Tanzania: IMF Approval Is Welcome, but Continued Vigilance Is Vital

Dar es Salaam — THE International Monetary Fund's (IMF) approval of a 443.8 million US dollars (about 1.17tri/-) disbursement to Tanzania is welcome news, providing additional external financing and reaffirming confidence in the country's economic reform programme.

Coming at a time of heightened geopolitical tensions and climate-related disruptions, the financing provides valuable fiscal space, enabling Tanzania to strengthen economic resilience and support priority development and climate adaptation programmes without excessive reliance on costly commercial borrowing.

Yet the data underpinning the Fund's latest review tells a more nuanced story. Behind the successful review are signs that both fiscal and monetary policy are operating under increasing pressure.

While Tanzania met all end-June 2025 quantitative performance criteria, subsequent reviews revealed where global shocks began to weigh on domestic targets. All end-September 2025 indicative targets were achieved except for the domestic primary balance target, reflecting fiscal pressures during the first quarter of the 2025/26 financial year.

Follow us on WhatsApp | LinkedIn for the latest headlines

Accelerated implementation of strategic infrastructure projects may partly explain the deviation. Nevertheless, the episode highlights the need to ensure that expenditure growth remains matched by stronger domestic revenue mobilisation to avoid wider fiscal imbalances.

Equally important was the breach of the Net Domestic Assets (NDA) ceiling at the end of December 2025, which required the government to seek a formal waiver from the IMF. The NDA measures the domestic component of the central bank's balance sheet and is an important indicator of liquidity creation. Exceeding the ceiling suggests domestic liquidity expanded beyond programme limits through increased domestic credit or measures to offset pressure on foreign assets.

The external environment undoubtedly complicated policy implementation. Higher global fuel prices and elevated freight costs linked to tensions in the Middle East placed additional strain on the balance of payments and the exchange rate. Even so, liquidity growth beyond programme assumptions can fuel inflationary pressures and put additional pressure on the Tanzanian shilling if left unchecked.

The IMF approved the waiver because it concluded that the programme remained broadly on track and that the missed target reflected temporary factors rather than a fundamental policy reversal. Strong gold exports, a rebound in tourism and continued economic growth strengthened the country's external position and supported that assessment.

Temporary external gains, however, should not obscure the need for sustained fiscal and monetary discipline. As implementation of the Fourth Five-Year National Development Plan (FYDP IV) gathers pace, government spending must remain aligned with realistic revenue mobilisation, while the Bank of Tanzania continues to safeguard price and financial stability.

Sign up for free AllAfrica Newsletters

Get the latest in African news delivered straight to your inbox

An IMF waiver is a valuable safety valve during unexpected external shocks. It should, however, remain the exception rather than the norm. Lasting macroeconomic stability will depend not on temporary waivers, but on consistent fiscal and monetary discipline.