IMF cautions govt over spending, Pinda reacts

Premier Mizengo Pinda speaks to city-based journalists soon after landing at the Julius Nyerere International Airport in Dar es Salaam yesterday.  PHOTO | EDWIN MJWAHUZI 

By Songa Wa Songa and Florence Mugarula,The Citizen Reporter

In Summary

• The Bretton Woods body says the government, faced with tax shortfalls and aid freeze by donors, has resorted to heavy borrowing through the central bank and this may impact negatively on the market.
• The mission said the upcoming mid-year Budget review with the state would be used to align expenditure allocations with available resources

Dar es Salaam. The International Monetary Fund (IMF) has raised the alarm over the inability of the government to control its appetite for spending above its means, warning that the trend could distabilise Tanzania’s monetary policy.

An IMF mission report released on Tuesday noted that the government, faced with tax shortfalls and aid freeze by donors, has resorted to heavy borrowing through the central bank and this may impact negatively on the market.

According to IMF, the government needs to urgently re-align its spending priorities with what it can afford. 

“Front-loading of domestically-financed capital expenditure in July and August was facilitated by the Bank of Tanzania (BoT) through conversion of liquidity paper into financing paper but this complicated monetary policy implementation,” it said.   

The mission said the upcoming mid-year Budget review with the state would be used to align expenditure allocations with available resources.

“The expected implementation of VAT reforms in early 2015 should help bolster the revenue base,” IMF noted in the brief that usually follows meetings with top government leaders.

The warning yesterday coincided with a stinging attack on the donor community by  Prime Minister Mizengo Pinda who stopped short of accusing development partners of patronising the state.

Mr Pinda expressed the government’s frustrations over donors who have withheld nearly Sh1 trillion in budget support for the current financial year, saying the only solution to evade embarrassment was to “completely avoid budget dependence.”