The International
Monetary Fund is worried that Tanzania's economic growth could be
clouded by growing investor concerns over government policies.
IMF said that
although gross domestic product data point to continued strong growth,
other high frequency data suggest a weakening of economic activity.
"There are downside
risks to economic growth in the short term stemming from slow budget
implementation, a challenging business environment and private sector
concerns about authorities' enforcement of rules," noted the IMF.
This is attributed
to dwindling tax revenue collections and credit growth stagnation that
is reflected in ballooning of non-performing loans in commercial banks.
"Tanzania's recent
economic performance has been mixed and the outlook is subject to
emerging risks," said the IMF in a statement following the completion of
the seventh and last review of Tanzania's economic performance under
the Policy Support Instrument (PSI) programme.
Best performing economy
Tanzania is the
best performing economy in East Africa, posting a GDP growth of 7.7 per
cent in the first half of 2017 fiscal compared with Kenya and Uganda,
which recorded a growth of 4.9 per cent and 4.7 per cent respectively.
Projections show
that in 2017, Tanzania's economy grew by seven per cent compared with
Kenya's five per cent and Uganda's 5.1 per cent.
According to the
IMF, apprehension among foreign investors and the private sector due to
government policies pose threats to Tanzania's growth in the immediate
future.
Far-reaching reforms
Over the past two
years, President John Pombe Magufuli's administration has instituted
far-reaching reforms, some of which have rattled investors particularly
in the mining sector.
Some of the
reforms, particularly on taxation, have seen multinationals and private
companies opt to scale down their operations on the basis that they are
punitive.
The Tanzanian government has been seeking to increase revenue collection to finance its mega infrastructure projects.
The need to collect
more revenues has become more pressing because other sources of
financing like official aid are declining while commercial borrowing
remains restricted according to the World Bank.
Falling tax revenue
In the 2014/15
financial year, tax revenue in Tanzania stood at $6 billion but declined
to $4.5 billion in 2015/16. This financial the country is targeting to
increase collection to $6.6 billion.
"Additional
domestic revenue needs to be mobilised through tax policy and
administration reforms, while improving the functioning of the value
added tax refunds system," stated the IMF.
The three-year PSI
for Tanzania, which expires this month, was aimed at supporting the
country's medium-term objectives that include maintenance of
macroeconomic stability, preservation of debt sustainability and
promotion of more equitable growth and job creation.
No comments:
Post a Comment