IMF Forecasts Tanzania's Economy to Grow by 5.4% in 2024

The International Monetary Fund (IMF) has projected that Tanzania’s economy will grow by 5.4% in 2024, spurred by improvements in the business environment and a reduction in global commodity prices.

Over the past weekend, the IMF released an optimistic economic outlook for Tanzania. A staff team led by Charalambos Tsangarides, the IMF mission chief for Tanzania, conducted meetings in Dodoma and Dar es Salaam from May 2 to 17 for the third review under the Extended Credit Facility (ECF).

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During their mission, the team met with Tanzania’s Minister for Finance, Dr. Mwigulu Nchemba, the Bank of Tanzania (BoT) Governor, Mr. Emmanuel Tutuba, along with other senior officials, development partners, and private sector representatives.

Subject to approval by the IMF Executive Board, the review will make available $150 million, bringing the total IMF financial support under the arrangement to $604.2 million.

The IMF team also discussed the authorities’ request to access funds under the Resilience and Sustainability Facility (RSF) amounting to 150% of quota, which is $789.6 million.

“I am pleased to announce that we have reached a staff-level agreement on the policies needed to complete the third review of Tanzania’s ECF-supported program, and on the request to access financial resources from the RSF. The IMF’s Executive Board will discuss these requests in the coming weeks,” said Mr. Tsangarides at the conclusion of the mission.

In a recent statement, the Bank of Tanzania (BoT) projected the country’s economic growth to reach 5.5% this year, driven by an improved business climate and public investment in infrastructure. The World Bank has also forecasted a 5.6% growth.

Tanzania’s economic growth was recorded at 4.6% in 2022. Despite challenges such as power outages and strained foreign exchange liquidity that dampened manufacturing and trade activities, the economy grew by 5.1% last year.

According to the IMF, the country’s year-on-year inflation remained at 3.1%, with core inflation ticking up to 3.9% in April 2024. Additionally, the IMF observed that the current account deficit is expected to narrow to 4.3% of GDP this fiscal year from 6.5% in the 2022/23 fiscal year.

However, the IMF noted that external financial conditions are expected to remain tight, and pressures in the foreign exchange market are likely to persist.

The BoT has reiterated its commitment to allowing more exchange rate flexibility to revitalize the foreign exchange (FX) interbank market and ensure a market-determined exchange rate. The BoT plans to limit FX interventions to avoid disorderly market conditions and will enhance transparency by publishing the results of its FX auctions. Maintaining a moderately tight monetary policy stance will support efforts to ease pressures in the FX market while preserving price stability, the IMF pointed out.

Nonetheless, the IMF disclosed potential risks to Tanzania’s economic outlook, including regional conflicts, increased commodity price volatility, abrupt global slowdowns, prolonged liquidity issues in the FX market, and intensification of floods from El Nino.

Currently, the IMF observed that the government continues to implement its growth-friendly fiscal consolidation plan as outlined in the FY2023/24 budget.