IMF says the bulldozer needs to be careful about spending

In November 2015, Tanzanian President John Magufuli announced that public money that would have been used for Independence-Day festivities will be reallocated to improve health-care and fight a cholera outbreak that had killed at least 150 people in three months at the time. He was mocked on Twitter, with a hashtag #WhatWouldMagufuliDo suggesting unlikely cost-cutting measures fellow citizens could take. Fast forward to July, 2016, the International Monetary Fund (IMF) is saying Magufuli has not done enough.

The lender advised the East African country on Wednesday to curtail public spending as it seeks to invest in several major infrastructure projects. It also urged Tanzania to implement structural reforms and prioritize its development plans to avoid running into debt.

Tanzania plans to increase spending by 31 percent to Sh29.53 trillion for its 2016/17 fiscal year budget, with focus on infrastructure and industrial projects.

“Careful prioritisation and implementation of expenditures will be required to ensure that spending does not exceed available resources and to avoid domestic arrears accumulation,” IMF deputy managing director Min Zhu said in a statement after concluding a country review for Tanzania.

“Creating fiscal space for higher infrastructure investment through sustained efforts to raise domestic revenue and increasing spending efficiency, particularly in public investment, is imperative.”

While Zhu expressed belief that Tanzania is on the right path, he said vigorous reforms will be required to foster further structural transformation of East Africa’s second largest economy.

“Tanzania’s macroeconomic performance has been strong … Growth has remained close to 7 percent and inflation is moderate,” he said.