vivian
JF-Expert Member
- Nov 2, 2009
- 1,813
- 1,258
[TD="class: articlePhoto, align: center"]
[/TD]
By Fumbuka Ng'wanakilala
DAR ES SALAAM (Reuters) - Tanzania's growth this year may exceed the 6 percent forecast earlier due to the strong performance of its telecommunications, construction and financial services sectors, the International Monetary Fund (IMF) said on Monday.
The IMF cut its 2011 growth forecast for Tanzania to 6 percent from 7.2 percent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.
"Tanzania's growth for the calendar year 2011 could be a bit more than 6 percent ... despite recent power shortages, Tanzania's economy continues to grow strongly, expanding by 6.3 percent in the first half of 2011," said Peter Allum, division chief at the IMF's African Department.
Like its east African neighbours, Tanzania has struggled this year with rising inflation driven by higher food and fuel prices, a worsening current account deficit and a slide in its currency to record lows against the U.S. dollar.
"Public spending has risen as a share of gross domestic product (GDP) in recent years to deliver significant growth in local government health, education and other social programs as well as scaled-up investments in roads and other infrastructure," he said at a news conference in Dar es Salaam.
The news conference was held at the conclusion of the IMF's latest Policy Support Instrument (PSI) review for east Africa's second largest economy.
Allum said talks with the government focused on ensuring public spending does not exceed the resources available, setting the right policy mix for reducing inflation and the financial implications of the country's emergency power plan.
He said Tanzania's core inflation, excluding food and energy components, remained in single digits. Headline inflation hit 16.8 percent in September, boosted by energy costs, food prices and the recent depreciation of the shilling.
"Telecoms is doing very well, construction is doing well and financial intermediation as well, and this will probably continue. The government has taken good measures to deal with the energy shortages," said Frank Lakwijk, senior economist at the IMF's African Department.
The IMF warned that Tanzania's overall recurrent spending had out paced revenues and grant financing, contributing to growing fiscal deficits and a rising public debt stock, projected to reach close to 42 percent of GDP this year.
"It was agreed that the budget deficit in 2011/12 should be allowed to exceed the earlier programmed level of 6 percent of GDP to help finance the emergency power plan and accommodate expanded social spending," said Allum.
Savings in non-priority programmes were expected to reduce the budget deficit to around 6.5 percent of GDP by the end of June next year, and help tackle inflation, he said.
Tanzania had agreed to pursue fiscal tightening measures in the 2012/13 financial year and beyond to stabilise the country's rising public debt. The 2012/13 fiscal year starts in July next year.
"The government has agreed that recurrent spending in the 2012/13 budget should not exceed the financing provided by revenues and grants. This will require continuing efforts to prioritise spending and/or increase revenue," Allum said.
Tanzania had also agreed to maintain tight liquidity conditions to curb demand for foreign exchange and stem inflationary pressures.
"The floating exchange rate regime will be maintained and the accumulation of international reserves will benefit in the coming months from new donor funding and other credits," he said.
Source: Reuters Africa