- The Tanzanian government has reached an agreement with the International Monetary Fund (IMF) over a 2003-06 economic programme, which includes further structural reforms to "reduce poverty". An IMF review of the 1996-2002 period however demonstrated that strong economic growth had done little to reduce poverty.
The IMF today reported it had completed another review of Tanzania's economic performance with a special view on poverty reduction. While poverty remained pervasive, the Tanzanian government however had stuck to the IMF's economic policy recipes and thus were granted a US$ 21 million disbursement.
The Fund further had approved of Tanzania's new three-year programme to fight poverty through economic reforms, which implied another loan of US$ 27 million to finance the programme.
According to Shigemitsu Sugisaki, the IMF's Acting Chairman, the Tanzanian authorities were to be "commended for their strong implementation of sound macroeconomic policies and structural reform under the Tanzania's three-year program launched in 2000. These policies have substantially boosted Tanzania's economic growth, raised average per capita incomes, and reduced inflation," said Mr Sugisaki.
Real GDP growth averaged 4.6 percent during 1996-2002 against 2.7 percent during 1990-95, according to the IMF. At the same time, as Tanzania followed IMF prescriptions, inflation fell to below 5 percent from about 30 percent. Fiscal imbalances had been reduced, expenditures reoriented to the social sectors and the external position substantially strengthened, the Fund says.
Indeed, real GDP growth has been impressive in Tanzania during the first years of the new millennium. While growth was at 4.9 percent in 2000, it increased to 5.7 percent in 2001 and an estimated 6.0 percent last year. This year, GDP growth is expected to reach 5.5 percent and an even higher number (6.3 percent) next year.
- Nevertheless, admitted Mr Sugisaki, "the persistence of poverty in Tanzania, especially in the rural areas, is cause for concern." The IMF official was confident that new measures regarding education, health, road construction, and agriculture, "should, when implemented with the expected strong support from Tanzania's development partners, go a long way in helping the authorities to tackle poverty."
Economic growth and structural reforms are the main ingredients in the IMF prescription for poverty reduction in Tanzania. The Tanzanian government thus has come up with a new three-year programme to combat poverty, closely following IMF guidelines and therefore also securing, yesterday, a loan to finance the programme.
Tanzania's new anti-poverty programme for 2003-06 aims to contain inflation at about 4 percent and raise real GDP growth further, to above 6 percent. Growth it to be underpinned by substantial investments in physical infrastructure as outlined in the country's Poverty Reduction Strategy Paper. The current account deficit is projected to decline steadily, "given robust growth in exports and a modest increase in imports."
As expected, the newly announced structural reforms in Tanzania were welcomed by the IMF. According to Mr Sugisaki, the new programme would "provide the necessary framework for the authorities' continuing reform efforts. Much of the outstanding reform agenda falls within the Fund's core areas of expertise. The continued engagement of the Fund is intended as an endorsement of the authorities' commitment to sound economic policy."
Key elements of the structural reform programme to dominate Tanzania's economy the following years are, as usual, mobilising more tax revenue "in order to strengthen domestic savings and reduce aid dependency."
Further, the Tanzanian government will liberalise its trade regime in order to enhance efficiency and strengthen the tradables sector. Finally, the policy aims at improving the economy's supply response by removing key impediments to growth, including measures to improve the efficiency of the financial sector and promote private sector development; i.e. more privatisations.
Thus, the IMF sticks to its age-old belief that economic growth and structural reform alone will reduce poverty. Although in Tanzania "poverty remains pervasive" (IMF) after seven years of the same recipe, the government has to continue on the same path to obtain further IMF financing.
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