THE International Monetary Fund (IMF) has approved 567.25 million US dollars (about 1.304tri/-) to enable the country cushion the impact of the Covid-19 pandemic, following collapse of the tourism sector.
The Fund approval on Monday was 100 per cent of the county quota under two facilities--Rapid Credit Facility (RCF) and Rapid Financing Instrument (RFI)--to help finance the urgent balance of payment needs, stemming from the outbreak of the coronavirus pandemic.
IMF’s Executive Board’s discussion Chair, Mr Bo Li, who is a Deputy Managing Director, said the fund is geared to support the Tanzania government’s efforts in responding to the pandemic by addressing urgent health, humanitarian and economic costs.
“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 Brenton Wood Institution said in a release, adding: “The country’s economic outlook has deteriorated due to the impact of the Covid-19 pandemic.”
The country tourism sector has collapsed amid travel restrictions, the economy reportedly decelerated to 4.8 per cent growth last year, according to IMF, and growth is expected to remain subdued this year Tanzania faces an urgent balance of payment needs of about 1.5 per cent of the GDP.
Currently, the government is implementing a comprehensive plan--Tanzania Covid-19 Socioeconomic Response Plan (TCRP) to mitigate the effects of the pandemic and preserve macroeconomic stability in the face of a reported third wave of the virus. “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,” IMF said. The Fund said the emergency support under the RCF and RFI 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,” the discussion chair said.
He said 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.
IMF suggested that 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,” the statement said The government, according to IMF, said once the crisis abates, they appropriately intend to resume implementing reforms to achieve sustainable and inclusive growth.
“Their (government) 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 improvement of the business climate,” IMF said.
The government is also committed to IMF to strengthen governance and transparency, to ensure that the financial resources are efficiently spent on addressing the crisis.
On Monday, the Tanzania Securities report on Tanzania Banking sector review 2020 showed that the sector experienced good performance despite the tremendous economic impact of the Covid-19 pandemic.
The banks’ assets grew by 5.54 per cent last year, which was faster than the GDP growth of 4.8 per cent.
“This is evidenced by growing profitability, improved liquidity and increased lending to the private sector,” the report of Tanzania Securities said.
The World Bank 16th Tanzania Economic Update, Transforming Tourism: Toward a Sustainable, Resilient, and Inclusive Sector report issued July this year said the country has an opportunity to ignite inclusive economic growth by transforming its tourism sector.
WB proposed some priorities for sustainable recovery for the tourism sector, including creating an efficient, reliable and transparent business environment, improving tourism information management system, ensuring affordable financial support to struggling businesses across the value chain, strengthen adherence to health and safety protocols and data transparency.
According to the government's third Five-Year Development Plan (FYDP III), tourism sector is envisaging to grow fast. The number of tourists increased from 1,137,182 in 2015 to 1,527,230 in 2019. Positive progress is also observed from the FYDP II’s indicator, ‘earnings from tourists.’
The earnings increased from the baseline figure of 1.9 billion US dollars (about 5tri/-) in 2015 to 2.6 billion US dollars (about 6tri) by 2019, which is 36.8 per cent increase from the baseline. O
ther achievements are an increase of licenced tourism operators from 1,242 in 2016 to 2,051 in 2020, also cultural tourism enterprises increased from 66 in 2016 to 76 in 2020.
However, due to the Covid-19 pandemic shock, the earnings are projected to significantly decline, and likely to fall short of the FYDP II’s target of 3.6 billion US dollars.