising our efforts and granting us this debt relief,” he said in Dodoma, at the event for launching the headquarters of Tanzania Rural and Urban Road Agency (TARURA).
Dr Magufuli said yesterday that he was considering writing a letter of appreciation to the IMF boss, adding that this support means a lot to the country.
In a statement, IMF says the pandemic has weakened nearterm macroeconomic prospects for Tanzania.
The country is facing a drastic reduction in tourism receipts, budget pressures, and a projected deceleration of GDP growth from over 6 per cent to 4 percent in the current fiscal year and to 2.8 percent in the upcoming fiscal year (the fiscal year ends in June).
“The Covid-19 pandemic is having an adverse economic impact on Tanzania, creating an exceptional fiscal and balance of payments needs. The authorities have implemented containment measures and avoided an economic lockdown. They remain vigilant to the risk of spiraling infections and uncertainty surrounding the pandemic,” read the statement.
Moreover, IMF is impressed with the commitment of Tanzania authorities for being committed to using the additional resources for their intended purposes and in a transparent manner, including through ex-post audits of COVID- related spending.
“To deal with the remaining risks, it will be important to safeguard appropriate funding for health and other priority social spending in the financial year 2020/2021 budget, as well as ensure close cooperation with the World Health Organisation (WHO), multilateral agencies, and donors,” read the statement, adding: “Looking ahead, structural reforms remain crucial to support a robust economic recovery. The focus includes addressing arrears on VAT refunds and government expenditures, enhancing human capital and the business environment, and improving the affordability of bank credit.”
One of the economists, Dr Hildebrand Shayo, hailed the development, saying it was an indication that Dr Magufuli’s plea had begun to bear fruit.
“Instead of taking new loans as others did, he asked for debt relief or extension of repayment to allow resources to be used to fight Covid-19,” he said, adding that Dr Magufuli’s administration was keen to lead Tanzania to achieve targets and that can only be achieved with improved infrastructure.
According to him, given the potential of the future of Tanzania, it is yet another sign indicating that international financial communities like the IMF are now appreciating that President Magufuli is determined to create a system that needs support.
Dr Shayo was of the view that the move would pave the way for other similar financial institutions to support what Tanzania was undertaking.
