The COVID-19 outbreak has led to the collapse of the tourism sector and amplified the need for significant financing to tackle the health and economic effects of the pandemic; The IMF approved US$567.25 million in emergency financial assistance under the Rapid Credit Facility and Rapid Financing Instrument to support the authorities’ efforts in responding to the pandemic by addressing the urgent health, humanitarian, and economic costs.
The resources are also expected to play a catalytic role in their efforts to mobilize additional support from development partners; The authorities also commit to strengthening governance and transparency to ensure that the financial resources are efficiently spent on addressing the crisis.
The Executive Board of the International Monetary Fund (IMF) today approved a disbursement of SDR132.6 million (US$189.08 million) under the Rapid Credit Facility (RCF) and a purchase equivalent to SDR265.2 million (US$378.17 million) under the Rapid Financing Instrument (RFI), a total of SDR397.8 million (US$567.25 million or 100 percent of quota). This emergency financing will help finance Tanzania’s urgent balance of payment needs stemming from the outbreak of the COVID-19 pandemic.
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 percent growth in 2020, and growth is expected to remain subdued in 2021.Tanzania faces an urgent balance of payment need of about 1.5 percent 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.
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 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, issued the following statement:
“The COVID-19 pandemic has negatively impacted Tanzania’s macroeconomic outlook, and the health and wellbeing of its population. Growth decelerated in 2020 and is expected to remain subdued in 2021, increasing poverty and negatively affecting employment. Tanzania’s risk of external and public debt distress increased to moderate, mainly due to the pandemic’s effect on tourism exports. 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. Prioritizing the health response, strengthening coordination and transparency to ensure that funds received are spent on fighting the pandemic, and regularly and transparently reporting epidemiological data will be critical for the plan’s success.
“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.”