南非国际事务研究所-坦桑尼亚的宏观经济政策发展（英）-2021.10-36正式版

COVID-19MACROECONOMICPOLICYRESPONSESINAFRICA07MacroeconomicPolicyDevelopmentinTanzaniaOswaldJosephMashindano&VivianKaziInternationalDevelopmentResearchCentreCentrederecherchespourledéveloppementinternational每日免费获取报告1、每日微信群内分享7+最新重磅报告；2、每日分享当日华尔街日报、金融时报；3、每周分享经济学人4、行研报告均为公开版，权利归原作者所有，起点财经仅分发做内部学习。扫一扫二维码关注公号回复：研究报告加入“起点财经”微信群。。AboutCoMPRATheCOVID-19MacroeconomicPolicyResponseinAfrica(CoMPRA)projectwasdevelopedfollowingacallforrapidresponsepolicyresearchintotheCOVID-19pandemicbytheIDRC.Theproject’soverallgoalistoinformmacroeconomicpolicydevelopmentinresponsetotheCOVID-19pandemicbylowandmiddle-incomecountries(LMICs)anddevelopmentpartnersthatresultsinmoreinclusive,climate-resilient,effectiveandgender-responsivemeasuresthroughevidence-basedresearch.ThiswillhelptomitigateCOVID-19’ssocialandeconomicimpact,promoterecoveryfromthepandemicintheshorttermandpositionLMICsinthelongertermforamoreclimate-resilient,sustainableandstablefuture.TheCoMPRAprojectwillfocusbroadlyonAfricancountriesandspecificallyonsixcountries(Benin,Senegal,Tanzania,Uganda,NigeriaandSouthAfrica).SAIIAandCSEA,astheleadimplementingpartnersforthisproject,alsoworkwiththinktankpartnersinthesecountries.OurDonorThisprojectissupportedbytheInternationalDevelopmentResearchCentre(IDRC).TheIDRCisaCanadianfederalCrowncorporation.ItispartofCanada’sforeignaffairsanddevelopmenteffortsandinvestsinknowledge,innovation,andsolutionstoimprovethelivesofpeopleinthedevelopingworld.AbstractDuringtheperiodbetween1961,whenTanzaniaattainedindependence,andthemid-1980s,thecountryfollowedsocialistmacroeconomicpolicies.Theresultofimplementingsocialistpolicieswastoslowsocio-economicgrowth,double-digitinflation,negativerealinterestrates,largeunsustainablefiscaldeficits,anovervaluedTanzanianshillingandathrivingparallelforeignexchangemarket,whichincludedtherationingofforeignexchangeandsometimesconsumablecommodities.Aftertheliberalisationoftheeconomyinthemid-1980s,macroeconomicpoliciesweremarket-determinedandthegovernmentrecognisedtheprivatesectorastheengineofgrowth.Asaconsequence,macroeconomicpoliciescombinedwithstructuralreformsbegantotranslateintorealgrossdomesticproductgrowthabovethe2.8%populationgrowthlevel,inflationwasbroughtdowntobelowsingledigitlevels,greaterforeignanddomesticprivateinvestmentfollowed,andaprogressivereductioninpovertyoverthepastdecade(beforeCOVID-19)wasachieved.Thisresultedinasustainedaveragerealgrossdomesticproductgrowthrateof7%perannumbetween2010to2019.Theadventofthecoronaviruspandemic,firstdetectedinTanzaniainMarch2020,disruptedthemacroeconomicperformanceachievedoverthepastdecade.RealGDPgrowthisexpectedtodeclineto5.5%ormorein2020and2021,inflationisexpectedtoremainatpre-COVIDlevels(below5%),interestratesincreasedslightlyin2020hurtingbusinesses,theTanzanianshillinghasdepreciatedslightlyagainsttheUSdollar,andthefiscaldeficit,althoughlow,continuestofacehighrisksofworseningasinternationaltradecontinuestobedisrupted.Thepublicdebt,withitsinterestpaymentofnearly40%ofdomesticrevenue,threatenstoincreasetheeconomy’sliquidityrisksanddivertresources,whicharemuchneededtofundongoinginfrastructureinvestmentstoimprovethecountry’stransport,electricity,water,educationandhealthsystems.Overall,however,Tanzaniaavoidedarecessionin2020,partlyduetosoundmacroeconomicmeasuresundertaken,butthesecondwaveofthepandemicissignificantlyimpactinglivesandlivelihoodsacrossthecountry.Inordertocounterthesevereimpactofthepandemicontheeconomy,themacroeconomicpoliciesadoptedbytheBankofTanzania(centralbank)andthegovernmenthavebeentoshieldtheeconomyfromfurtherdeteriorationbyinjectinggreaterfundingintothehealthsectortocontainthespreadofthepandemic,increasingsocialspendingtosavelivesandlivelihoods,employingaccommodativemonetarypolicytosteertheeconomytowardsasustainablemonetaryandfiscalstance,and‘buildbackbetter’tothepre-COVIDperiod.Macroeconomicpoliciesgoingforwardshouldbetointensifyandincreasefundingtopreventtheriskofmorethan11millionTanzaniansfallingbelowthepovertyline,adoptmonetarypoliciesthatincreaseliquiditytotheeconomyandtobankstoreducethecountry-wideliquiditycrunch,andtoenhancecreditavailabilitytotheprivatesector–includingmicro,smallandmediumenterprisestofacilitateinvestmentexpansionandhelptheeconomybounceback.IntroductionThispaperattemptstodiscussmacroeconomicpolicydevelopmentinTanzaniawiththeobjectiveofinformingpolicyresponsestothecoronaviruspandemic.Therationalehingesontheunderstandingthatthemacroeconomicframeworkofthecountryhasimplicationsforthecountry’sgrowthtrajectory.Ithasbeenwellestablishedthatmacroeconomicinstabilitywas3MacroeconomicPolicyDevelopmentinTanzaniaoneofthekeyfactorsunderminingthedevelopmentofAfricancountries,includingTanzania,betweenthe1970sand1990s.Therefore,asTanzaniaimplementsitsindustrialisationresolve,itsmacroeconomicpolicyshouldbepositionedtocreateanenablingenvironmentforindustrialpolicy.Toachievethecountry’s2025vision

tobecomeasemi-industrialisedmiddle-incomecountry,macroeconomicpolicyshouldalsomaintaintheconditionsthatfacilitatethestructuraltransformationsnecessaryforeconomicdevelopment.Aftertheseintroductoryremarks,thepapersummarisesthemacroeconomicdevelopmentinTanzaniaandanalysesthecountry’smacroeconomicpolicyenvironment.TheimpactofthepandemiconTanzaniaisdiscussednext,followedbythecountry’smacroeconomicpolicyresponsesandinterventionstocontainthespreadofthepandemicandsteertheeconomybacktoasustainedgrowthpathsuchasitwasonforthedecadepriortothepandemic.EvolutionofmacroeconomicpolicySinceitsindependencein1961,andespeciallyaftertheadoptionofsocialistmacroeconomicpolicies,Tanzaniahasexperiencedaseriesofoverlappingdomesticandexternaleconomicshocks,whichpushedtheeconomyintoaneconomiccrisisbetweenthe1970sandmid-1980s.Thiscrisiswascharacterisedbydismalandsometimesnegativerealgrossdomesticproduct(GDP)growthrates,double-digitinflation,negativerealinterestrates,hugefiscaldeficits(fundedlargelybydomesticfinancingandtheprintingofmoney),anovervaluedTanzanianshilling,andathrivingparallelforeignexchangemarket–inadditiontotherationingofforeignexchange.1

Anumberofattemptsweremadetoaddresstheseshocks.ChiefamongtheseweretheattemptsmadebyInternationalMonetaryFund(IMF)andWorldBanktocorrectsocialistpoliciesintheearly1980s.However,theseinterventionswerenotfullysuccessfuluntil1986,whenTanzaniaadoptedstructuraladjustmentprogrammestoenhancestructuralreformsandrestoremacroeconomicstability.Macroeconomicpoliciesafter1986includedtheliberalisationofinterestandexchangerates,aswellasthetransitiontotheindirectmonetarypolicyofmonetarytargeting,amongothers.2Thesewereprudentmonetarypolicyinterventions,whichhadsince