IMF Slates Unpredictable Policies in Report Tanzania Blocked

(Bloomberg) -- The International Monetary Fund said that Tanzania’s economy is being harmed by the government’s “unpredictable and interventionist policies” in a report whose release the East African country has blocked.

Tanzania refused to authorize the publication of the report, the IMF said Wednesday in a statement on its website. The government’s spokesman, Hassan Abbasi, didn’t answer a call to his mobile phone.

Tanzania’s economy has been rocked by a series of policy decisions by the administration of President John Magufuli, a leader whose nickname is the “bulldozer.” During his tenure, the government has imprisoned representatives of mining and mobile-phone companies involved in disputes with the state and demanded that gold producer Acacia Mining Plc pay a tax bill of $190 billion, equivalent to two centuries of revenue. The company, owned by Barrick Gold Corp., is now in talks with the state to resolve the dispute.

“It will make it more expensive for them to tap international markets, especially given that it was proving more difficult to source funding from multilateral and bilateral sources after certain government policies taken in September last year,” said Jibran Qureishi, a regional economist at Nairobi-based Stanbic Holdings Plc, in response to the blocking of the report.

Other risks to East Africa’s second-biggest economy include “delays or little progress in improving fiscal management” and rushed public investments that may not have a high rate of return, according to a copy of the IMF report that was seen by Bloomberg.

“Risks to the outlook are primarily on the downside,” according to the report. “These risks would be higher if reforms to protect macro-financial stability are not undertaken.”

IMF spokeswoman Lucie Mboto Fouda said the lender doesn’t comment on “leaked reports”. Some countries have in the past decided not to give consent for staff reports to be published, she said by email.

The Washington-based lender sees economic expansion slowing to 5.2 percent in the fiscal year that ends on June 30, from an estimated 6.7 percent increase in fiscal 2018, it said in the report.

‘Borrowing Plans’

Under Article IV of its Articles of Agreement, the IMF is authorized to inspect the economic, financial and exchange-rate policies of its members to ensure a smooth-running international monetary system. This entails at least one annual visit by IMF economists to the member country to analyze data and hold meetings with government and central bank officials. They submit a report to the executive board, which then transmits its views to the country’s government and publishes a summary of the report on its website with the consent of the member nation.

The staff visited Tanzania between Nov. 26 and Dec. 7 and met with the deputy finance minister and the central bank governor, among other officials. The report is dated March 18.

Tanzania has long had plans to issue an inaugural sovereign Eurobond and was held back by the lack of a credit rating. It obtained a B1 assessment, the fourth-highest non-investment-grade reading, from Moody’s Investors Service in March 2018.

In September, the central bank rejected claims it printed notes valued at 1.5 trillion shillings ($653 million) for government use.

Official data show the gross domestic product growth was 6.8 percent in 2017 from 6.9 percent in the previous year.

“However, there are serious weaknesses in the data and other high-frequency indicators point to a much more subdued pace of economic activity,” the IMF said in the unreleased report, referring to information on public-sector wages, credit to the private sector and imports, all of which fell in 2017-18.

The policies could “worsen the investment climate and lead to meager, or even negative, growth and potential risks to the balance of payments and debt sustainability,” the IMF said.

--With assistance from Ken Karuri.

To contact the reporters on this story: Antony Sguazzin in Johannesburg at asguazzin@bloomberg.net;Helen Nyambura in Nairobi at hnyambura@bloomberg.net

To contact the editors responsible for this story: David Malingha at dmalingha@bloomberg.net, Ana Monteiro, Rene Vollgraaff

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