Tanzania is seeking at least $700 million from the International Monetary Fund (IMF) as it adjusts its borrowing strategy to take on more concessional loans and reduce the risk of debt distress.
The move is part of President Samia Suluhu’s wider plan to boost Tanzania’s fiscal position, after the IMF in September raised the East African nation’s risk of debt distress from low to moderate.
The government ramped up commercial borrowings in the past few years to fund infrastructure projects, including about $1.5 billion from Standard Chartered Plc to help fund the construction of a new railroad.
“We have redirected the loan program, I am looking for concession, not for commercials. An agreement with the IMF hasn’t been reached yet.” President Samia Suluhu Hassan.
The talks if successful, will result in the nation’s first IMF policy-reform funding program in a decade. The institution’s disbursement of about $570 million for Tanzania last year was under the emergency lending provision for recovery from the coronavirus pandemic.
The nation’s debt climbed 20% to $37.1 billion in 2021, consequently, the fiscal deficit may widen to 4.2% of GDP this year, compared to 1.4% recorded in the 2019-20 fiscal year, the World Bank said in a January report.
The ongoing engagement with the IMF is seen as a shift from former President John Magufuli’s rule when the government had strained relations with international financial institutions and private investors.
Tanzania is also in discussion with the Export-Import Bank of India and China for concessional funding for projects in sectors including, water and sanitation, aviation as well as developing railroads, Hassan said without giving further details.
Samia Suluhu said they were also seeking a credit rating as part of their plans to sell the Tanzanian story among investors and increase capital inflows. However, she noted they are not keen on selling Eurobonds yet because of the associated financial risks.