IMF mulls action to fix Dar Budget after aid cut

Division Chief Africa Department, Celine Allard speaks during the launch of the report, ‘IMF Economic Outlook’ , that too place in Dar yesterday. PHOPTO|RAFAEL LUBAVA 

By Alawi Masare,The Citizen Reporter

In Summary

• Tanzania reached out to IMF at a meeting in Washington two weeks ago, expressing fear about serious disruption in government functions

Dar es Salaam. The International Monetary Fund said it was working with the government to review this year’s budget performance following the decision by donors to withhold $558 million (nearly Sh1 trillion) in aid due to corruption concerns in the power sector.  

The government reached out to IMF at a meeting in Washington two weeks ago, expressing fear about serious disruption in government functions as 12 key donor countries, including the World Bank, held back on General Budget Support over Independent Power Limited (IPTL) sale scandal.

Ms Antoinette Sayeh, director for African department at IMF said they are looking at additional adjustments that will be needed “including some revenue actions to fill the gap left by the donor funding.”

The donors would not release their pledges for the 2014/15 budget until the government releases the findings of the Controller and Auditor General (CAG’s) investigation into the controversial payment of Sh201 billion held in the escrow account in the Bank of Tanzania to IPTL.

“There are signs that donors are withholding their budget support pending the report currently being worked on about the IPTL case. Clearly there are risks that budget support may not be at the levels expected.

Tanzania is not low but compared to other countries, it can do better on the revenue to Gross Domestic Product (GDP) ratios…… so some actions on revenues will be needed in any case,” she said in response to media questions at a press conference yesterday.

Ms Sayeh was in Dar es Salaam to launch the Regional Economic Outlook for Sub-Sahara Africa.  Yesterday, economic experts told The Citizen that possible revenue measures that the government can take would include cutting extensively on unnecessary government spending or even borrowing more from commercial sources to fill the financial gap.

“At this stage of the budget cycle the option would be to relocate funds to expenditure that is absolutely vital although prioritising government needs can be a very challenging task here,” said Prof Samuel Wangwe, executive director of Repoa Policy Research for Development.

Supplementary budget

While still early to speculate, in times of a budget crisis, the state could table in Parliament a bill for a supplementary budget to fix a crippling budget hole.

But permanent secretary in the Ministry of Finance Servacius Likwelile was quoted by Bloomberg last week as saying that the government may also opt to borrow more from both domestic and commercial sources to fund its Sh19.8 trillion budget estimates.

He said the government has borrowing arrangement with the Bank of Tanzania. The central bank borrows on behalf of the government through both Treasury bills and bonds to finance the Budget