Gambia-L:
    This is a press release from the IMF albeit a few days old concerning the 
debt situation of Tanzania.
Hamjatta Kanteh
*************************************
 

 
Press Release No. 00/26 
April 5, 2000 International Monetary Fund
700 19th Street, NW
Washington, D.C. 20431 USA 
 



IMF and IDA Support Debt Relief for Tanzania
The International Monetary Fund (IMF) and the World Bank Group's 
International Development Association (IDA) agreed to support a comprehensive 
debt reduction package for Tanzania under the enhanced Heavily Indebted Poor 
Countries (HIPC) Initiative. Total relief from all of Tanzania's creditors is 
worth more than US$2 billion, which is equivalent to more than half of the 
net present value of total debt outstanding after the full use of traditional 
debt relief mechanisms. The IMF and IDA will start providing interim debt 
relief in April. 

The enhanced HIPC Initiative will help Tanzania to advance its poverty 
reduction programs and stimulate economic growth. The debt reduction 
operation will translate into debt-service relief over time of US$3 billion, 
or about one-half of Tanzania's debt-service obligations during fiscal years 
2001-2003 and about one-third of Tanzania's debt-service obligations 
thereafter. This will create room for additional public expenditures on 
poverty reduction. Tanzania's eligibility for debt relief under the enhanced 
HIPC Initiative is a recognition by the international community of the 
progress made in implementing economic reforms and achieving poverty 
reduction.

The assistance committed by the IMF (of US$152 million) will be delivered 
over a 10-year period, and will cover on average 58% of debt-service 
obligations to the Fund. The debt relief provided by IDA (of US$1.2 billion) 
will be spread over a period of 20 years, covering 69.1% of Tanzania's 
debt-service obligations to IDA.

Tanzania will receive the bulk of the assistance under the enhanced HIPC 
Initiative when it satisfies a number of conditions, including adoption and 
implementation of a participatory poverty reduction strategy paper (see 
Annex).

ANNEX

1. Tanzania

Track record

Tanzania has made substantial progress in implementing economic reforms. 
During the past 4 years, inflation came down to less than 7%, after many 
years of rates exceeding 20%, and the government has been repaying domestic 
debt, after many years of borrowing in excess of 3% of GDP annually. Tanzania 
has also made a strong structural adjustment effort in recent years, 
including far-reaching reforms in the external, financial, and public sectors.

Conditionality

The full assistance from the IMF and IDA will be delivered to Tanzania when 
the following conditions have been met:

Maintenance of a stable macroeconomic environment, as evidenced by 
satisfactory performance under a program supported by an arrangement under 
the IMF's Poverty Reduction and Growth Facility, and specific structural 
reform measures in the areas of governance, government financial management, 
tax reform, improvement of the business environment , and improvement of 
utility performance. 

Completion of a poverty reduction strategy paper through a participatory 
process and a first progress report on the paper's implementation, both of 
which need to be broadly endorsed by the Executive Boards of the IMF and the 
World Bank. For this purpose, the government is currently carrying out a 
dialogue with civil society, which is expected to take place in the next few 
months. The government's interim poverty reduction strategy paper was 
published on March 14, 2000.

Implementation of a set of other measures specifically related to poverty 
reduction, including improvements in the poverty database and monitoring 
capacity, provision of allocations in the budget for 2000/01 in line with 
poverty reduction objectives, progress in school mapping, and progress on 
immunization and implementation of the national spearhead campaign against 
HIV/AIDS.

Confirmation of the participation of other creditors in the debt relief 
operation.
2. General

The HIPC Initiative was launched by the World Bank and the IMF in 1996 as the 
first comprehensive effort to eliminate unsustainable debt in the world's 
poorest, most heavily indebted countries. In October 1999, the international 
community agreed to make the Initiative broader, deeper and faster by 
increasing the number of eligible countries, raising the amount of debt 
relief each eligible country will receive, and speeding up its delivery. The 
enhanced Initiative aims at reducing the net present value (NPV) of debt at 
the decision point to a maximum of 150% of exports and 250% of government 
revenue, and will be provided on top of traditional debt relief mechanisms 
(Paris Club debt rescheduling on Naples terms, involving 67% debt reduction 
in NPV terms and at least comparable action by other bilateral creditors).

Eligible countries will qualify for debt relief in two stages. In the first 
stage, the debtor country will need to demonstrate the capacity to use 
prudently the assistance granted by establishing a satisfactory track record, 
normally of three years, under IMF- and IDA-supported programs. In the second 
stage, after reaching the decision point under the Initiative, the country 
will implement a full-fledged poverty reduction strategy, which has been 
prepared with broad participation of civil society, and an agreed set of 
measures aimed at enhancing economic growth. During this stage, the IMF and 
IDA grant interim relief, provided that the country stays on track with its 
IMF- and IDA-supported program. In addition, Paris Club creditors, and 
possibly others, are expected to grant debt relief on highly concessional 
terms. At the end of the second stage, when the floating completion point has 
been reached, the IMF and IDA will provide the remainder of the committed 
debt relief, while Paris Club creditors will enter into a highly concessional 
stock-of-debt operation with the country involved. Other multilateral and 
bilateral creditors will need to contribute to the debt relief on comparable 
terms.

Thirty-six countries are expected to qualify for assistance under the 
enhanced HIPC Initiative, of which 29 are sub-Saharan African countries. As 
of early April 2000, four countries had reached their decision points under 
the enhanced framework (Bolivia, Mauritania, Tanzania and Uganda), with total 
committed assistance estimated at US$9.2 billion, representing an average 
stock-of-debt reduction of about 45% on top of traditional debt relief 
mechanisms. In addition, three countries had reached their decision points 
under the original framework (Burkina Faso, Côte d'Ivoire, and Mali), while 
two others (Guyana and Mozambique) had already reached their completion 
points. Total assistance under the HIPC Initiative committed to these five 
countries amounted to US$5.4 billion, equivalent to almost 50% debt 
reduction, and will be reassessed under the enhanced Initiative. 

For more information on HIPC, visit: 
http://www.imf.org/external/np/hipc/hipc.htm 
http://www.worldbank.org/hipc/


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