Tanzania’s recent economic performance has been mixed and the outlook is subject to emerging risks. Although GDP data point to continued strong growth, other high frequency data suggest a weakening of economic activity. Tax revenue collections are lower than expected and credit growth has stagnated reflecting in part banks’ rising nonperforming loans (NPLs). Inflation remains moderate, and international reserves have increased substantially. There are downside risks to economic growth in the short term stemming from slow budget implementation, a challenging business environment, and private sector concerns about authorities’ enforcement of rules.

 
Program performance under the PSI has been broadly satisfactory. Most quantitative targets for June and September 2017 were met. While progress in structural reforms has been mostly slow, efforts have been boosted to advance them.
 
Macroeconomic policies will need to be closely coordinated. After recording a small fiscal surplus in July-September against a programmed deficit, the government is planning to step up budget implementation, particularly in development spending. The monetary policy stance and liquidity forecasting and management will need to be closely coordinated with fiscal developments. 
 
 
Strong growth and job creation are needed to address high poverty and a large underemployed youth population. Infrastructure gaps and the business climate have also become increasingly challenging and require response. Sustained reforms will be needed to achieve the strong private sector-led growth envisioned by the government’s development plan. Budget implementation needs to be improved and arrears prevented. Additional domestic revenue needs to be mobilized through tax policy and administration reforms, while improving the functioning of the VAT refunds system. Addressing the high stock of NPLs is a priority to reduce financial sector vulnerabilities and revive credit growth.
 

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