[{"bbox": [84, 105, 1145, 212], "category": "Text", "text": "Although the pandemic has pushed the global economy into a recession in 2020, Tanzania managed to keep its economy relatively afloat. During the FY 21/22 budget speech, the Government reported on positive real economic growth in 2020 at a rate of 4.8%, compared to the projected growth rate of 5.5% in 2020, and a 7.0% growth stated for 2019. Growth for 2021 is projected at 4%, with a fiscal deficit of 3.9%"}, {"bbox": [84, 218, 1145, 325], "category": "Text", "text": "This economic slowdown was mainly attributable to adversely affected export-oriented industries, especially tourism and traditional exports, and caused a drop in foreign investment. However, significant discrepancies with International Monetary Fund and World Bank GDP growth rates persist, with 2020 real GDP growth estimates of 1.0% and 2.0% respectively."}, {"bbox": [84, 330, 1145, 596], "category": "Text", "text": "Thus far, the Tanzanian Government spent USD 8.4 million specifically related to deal with the effects of COVID-19. In addition, the government has received grants and will use contingency reserve of USD 3.2 million to fund additional health spending to mitigate the risks of the pandemic. To support the private sector, the authorities indicated that they expedited the payment of verified expenditure arrears with priority given to the affected SMEs, paying USD 376 million in March 2020. The government has also expanded social security schemes by USD 32.1 million to meet the increase in withdrawals benefits for new unemployed due to COVID-19. On May 12, the Bank of Tanzania (BoT) reduced the discount rate from 7 percent to 5 percent and reduced collateral haircuts requirements on government securities. Effective June 8, the BoT Statutory Minimum Reserves requirement is reduced from 7 percent to 6 percent. In addition, the BoT will provide regulatory flexibility to banks and other financial institutions that will carry out loan restructuring operations on a case-by-case basis."}, {"bbox": [84, 601, 1145, 789], "category": "Text", "text": "The Government of Tanzania secured financial assistance from the IMF for USD 567 million under the Rapid Credit Facility and the Rapid Financing Instrument to tackle the health and socio-economic challenges caused by the COVID-19 pandemic. The new loans comes a little over a year after the IMF Executive Board approved debt relief equivalent to USD 14.3 million under the Catastrophe Containment and Relief Trust to help free up resources for public sector health needs and other emergency spending. The IMF loan signal a positive development in the relationship between the country and the IMF, which has faced difficulties since the Tanzanian authorities have not consented to publication of the 2019 Article IV Consultation staff report."}, {"bbox": [84, 794, 1145, 953], "category": "Text", "text": "Notwithstanding the adverse effect the pandemic has had on important economic sectors, Tanzania seems to have maintained relative macroeconomic stability. The government has been able to manage the economy in a manner that has provided relatively low and consistent rates of inflation. In May 2021, inflation rate was recorded at 3.3%, slightly above the recorded annual inflation rate of 2020 which stood at 3.2%, but below the 2018-19 average of 3.5%. Whilst energy inflation has experienced volatility, there has been a high degree of stability in food and headline inflation in recent years."}, {"bbox": [84, 959, 1145, 1067], "category": "Text", "text": "A similar example of government control resulting in stable economic indicators is the recent trajectory of the Tanzanian Shilling (TZS). The TZS has seen relatively low degrees of volatility in recent years against key currencies. Foreign reserves remain at sufficient level to cover 5.1 months of import of goods and services, though have dropped compared to 6.1 months in the same period last year."}, {"bbox": [84, 1071, 1145, 1231], "category": "Text", "text": "Tanzania's risk of debt distress increased to moderate for both external and overall public debt, with an estimated debt-to-GDP ratio of 40 percent in 2020/21. The increase in the rating is caused by Tanzania's weakened ability to absorb shocks with sensitivity to a narrowing export base and by the lower debt burden thresholds corresponding to the new medium debt carrying capacity classification. The changing debt composition may lead to liquidity risks as commercial debt has increased from just 4 percent to about 20 percent over the past 8 years, driven by the financing needs of large capital projects. In March 2021, debt service equalled 41% of domestic revenues."}, {"bbox": [84, 1237, 1145, 1343], "category": "Text", "text": "Tanzania reached an important milestone in July 2020, when it formally graduated from low-income country to lower-middle-income country (LMIC) status. This reclassification reflected the country's rising gross national income per capita, which reached USD 1,080 in 2019. However, Tanzania's extreme poverty rate remains high at close to 50%."}, {"bbox": [84, 1349, 1145, 1588], "category": "Text", "text": "Domestic revenue mobilisation continues to be a priority for the Government of Tanzania to finance the FYDP III. The country's recent reclassification to LMIC is likely to reduce access to grants and concessional loans. Tanzania has considerable untapped tax revenue potential. The tax gap is estimated at 6 to 7 percent of GDP, one of the largest in the region. The tax to GDP ratio has increased marginally over time and is still relatively low at 12%. During the implementation of the FYDP II (2015/16 – 2020/21), tax revenues increased by 56% in nominal terms. Since the start of Covid-19, nominal tax revenues have contracted by roughly 3% in 2020. Zanzibar experienced a particular large drop due to the collapse of the tourism industry. Tax revenue targets for FY2021/22 seem optimistic, predicting a 9% nominal increase while the economy is still recovering from the pandemic. On the other hand, the increase is much more conservative than the >20% increase in the first budget of the previous 5th phase government."}, {"bbox": [84, 1594, 1145, 1645], "category": "Text", "text": "In conclusion, the authorities are pursuing a stability-oriented macroeconomic policy and the eligibility criterion is met."}, {"bbox": [1051, 1663, 1158, 1687], "category": "Page-footer", "text": "Page 8 of 24"}]