The International Monetary Fund approved a $14.3 million grant under its Catastrophe Containment and Relief Trust to cover Tanzania’s debt repayments falling due to the IMF from June 12 to Oct. 13.
“Additional relief covering the period from Oct. 14, 2020, to April 13, 2022, will be granted subject to the availability of resources in the CCRT, potentially bringing total relief on debt service to the equivalent of about $25.7 million,” the IMF said in an emailed statement on Friday.
“The pandemic has weakened near-term macroeconomic prospects for Tanzania,” the IMF said.
“The country is facing a drastic reduction in tourism receipts, budget pressures, and a projected deceleration of gross domestic product growth from over 6% to 4% in the current fiscal year and to 2.8% in the upcoming fiscal year,” with the fiscal year ending in June, the IMF said.
Tanzania was seeking as much as $272 million from the IMF’s rapid credit facility and is in talks with bilateral creditors about debt relief, according to Finance Minister Philip Mpango.
Mpango told lawmakers during a budget speech last week that the government has begun negotiations with creditors over a G20 nations initiative over debt relief as part of efforts to mitigate negative economic effects sparked by the coronavirus outbreak.
The initiative is geared towards delaying debt repayments beginning in May to December 2020, freeing up cash for governments to use to ease the economic impact of COVID-19.
“The 20 richest nations in the world (G-20) have urged bilateral official creditors to provide debt relief to the world’s poorest nations including Tanzania,” Philip Mpango said in parliament.
“The government has began negotiations with creditors to benefit from this initiative.”
The government is talking to the European Union for potentially 27 million euros’ worth of support and the International Monetary Fund’s rapid credit facility where Mpango said it could access up to $272 million as balance of payments support.
The African Development Bank has pledged a concessional loan of $50 million as budget support, the finance minister added.
Mpango said that Tanzania expects its economy to grow by 5.5% in 2020 compared with a previous estimate of 4%, after the government took steps to mitigate the economic impact of coronavirus, a much rosier outlook than the World Bank’s projection of 2.5%.
“This is due to rains ruining transport infrastructure in the country and the impact of COVID-19 which hit a lot of countries that are our trade partners,” he said.
In what is the last budget for this parliament before the general election in October, Tanzania plans to spend 34.88 trillion Tanzanian shillings ($15.09 billion) for the fiscal year 2020/21, up from 33.11 trillion shillings the previous year, Mpango said.
The finance minister told parliament that total public debt to GDP ratio stood at 27.1% while external public debt to GDP was at 16.3%.
Tanzania plans to borrow a total of 7.94 trillion shillings from domestic and international markets for the next fiscal year, said Mpango.