Mr Tao Zhang
The International Monetary Fund (IMF) Deputy Managing Director, Mr Tao Zhang arrives in the country today for an official visit. The following are excerpts of an interview he granted to ‘Daily News’ Business Editor, Henry Lyimo ahead of his visit where he touches on the purpose of his visit as well as Tanzania’s relations with the IMF.
What brings you to Tanzania and what is your message to the country?
Let me start by thanking you for this interview. I am here to see firsthand the progress that Tanzania has made in raising the living standards of all its citizens, and the measures being taken to address the challenges ahead. I look forward to engaging with President John Magufuli, your policymakers, business leaders, and representatives of civil society. I want to share the International Monetary Fund (IMF)’s views, but I am also here to listen. Tanzania has made substantial progress in creating an economic environment that has benefitted all– be persistent! Continue to focus on high and sustainable growth, macro-economic stability, and on making the economy work for all. In this regard, I hope to discuss several important issues during my visit. How can your growth strategy address issues such as poverty and inequality? There is also the challenge of having to improve the business environment and remove infrastructure bottlenecks in order to boost job creation and future growth. These are issues that are also faced by other countries in sub-Saharan Africa and, indeed, globally.
What is the IMF’s growth outlook for Tanzania?
Tanzania is a stable country that has sustained high levels of growth over two decades. Its sound economic policies have cushioned the country from the sharp slowdown that has affected much of the sub-Saharan Africa. The country is blessed with natural resources, a large labor force and a strategic location within the center of the East African Community— all of which make the country attractive to foreign investments. We forecast growth to be around 6-7 per cent in 2017, similar to the last few years. Over the medium term, we expect this growth level to be maintained as the ongoing infrastructure developments bear fruit, investments in natural resources pick up, and integration in the East African Community creates new opportunities. For this to happen, it is important for the country to maintain its focus on raising the living standards of all its citizens and to create a more business friendly environment supported by strong institutions and continued anticorruption efforts. We welcome the government’s emphasis on these issues through its second Five-Year Development Plan (FYDP II). This will be crucial in the country’s efforts to achieve continued success— including the Development Vision 2025 goal of achieving middle-income status along with the Sustainable Development Goals.
What is the status of IMF relations with Tanzania?
Tanzania has had a series of programmes with the IMF for the past four decades— the latest of which is a Policy Support Instrument. This programme aims to support low-income countries that do not need IMF financing, but want close engagement with us via monitoring and policy support. Tanzania has made substantial progress in some areas under the current IMF programme. For example, the country has succeeded in maintaining its debt on a sustainable path, inflation has generally been kept at moderate levels, and there have been gradual improvements in the collection and administration of taxes. In addition, the programme has helped to provide a framework for the economic policies that are driving high growth. The programme also integrates IMF capacity development and training in support of these efforts. This includes visits by teams from IMF headquarters and our Regional Technical Assistance Center here in Dar es Salaam, East AFRITAC, as well as participation by Tanzanian officials in training courses in Washington and at our Africa Training Institute in Mauritius. Some of the areas in which we have provided this type of support include public financial management, monetary policy, statistics, and revenue administration.
How relevant have your policies been in reducing inequality, poverty and promoting growth?
Our engagements with your policymakers on the roll-out of the Policy Support Instrument and previous programmes, have been characterized by an emphasis on making sure that there is sufficient money allocated for social spending.
The aim here is to support Tanzania’s continued progress in reducing poverty, improving education and creating more jobs for its young people. In addition, we have engaged with your authorities on the necessary tax reforms that can be used to increase revenues, thereby providing the government with more money to spend on health care, sanitation and food security. These revenues can also help to pay for increased investments in infrastructure thereby contributing to keeping public debt at a manageable level.
There are concerns that sub-Saharan Africa is paying heavily to service loans and yet the debts are mounting. How can countries get out of the debt trap and what are your views on this?
Let me start by stressing that public debt levels in sub- Saharan Africa are well below those observed in the 80s and 90s. Debt has started to drift upward, but from a low level and in general remains below the highs of the past. It is important to stress that the debt picture varies considerably across this region. The challenge for countries is to strike a healthy balance between addressing development spending needs and avoiding an unsustainable debt build-up, something Tanzania has managed well until now. Many countries in sub-Saharan Africa need to borrow to raise funds for key projects and can afford to do so if this external financing is at low interest rates, and preferably on concessional terms (low interest rates and long maturities).
There is also a need for enhanced domestic revenue mobilization to help finance investment projects and keep debt servicing costs down. It is also evident that the financing available domestically is not sufficient for the government and the private sector to carry out the necessary investments in a reasonable timeframe. External borrowing allows for higher rates of investment than otherwise possible. It is important that the projects that are being financed are implemented in a cost-effective manner, and chosen to generate the biggest possible return in terms of higher growth while keeping debt at manageable levels.
Source: DailyNews
No comments:
Post a Comment