1995successfullydeliveredrealGDPgrowthincreasingtoanaverageof7%inthe2000s,from3.7%in1995,andwith1BennoNdulu,“StructuralAdjustmentPoliciesandProgrammes:ACaseStudyofTanzania”,(Helsinki:WorldInstituteforDevelopmentEconomicsResearchfortheUnitedNationsUniversity,1987).2EnockT.NyorekwaandNicholasM.Odhiambo,“MonetaryPolicyPerformanceinTanzania(1961-2014):AReview”,BanksandBankSystemsVolume9,Issue4,2014,8–15./images/pdf/applications/publishing/templates/article/assets/6084/BBS_en_2014_04_Nyorekwa.pdf.4MacroeconomicPolicyDevelopmentinTanzaniainflationdecliningtoanaverageof10%inthe2000s,from35%in1994.3Theimprovementinpricestabilitywasinpartduetoadecelerationinthegrowthofthemoneysupply(M2)toanannualaverageof17.5%(since1995)comparedtotheannualaverageof33%adecadebefore.4Likewise,thefinancialdeepening,whichsloweddowninthelate1990s,pickedupagaininthe2000s,tomatchlevelsachievedintheearly1990s.Domesticcredittotheprivatesectorincreasedfrom3.1%in2000to12.1%in2019,growingatanaverageannualrateof8.0%,butslowingto5.1%in2020duetotheimpactofCOVID-19.Inordertomaintainanappropriatemacroeconomicstance,thegovernmentacceleratedstructuralreformsbyintroducingitscomprehensiveEconomicRecoveryProgrammein1986.Thisprogrammeaimedtorestoreeconomicstabilitythroughvariousinstrumentsnamely:•••••Liberalisinginternalandexternaltrade;unifyingtheexchangerate;revivingexports;stimulatingdomesticsaving;andrestoringfiscalsustainability.Figure1RealGDPgrowth876543217,07,07,06,96,86,86,45,65,55,302016201720182019202020212022202320242025Source:TanzaniaNationalBureauofStatistics,https://www.nbs.go.tz/index.php/en/,May202134BankofTanzania,“TanzaniaMainland’s50YearsofIndependence:AReviewoftheRoleandFunctionsoftheBankofTanzania(1961-2011)”,June2011,https://www.bot.go.tz/Adverts/PressRelease/en/202003130724034239.pdf.BankofTanzania,“TanzaniaMainland’s50YearsofIndependence”.5MacroeconomicPolicyDevelopmentinTanzaniaThethree-yearEconomicandSocialActionPlanwassubsequentlyadoptedin1989,tofurtherliberaliseandreformthebanking,agriculture,parastatalandsocialsectors,aswellasgovernmentadministration.5Financialreformsstartedin1987,withadjustmentsdesignedtomoverealinterestratesintopositiveterritory.Privatebankingstartedin1991followingtheFinancialInstitutionsAct.Todate,Tanzaniahasasoundmacroeconomicframework,whichcontributedtothecountryavertingarecessionin2020despitethehighimpactofthepandemicontheeconomy.TanzaniamacroeconomicenvironmentEconomicgrowthTanzania’seconomyexhibitedstrongrealGDPgrowth,whichaveragednearly7%forfouryearspriortoCOVID-19(Figure1).Therobustgrowthislargelyattributedtohighpublicinvestmentsininfrastructure.Othersectorsthatperformedwellincludedminingandquarrying(17.7%);construction(14.8%);arts,entertainmentandrecreation(11.2%);transportandstorage(8.7%);andadministrativeandsupportservices(8.4%).ThepercentagesharesofsectorstonominalGDPwereagriculture(26.6%),construction(14.3%),tradeandrepairs(8.8%),andmanufacturing(8.5%).Figure2Inflationrate(%)765432102016201720182019202020212022202320242025Source:TanzaniaNationalBureauofStatistics,https://www.nbs.go.tz/index.php/en/,May20215NyorekwaandOdhiambo,“MonetaryPolicyPerformanceinTanzania”.6MacroeconomicPolicyDevelopmentinTanzaniaCOVID-19appearedtoexertsomeimpactonrealgrowth,withtheBankofTanzaniaprojectingaslowingdownoftherealGDPgrowthrateto5.5%in2020.6

