Why Tanzania's Sh1.3trillion IMF loan is now interest-free

By Josephine Christopher

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Dar es Salaam. The Sh1.3 trillion loan given to Tanzania by the International Monetary Fund (IMF) will draw no interest after the Washington-based international financial institution was satisfied with the government’s expenditure plans for the

money.
To help the Tanzanian economy recover from the adverse effects of the global Covid-19 pandemic, IMF extended a total of $567 million as a loan, with $189 million of that being under the Rapid Credit Facility (RCF) programme, while $378 million was under the Rapid Financing Instrument (RFI).
In a statement released by the IMF on November 12, 2021, Tanzania will now obtain the funds fully on the concessional terms after RFI funds - which make up 66.7 percent of the quota - were repurchased and disbursement made from RCF resources.
“This RCF disbursement allows Tanzania to take full advantage of its new eligibility to borrow from the Fund on concessional terms,” the IMF statement reads in part.
The deputy IMF managing director, Mr Bo Li, stated that the Fund’s emergency financing on fully concessional terms will help the country to narrow its external financing gap, support the authorities’ implementation of the Tanzania Covid-19 Socio-economic Response Plan (TCRP), and help catalyse donor support.
“…To ensure success of the TCRP, the authorities will prioritise the health response - including the vaccination campaign; enhance social safety nets, and strengthen coordination, governance, and transparency of pandemic-related spending,” he said.
Speaking to The Citizen, the Head of Communications at the Ministry of Finance and Planning, Mr Ben Mwaipaja, said the approval for making the entire loan interest-free was achieved after the IMF was satisfied by utilisation plans that Tanzania had indicated for the funds.
“They saw good prospects in terms of the projects that the government plans to implement using the funds,” he said.
During the launch of the Development Campaign for National Welfare and the Fight Against Covid-19 last month, Finance Minister Mwigulu Nchemba said the money would be used to implement development projects in the education, water, health and tourism sectors of the economy.
While $100 million - roughly equivalent to Sh230 billion - was allocated to Zanzibar, Mainland Tanzania plans to construct 15,000 classrooms in secondary schools and 3,000 in primary schools.
The funds will also be used to implement water projects in urban and rural areas, while in health-care the government plans to procure and install modern Intensive Care Unit (ICU) equipment, as well as increase the number of the units countrywide.
Other plans are increasing the availability of oxygen distribution systems, X-ray machines, CT-scanners, and Magnetic Resonance Imaging (MRI) facilities - just to mention a few.
Modern Emergency Departments (MEDs) would be built at the national, referral, zonal, regional and strategic districts levels, bringing their number to 105 from the present 10 MEDs, Mr Nchemba revealed.
President Samia Suluhu Hassan has warned against misuse of the funds, stressing the proverbial value for money concept in implementing the intended projects.
“The country is going to boil over, with development projects in all corners. Therefore, ministers, district executive directors and the respective teams should exercise effective supervision of the projects,” the President said.
As she has continuously been insisting, the Head of State stressed that there would be no mercy for officials who misuse the loan funds, stressing transparency and accountability instead.