November 6, 2013 / 5:31 PM / 5 years ago

Tanzania needs to tackle subsidies, tax exemptions -IMF

DAR ES SALAAM, Nov 6 (Reuters) - Tanzania’s economy is set to grow 7 percent in 2013 but the government needs to expand revenue by simplifying tax exemptions and curbing power subsidies to sustain growth and ease fiscal pressure, the IMF said on Wednesday.

The International Monetary Fund said inflation was expected to slip back towards the government’s target of 5 percent by mid-2014, after falling to 6.1 percent in the year to September.

It also noted that the current account deficit “remained large”, at the equivalent to 13.5 percent of gross domestic product in the year July 2013 to June 2014.

Tanzania, like its east African neighbours, has been growing strongly. It is banking on gas discoveries in the years ahead, but for now has a huge job fixing rickety infrastructure, lifting its people out of poverty and addressing the sensitive issue of power and other subsidies that drain state coffers.

Paul Mauro, who led an IMF team to Tanzania, said in a statement at the end of the talks that growth of 7 percent in the first half of 2013 was expected to extend to the full year.

“To sustain economic growth and to stem fiscal pressures during the current and next fiscal year, priorities include mobilising additional revenues by reducing and simplifying tax exemptions and bringing the power sector to financial sustainability,” he said.

He said the government had reaffirmed its commitment to a fiscal deficit equivalent to 5 percent of gross domestic product that was agreed with the IMF, although he said agreed targets for domestic financing had been exceeded in 2012/2013.

Among the medium-term policy challenges, Mauro included “enhancing the institutional framework to ensure that possible future revenues from newly discovered natural gas deposits benefit all citizens”.

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