However,theWorldBankobservedthatthecountryavoidedarecessionin20207andestimatesa5.8%and6.1%growthratefor2020and2021,respectively,8

whiletheAfricanDevelopmentBankestimates6.4%and6.6%for2020and2021,respectively.9TheIMFalsoprojectssimilarrealeconomicgrowth,statingthatTanzania’seconomyis‘supportedby‘prudentmonetaryandfiscalpolicies,Tanzania’seconomicconditionsremainstable,witheconomicgrowthestimatedatabout6%,inflationatunder5%,anadequatelevelofforeignreserves,andmanageablepublicdebt’‘.10

Thereducedgrowthfromitspre-COVID-19pathisduetoaslowdownintherateofgrowthofsomesectorsoftheeconomy,suchastourism,hotels,education,internationaltravelandsocialactivities.Thegovernment’spolicytoconduct‘businessasusual’andnottolockdowntheeconomy(exceptforschoolsandsocialactivitiesinMarchtoMay2020)helpedtomaintainrelativelygoodgrowth.Thiswasaidedbyagriculture,whichbenefittedfromamplerainsduringtheseason,goodminingperformanceduetohighglobalmarketpricesandenhancedmanagementofthesector.Thepublic’shighinvestmentininfrastructureandaccommodativemonetarypolicysomehowhelpedtocushiontheimpactofthepandemicontheeconomy.Thetwolargestinvestmentsare$3.6billionforthe2115MWJuliusNyerereHydropowerStation,ofwhich$695.6millionisfromdomesticresources,and$1.46billion“Thegovernment’spolicytoconduct‘businessasusual’andnottolockdowntheeconomyhelpedtomaintainrelativelygoodgrowth…aidedbyagriculture,whichbenefittedfromamplerainsduringtheseasonandgoodminingperformance”67BankofTanzania,“MonetaryPolicyStatement2020/21Report”,IssueISSN0856-6976,2020,https://www.bot.go.tz/Publications/Regular/Monetary%20Policy%20Statement/en/2020061515311396.pdf.WorldBank,“TanzaniaEconomicUpdate,February2021:RaisingtheBar–AchievingTanzania’sDevelopmentVision”,Issue15,February2021,/bitstream/handle/10986/35204/Tanzania-Economic-Update-Raising-the-Bar-Achieving-Tanzania-s-Development-Vision.pdf?sequence=1&isAllowed=yorg/bitstream/handle/10986/35204/Tanzania-Economic-Update-Raising-the-Bar-Achieving-Tanzania-s-Development-Vision.pdf?sequence=1&isAllowed=y.89Reuters,“WorldBankSaysTanzania’sGDPtoGrowFasterin2020”,/article/us-tanzania-economy/world-bank-says-tanzanias-gdp-to-grow-faster-in-2020-idINKBN1Y70OTcom/article/us-tanzania-economy/world-bank-says-tanzanias-gdp-to-grow-faster-in-2020-idINKBN1Y70OT.AfricanDevelopmentBankGroup,“TanzaniaEconomicOutlook”,2021,https://www.afdb.org/en/countries-east-africa-tanzania/tanzania-economic-outlook.10InternationalMonetaryFund,“IMFStaffCompletes2020ArticleIVMissiontoTanzania”,pressrelease,March5,2020,/en/News/Articles/2020/03/05/pr2081-tanzania-imf-staff-completes-2020-article-iv-mission.7MacroeconomicPolicyDevelopmentinTanzaniafora1224kmstandardgaugerailroad.Thecostoffinancingthesetwoinfrastructureprojectsisabout33.7%ofthecountry’s$15billion2020/21budget.Theinfrastructureprojectswereplannedbeforethepandemicandcontinuedtobefundedasplannedin2020.Thegovernmentaimstoputinplacefiscal,monetaryandtradepoliciesthatwillsupportafastrecoveryinordertoattaina7-10%rateofrealGDPgrowthby2025.Projectionsindicatethatthecountrycanexpecttobouncebacktoitspre-COVIDgrowthpath(Figure1).InflationOverallinflationhasremainedlowandstableatbelow4%forthethreeyearsbeforeCOVID-19andremainedstableat3-4%in2020toApril202111duetocontinuedadequatefoodsupplyinmostpartsofthecountry,thepursuitofprudentmonetaryandfiscalpoliciescoupledwithlowoilpricesandadequatepowersupply(Figure2).12ProjectionsshowthesecondwaveofCOVID-19mightexertpressureoninflationin2021andbeyondbutexistenceoflargestocksoffoodsupply,13subdueddemandpressureforgoodsandservices,continuedlowoilpricesgloballyandstablepowersupplyshouldmaintaininflationatthetargetlevelof5%orbelow(Figure2).InterestratesSincemid-1980sinterestrateshavebeenmarket-determined,withtheBankofTanzaniaapplyinganaccommodativemonetarypolicytosteerinterestratesincasesofperceivedmarketfailure.AsFigure3shows,bothshort-termandoveralllendingratesdeclinedslightlybetweenJuneandDecember2019,butrosesharplyuptoJune2020dueinparttotightcreditinthebankingsystem.TheBankofTanzaniaintervenedinthecreditmarketand,asaresult,lendingratesdeclinedfromabout17%inJune2020to8.6%and6.5%forboththeshort-termandoveralllendingrates,respectively.Theintentionwastostimulateeconomicgrowthandencourageborrowingandinvestmentbytheprivatesector.However,astheseverityofthepandemiccontinuedtodepresstheeconomy,bothlendingratesroseagaintoabout16%asofendMarch2021.Depositratesappeartohaverisensteadilyfrom2.2%inDecember2019to6.9%and8.8%foroveralltimedepositandshort-termlendingrates,respectively.Theincreaseispartlyduetotheexpectationthatinterestrateswillcontinuetoincreaseduringthepandemicperiod.11BankofTanzania,“MonthlyEconomicReview,December2020”,https://www.bot.go.tz/Publications/Regular/Monthly%20Economic%20Review/en/2021010510481472.pdf;BankofTanzania,“MonthlyEconomicReview,April2021”,https://www.bot.go.tz/Publications/Regular/Monthly%20Economic%20Review/en/2021050317360315.pdf.1213BankofTanzania,“MonetaryPolicyCommitteeStatement”,pressrelease,January25,2021,BankofTanzania(viaPublic)/MONETARYPOLICYCOMMITTEESTATEMENT().In2019/20,Tanzaniawas120%foodself-sufficient.8MacroeconomicPolicyDevelopmentinTanzaniaFigure3Lendinganddepositsinterestrates181614121086OveralltimedepositrateOveralllendingrate12-monthsdepositrateShort-termlendingrate(upto1year)Source:BankofTanzania,https://www.bot.go.tz/,May2021ExchangeratesTheTanzanianshillingappearstohavedepreciatedagainsttheUSdollarfrom2016to2020(Figure4)byabout5.2percentagepoints.Thisdepreciationisfairlylowpartlyduetolowandstableinflation,amoderatecurrentaccountdeficit,prudentmonetaryandfiscalpolicies,andmeasurestakentoensureorderlyfunctioningoftheforeignexchangemarket.COVID-19exertedasmalldepreciationoftheshilling–about0.4percentagepointsagainsttheUSdollarbetweenDecember2019toDecember2020.Itisworthnotingthat,duetothepandemic,volatilityincreasedduringthesecondquarterof2020ascapitalinflowstoTanzaniasharplydeclined.However,theBankofTanzaniainterventionsintheforeign-exchangemarketwereabletostabilisetheshilling.Toachieveitsmonetarypolicyobjectives,theBankofTanzaniausuallyfocusesonmaintaininganadequatelevelofliquidityintheeconomyandensuringstableinterestandexchangerates.Overall,in2020,therealeffectiveexchangeratedepreciatedonlybyabout0.1%,andtheinflationdifferential“Volatilityincreasedduringthesecondquarterof2020ascapitalinflowstoTanzaniasharplydeclined.However,theBankofTanzaniainterventionsintheforeign-exchangemarketwereabletostabilisetheshilling9MacroeconomicPolicyDevelopmentinTanzaniabetweenTanzaniaanditsmajortradingpartnerspartlyoffsetadeclineinthecountry’snominalexchangerate.Theincreaseintherealeffectiveexchangeratehasbeenaccompaniedbyrisingexportsofmanufacturedgoodseveninacontextoflowerglobaldemandassociatedwiththepandemic.Figure4Realeffectiveexchangerate2019–20(%)105100959085NominaleffectiveexchangerateRealeffectiveexchangerateSource:WorldBankDatabank,/home.aspx,May2021MoneysupplyandcredittotheprivatesectorOverall,thesupplyofcreditdecreasedin2020and2021.Thebehaviourofmoneysupply(M3)andcredittotheprivatesectorin2020andearly2021isshowninFigure5.Duringtheperiod2018to2019,moneysupplyincreasedfrom4.5%to9.6%,respectively,duetoariseincredittothegovernmentforthefundingoflargeinfrastructureinvestments.Thetwolargestinvestmentsare$3.6billionfora2115MWJuliusNyerereHydropowerStation,ofwhich$695.6millionisfromdomesticresources,and$1.46billionfor1224kmofstandardgaugerailroad(whichis33.7%ofthetotalannualbudget).Thegovernmentborrowed$2.3billionfromthedomesticmarketforinfrastructurespending,andthishastendedtocrowdouttheprivatesector.Theextendedbroadmoneysupply(M3)grewatanaveragerateof8.8%betweenDecember2019andDecember2020,whichwasbelowtheBankofTanzania’stargetof10.0%.BankofTanzaniacreditgrewatanaveragerateof6%betweenDecember2019andDecember2020.Thiswasbelowthetargetsetbythecentralbank,whichwas13.5%,andbelowthe8.6%averagegrowthrateobservedinthesameperiod.However,BankofTanzaniacredittothegovernmentwasreducedbyanaveragerateof3.8%betweenJanuaryandJune2020before10

MacroeconomicPolicyDevelopmentinTanzaniaexpandingatanaveragerateof38.4%betweenJulyandDecember.Increasedfundingwasneededtospendonfiscalmeasuresinordertodeterfurtherdeteriorationoftheeconomyduetothepandemic.AsFigure5shows,credittotheprivatesectorhasbeenprogressivelydecliningfromabout12.1%in2019toaverylowlevelof2.3%inFebruary2021–asgovernmentborrowingfromthebankingsystemcontinuedtocrowdouttheprivatesectorfromthecreditmarket.Goingforward,theBankofTanzaniaenvisionsthatcredittotheprivatesectorwillreboundtothepre-COVIDperiodandremainfairlystableasashareofGDPin2021/22duetovariousaccommodativemeasuresbeingtaken.Thesemeasureswillfacilitatecontinuedlendingtobusinessestoencouragegreaterinvestmentaswellastohelptheeconomy’buildbackbetter’toitspre-COVIDgrowthpath.Figure5GrowthratesofM3andcredittotheprivatesector(%change)151050M3CredittoprivatesectorSource:BankofTanzania,https://www.bot.go.tz/,May2021PublicfinanceTanzania’sfiscalpolicyremainedontrackduringpre-COVID-19in2019,aswellasinto2020,byleveragingtechnologytosecureoptimalrevenuemobilisationthroughmakinguseofanelectronicrevenuecollectionsystem–theGovernmente-PaymentGateway–andotherICT-basedrevenuecollectionsystems,suchase-services,e-paymentsandthelocalgovernmentrevenuecollectioninformationsystem.Further,thegovernmentstreamlinedexpendituretowardsfinancingstrategicdevelopmentprojects–asplanned.However,during2020,manytaxpayersfailedtomeettheirtaxobligations,andthisappearstohaveimpactedonmonthlyrevenuereturns.Plannedmonthlyrevenuelevelsinmostofthetaxcategoriesfailedtomeettargetsexceptfornon-taxrevenue(Figure6).Taxesonimportsdeclinedby10.8%,incometaxrevenuefellshortby24.7%,andtaxes11

