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The International Monetary Fund (IMF) said on Tuesday that Tanzania's macro-economic performance remained strong and medium term prospects were favorable.
IMF's Deputy Managing Director Min Zhu said in a statement that the East African nation's performance under the Policy Support Instrument (PSI) was satisfactory through December 2014, but weakened in early 2015 due to a range of factors.
The statement said factors that caused the weakening of performance in early 2015 included delays in mobilizing external financing and donor support.
"Against this backdrop, the authorities' corrective measures aimed at achieving the 2014/15 budget deficit target are commendable, though earlier expenditure ceiling adjustments could have helped preserve development spending," said the statement.
It said the draft 2015/16 budget, which targeted an underlying deficit of 3.5 percent of GDP, excluding arrears clearance, was built on more prudent revenue and foreign financing assumptions.
The fiscal target also put Tanzania on a path to a 3 percent deficit over the medium term, which was consistent with maintaining a low risk of debt distress, said the statement.
The PSI offers low-income countries that do not want, or need, IMF financial assistance a flexible tool that enables them to secure IMF advice and support without a borrowing arrangement.
This non-financial instrument is a valuable complement to the IMF's lending facilities under the Poverty Reduction and Growth Trust. The PSI helps countries design effective economic programs that deliver clear signals to donors, multilateral development banks, and markets of the IMF's endorsement of the strength of a member's policies.
