Director of the International Monetary Fund’s African Department Abebe Aemro Selassie (left) during an interview with The Citizen Managing Editor Mpoki Thomson. photo | LOVENESS BERNARD
The International Monetary Fund (IMF) Director of African Department, Mr Abebe Aemro Selassie, exuded optimism earlier this week that President Samia Suluhu Hassan is taking the country’s economy in the right direction
In an exclusive interview with The Citizen, Mr Selassie said there is light at the end of the tunnel - banking his hopes on what he called the right approach in tackling the Covid-19 pandemic which has wreaked havoc on national economies globally.
The interview was held by The Citizen managing editor, Mpoki Thomson, and compiled by a Business Reporter Alex Malanga. Excerpts:
QUESTION: In the recent meeting with editors, President Samia Suluhu Hassan said her major priority right now is to review the economy and ensure that it grows at a higher percentage from last year’s stumble. What advice would you give the government to ensure it is on the right path?
ANSWER: Our immediate managing director Christine Lagarde has been saying that vaccine policy is an economic policy. Without that, it is really difficult to see how we can pursue an economic development agenda.
We are really pleased to see that the focus of getting the pandemic under control is exactly what President Hassan is working on. It is really very good to see that.
Second, the pandemic has really caused people to lose a lot. I think there is a need to find ways to reverse some of the increased poverty.
Also targeting social protection programmes: spending more on health and education will make a lot of sense.
I think the government is heading in that direction; the direct tackling of the pandemic and of course the kind of financing we are providing is intended to support those kinds of initiatives.
In 2019, IMF issued a report that criticised the immediate-past Magufuli regime in what was said to be unpredictable policies and statistics. What is your view on some reforms that President Hassan has undertaken compared to the previous regime?
The IMF does not assess how economic policies are being implemented. But what I can say is that the main threat that Tanzania’s economy is facing right now, in our view, is the pandemic.
That President Hassan’s administration has shown commitment to tackling the Covid-19 pandemic is incredibly good news.
We also like the way she is considering proposal inputs and taking the decision based on independent answers she is getting from colleagues. It is really very encouraging and we are so pleased with the direction she wants to take the economy.
What do you think are some of the things that the President needs to do for the country to make progress?
There is a need to learn from experience from other countries on how they have been tackling the pandemic… Reaching out to the peers in the region and beyond to see what policies have worked. Finance also comes to help. We are calling on the international community to immediately prioritise sending vaccine to Africa so that it is not left behind. Right Now we see a dangerous divergence in terms of vaccine access.
What is your assessment of the current government shift in handling Covid-19?
We are happy with how President Hassan’s administration has been approaching economic and health policies when it comes to Covid-19.
She had formed an independent committee that came up with recommendations on how to tackle the pandemic and now the government is implementing the same. This is good and encouraging.
Would you say Covid-19 is the biggest challenge the IMF has ever dealt with?
It goes without saying this is the biggest economic and health shock that countries are facing.
So, indeed this is the biggest crisis we have to deal with.
Does the IMF have any specific plans for Tanzania?
We are working closely with the Tanzanian government to tell us what is it they have in the plan that needs our support.
We give technical advice and views desired in policy. But first and foremost the design has to come from the country’s authorities.
What is the status of the $571 million loan that Tanzania has applied for from the IMF to help mitigate the adverse effects of the Covid-19 pandemic?
This pandemic really has been brutal. It has caused economic shocks. The IMF is treating this as a major threat to the livelihood of the people.
What we wanted to see is a clear plan of how the resource will be used. As we speak, we are working very hard to process the plan presented by Tanzania.
That plan should be up right now under the leadership of President Hassan.
We hope to process the request and present it to the (IMF) executive board.
So, what you are saying is that issuance of the loan right now depends on the government?
We have to have a credible case that gives us a reason for approval. We need to understand how the resources will be used. How they integrate to other government aspects, policy, of course and also how the pandemic is affecting the economy.
I am here also to meet with President Samia Suluhu Hassan to understand the government’s processes and strategies so that we can facilitate them.
One of the preconditions before you issue a loan is Tanzania being able to make Covid-19-related data public?
Just be very clear: it was not a condition, but a recommendation.
Before you solve the problem, you have to understand the magnitude of the problem. We don’t have to come and interfere… The government has its way of tackling the pandemic.
There is a need to scale-up measures to curb Covid-19 as much as possible.
So, we are encouraging that interventions being made by the government should be scientific and data-based. That is the discussion that we had.
The East African countries of Kenya, Tanzania, Uganda, and Rwanda have massively borrowed to mitigate the impact of the pandemic. Do you think this massive borrowing is sustainable?
The kind of finance IMF is providing when countries are facing some kind of economic complication or during an emergency like the one countries are facing in the context of the pandemic, is of more support.
This is different from a regular market type of borrowing that countries have been relying on. So, when you differentiate, our financing is highly concessional, it has a half percent interest rate compared to borrowing in commercial terms.
The reason why countries have to borrow from us at a time like this is that we are able to provide when the market is distracted. When other sources of financing are strained, countries can borrow from the IMF at a minimum cost.
As I said, through a rapid credit facility, it is not about having an economic program or reform, but we are really committed to providing support to the people in an emergency situation.
So, this is really important to distinguish between the rapid emergency type of financing that we have been providing over the last year from other financing in the context of countries doing economic reforms and the like. And what Tanzania has asked for is rapid emergency financing. Over the last year, we provided such financing to the likes of Rwanda, Kenya and Uganda.
What measures are in place to ensure the financing you provide is going to be used as planned? Do you have any follow-up systems?
First, we ask for a plan showing spending initiatives that the government is going to pursue. The plan has to indicate how the resources are going to be used. Are they going to be used wisely?
Secondly, it will be useful and important that later there are national audit processes being followed to ensure that money has been spent well as intended.
Again showing exactly to the public how money is being used is part of strengthening good governance in countries.
What is your advice on whether Tanzania should adopt use of cryptocurrency or not?
There are quite a lot of excitements to see how this technology will be effective. We understand that curiosity and why countries are interested. So, it is good to understand what is going on…what the debate is all about and what use we could make out of this technology.
But on the question of whether cryptocurrency has to be used for transactions, it is a bit premature to say that.
Why? Because security features are not clear, there are a lot of complications that suggest the type of tech is not ripe to be used across the board in our economies.
As the IMF director for Africa, what is your message to Tanzania?
As I said before, I have come here to listen and try to understand what the President would like us to help. Secondly, we have come to show that we stand fully behind the people of Tanzania as we have the rest of the world.
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