MacroeconomicPolicyDevelopmentinTanzaniaonlocalgoodsandservicesfellby28.2%.Onlynon-taxrevenueperformedwell,increasingby18.7%in2020,largelydrivenbyanincreaseindividendpayments.*Governmentrevenue(TZSbillions)Figure6TaxesonimportsIncometaxTaxesonlocalgoodsandservicesOthertaxes2020ActualsNon-taxrevenue2019Actuals2020Estimates*TZS=currencycodeforTanzanianShillingSource:BankofTanzania,https://www.bot.go.tz/,2020Withrevenueshortfall,monthlyexpenditurewasstreamlinedtoaccommodateestimatesfor2020/21.Budgetexecutionisbasedonavailableresourcesandalignedwithfinancingneedsforpro-poorprogrammes,whichincludeexpenditureonhealthandeducation,andsubstantialinvestmentsininfrastructure(electricity,roads,railroads,airports,etc.)tocreateanenablingenvironmentforprivatesectoroperations.Expenditureonwagesandsalariesremainedalmostunchangedbetweenthepre-COVID-19periodin2019,andplannedandactualspendingin2020(Figure7).Interestpaymentsincreasedby9.6%signifyinganincreaseindemandformoneyorcredit.Otherrecurrentspendingalsoincreasedby4%,whiledevelopmentspendingdroppedby52.9%duetoashortfallinrevenuetoaccommodatealltheplannedactivities(Figure7).Exceptforthehealth,socialprotectionandinfrastructuresectors,whichexhibitedanincreaseindevelopmentspending,allothersectorssufferedadeclineindevelopmentspending.Themostaffectedsectorsintermsoftheirpercentagesharesindevelopmentspending,whenfiscalyear2019iscomparedwith2020(withthepercentagedeclineinbrackets),areconstruction(28.9%to24.0%),trade(0.4%to0.2%),industry(28.9%to24%),tourism(0.4%to0.3%)andeducation(7%to6.7%).12

MacroeconomicPolicyDevelopmentinTanzaniaFigure7Governmentexpenditure(TZSbillion)WagesandsalariesInterestcostsOtherrecurrentexpenditureDevelopmentexpenditure2019Actuals2020Estimates2020ActualsSource:BankofTanzania,https://www.bot.go.tz/,May2021PublicdebtTanzania’sdebtbeforeCOVID-19in2019andduringthepandemicremainssustainablebutdebtservicecostsarehigh.Totaldebtstock,whichconsistsofexternalanddomesticdebt,reached$29708.9millioninNovember2020;80.1%or$23813.6millionwasexternaldebt.Comparedwiththepre-COVIDperiodin2019,thetotaldebtstockincreasedby5%fromtheendofNovember2019toendNovember2020.Partofthereasonfortheincreaseindebtisongoingpublicinfrastructureinvestmentssuchasthe2115MWNyerereHydropowerStationandstandardgaugemodernrailroad.AsTable1shows,theriskofbothexternalandpublicdebtdistressremainslow,withallbenchmarkratiosbelowthethresholdlevel.However,debtservicespendingin2020/21isexpectedtobeabout40%ofdomesticrevenue,whichwillincreasetheeconomy’sliquidityrisksandwillrequiremoreprecautionarydebtmanagementmeasuresgoingforward.“ThedebtmanagementstrategyfollowedbythegovernmentthroughthecentralbankhasbeentomaintainthecredibilityandsustainabilityofthedebtstocktoconformtointernationalbenchmarkssothatTanzaniacontinuestobecreditworthy”TheBankofTanzaniadebtratiosarebelowIMFestimates,buttheIMFconcurswiththebankthatTanzania’spublicdebtissustainableandthatthecountrydoesnotsufferfrom13

MacroeconomicPolicyDevelopmentinTanzaniadebtdistress.14ThedebtmanagementstrategyfollowedbythegovernmentthroughthecentralbankhasbeentomaintainthecredibilityandsustainabilityofthedebtstocktoconformtointernationalbenchmarkssothatTanzaniacontinuestobecreditworthy.ThegovernmenthasdevelopedasoundinstitutionalarrangementconsistingofaMonetaryPolicyCommittee,AuditCommittee,BankSupervisionCommitteeandFinanceandInvestmentCommitteetoensureoversightandpropermanagementofdomesticandexternalpublicdebt.Onaverage,about46%ofTanzania’spublicdebtisowedtomultilateralorganisations,withmostofthisdebtbeingconcessionalloans:35%commercialloans;9%bilate