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Business Insider
2 days ago
- Business
- Business Insider
Tanzania's policy reforms unlock $448.4 million IMF support package
The International Monetary Fund (IMF) has approved a total disbursement of about $448.4 million to Tanzania following the completion of reviews under two key lending arrangements, in recognition of the country's continued economic improvement and reform progress. The IMF approved a $448.4 million disbursement to Tanzania under key lending arrangements due to economic improvements. Tanzania's economic indicators show positive trends, including a GDP growth rate projected to reach 6.0% in 2025. Tanzania's achievements under the ECF and RSF included meeting all quantitative criteria and most structural benchmarks. The $448.4 million disbursement follows the successful completion of reviews under two key lending programmes and signals the IMF's confidence in Tanzania's macroeconomic policies and ongoing structural reforms. The IMF Executive Board on Friday concluded the 2025 Article IV consultation and completed the fifth review under the Extended Credit Facility (ECF) arrangement, as well as the second review under the Resilience and Sustainability Facility (RSF). The move allows for an immediate disbursement of about $448.4 million (SDR 326.47 million) to Tanzania under both arrangements. The completion of the fifth review under the ECF enables the release of $155.7 million (SDR 113.37 million), representing 28.5% of the country's IMF quota. This brings Tanzania's total access under the ECF arrangement to approximately $908.3 million. Under the RSF, the completed second review unlocks $292.7 million (SDR 213.1 million), equivalent to 53.5% of quota, raising total access under this facility to around $345.4 million. The IMF said Tanzania's macroeconomic indicators have continued to improve. Real GDP growth reached 5.5% in 2024 and is projected to rise to 6.0% in 2025. Medium-term growth is forecast at 6.5%, contingent on sustained reform implementation. Inflation remained steady at 3.2% year-on-year in April 2025, staying below the central bank's target. The current account deficit narrowed to 2.6% of GDP in 2024, down from 3.8% the previous year, supported by a robust export performance. The IMF also noted that the authorities maintained a neutral or mildly stimulative monetary policy stance, alongside increased exchange rate flexibility. Tanzania's banking sector remains resilient, although the Fund warned that some vulnerabilities persist. The fiscal balance weakened markedly in the third quarter of the 2024/25 fiscal year, prompting the government to delay lower-priority spending in the final quarter. Continued reform commitment and risk outlook All quantitative performance criteria and indicative targets for end-December 2024 under the ECF and RSF were met. While two of three structural benchmarks for end-March 2025 were implemented, albeit with delays, the implementation of the Secured Transaction Act remains pending and has now been rescheduled for end-February 2026. Looking ahead, the IMF warned that while economic conditions are expected to remain favorable, risks are tilted to the downside. The Tanzanian authorities reaffirmed their commitment to reforms aimed at maintaining macro-financial stability, promoting inclusive and sustainable growth, advancing structural changes, and addressing climate-related challenges.
The Print
04-06-2025
- Business
- The Print
India & Pakistan take opposite MSP paths— hiked here for 14 crops, scrapped there for wheat
'The authorities refrained from wheat procurement operations during the past year and in absence of government-imposed support prices, consumers have seen large benefits as reflected in subdued food inflation,' read a 9 May report by the IMF Executive Board, following its first review under the Extended Fund Facility (EFF) for Pakistan. Pakistan's unprecedented February 2025 move was the culmination of a subsidy rollback agreed on late last year as part of a $7 billion International Monetary Fund loan deal. While the end of the MSP programme for wheat has set off a wave of uncertainty about food security, the IMF says it's already delivering results. New Delhi: As India hikes MSP for 14 kharif crops, with BJP leaders calling it a historic move , Pakistan has gone in the opposite direction. It has scrapped the minimum support price for wheat, its most important crop, and ended government procurement altogether. The broader goal was to fix Pakistan's 'structural problems'—low productivity, uneven competition, and a system weighed down by bad incentives. As the rollback started, many Pakistani farmers also shifted to cash crops such as oilseeds and pulses. Pakistan and India have taken two very different forks in the road. At a time India is debating legalising MSP for more than 20 crops, Pakistan is doubling down on its removal for wheat (the only other crops with support prices are sugarcane and cotton). Some of the heated debates now playing out in Pakistan closely mirror those that followed Prime Minister Narendra Modi's 2020 announcement of farm laws and the promise of bringing India's farmers closer to market forces. Angry protests and old, socialist fears forced India to withdraw the laws. Some Pakistani experts are calling the scrapping of MSP a 'policy-induced collapse' and deregulation without safeguards. The government jumped the gun, many say. The IMF deal had allowed time until 2026 to phase out price-setting. But Pakistan acted two years early, without first putting market systems in place to support farmers. Critics warn of a storm in the making — a massive food security crisis. 'Wheat always seems to be under some scandal or crisis in Pakistan – from unnecessary imports and rampant smuggling to even the bizarre claims of stocks getting devoured by rats. Yet, little to no serious efforts can be seen to find sustainable solutions,' wrote Muhammad Faizan Fakhar, a senior research associate at the Centre for Aerospace & Security Studies, in The Express Tribune. He added that the reforms have left farmers uncertain and discouraged them from growing wheat at all. Others, however, argue that the MSP system needed to go even if there's short-term pain. 'Despite its intent to help farmers, the MSP system often led to outcomes where middlemen and flour millers benefited more than growers,' wrote Amar Razzaq, Associate Professor of Agricultural Economics at Huanggang University, China in an April 2025 blogpost. He argued the MSP system was costing over PKR 300 billion (INR 90.9 billion) annually, largely funded through debt, and was unsustainable amid Pakistan's fiscal crisis. What most agree on is that wheat is already in trouble. A shortfall is expected, and Pakistan may need to import. How a wheat-surplus nation has gradually gone into being a wheat-deficient one is a story by itself – of population rise and dropping yields. As the backbone of Pakistan's agriculture, wheat is grown on 36 per cent of the fertile land and contributes 2.2 per cent to the GDP. It accounts for 72 per cent of daily caloric intake, according to the USDA's Foreign Agricultural Service (FAS). Pakistan is the world's eighth-highest producer, but policy turmoil, the effects of climate change, and recurring shortfalls have made it more vulnerable to food insecurity. This year, wheat output is projected to drop by 11 per cent—from last year's record 31.4 million metric tonnes (314 million quintals) to 27.9 MMT (279 million quintals)—according to the country's Ministry of Finance. Market prices have fallen below production costs and forced distress sales. Wheat is typically traded by the maund, which is equivalent to 40 kg, or 0.4 quintal, in Pakistan's local markets. In Punjab, Pakistan's largest province and agricultural heartland, wheat prices have reportedly dropped below PKR 2,400 (INR 725) per maund, well under the average production cost of PKR 3,000 (INR 906). Some farmers, facing debt and liquidity crunches, have sold for as low as PKR 2,000 (INR 604.1) per maund. By comparison, India is in a more stable position. As the world's third-largest wheat producer, it has robust procurement systems and stock buffers. But it's not been immune to pressures either. Last year, falling yields and weak procurement raised fears it might have to import wheat for the first time since 2017, pushing prices to record highs. This year, however, saw a strong rebound: an estimated harvest of over 115 million tonnes (1,150 million quintals) and a four-year-high procurement of 29.7 million metric tonnes (297 million quintals). But MSP is not the answer, according to former Pakistan finance minister Miftah Ismail. 'Provinces had long set support prices for political and other non-market reasons and these prices were distorting the market. The IMF had merely asked them to do away with support prices,' he told ThePrint. However, while the Pakistan government is holding firm on MSP, some of its other moves point to a muddled reform strategy. Also Read: India's MSP system for farmers has outlived its purpose. It's time to phase it out Reform roadblocks Pakistan's tryst with agriculture reform may have arrived via the IMF, but many see it as an idea whose time had come. Minister for Parliamentary Affairs Dr Tariq Fazal Chaudhry earlier this month announced in the National Assembly that the federal government will no longer regulate wheat prices and plans to dissolve the Pakistan Agricultural Storage and Services Corporation (PASSCO). Chaudhry claimed the move benefits farmers due to strong market prices and unrestricted wheat movement. The decision, following a directive from the Prime Minister, includes exploring private sector-led strategic reserves. But much like India's aborted attempt at farm reforms, this was immediately contested by opposition parties in Pakistan. PPP's Aijaz Jakhrani warned the removal of price controls could harm farmers, while former minister Hina Rabbani Khar accused the government of lacking a coherent agriculture policy. Chaudhry defended the shift, citing rising production costs and arguing that a market-based system would offer farmers better returns. A new wheat policy encouraging private investment is expected next year. But the biggest fear persists: food shortage, an old sub-continental anxiety. 'Pakistan isn't facing a wheat shortage right now, but the policy direction is setting up a medium-term food security problem,' Adil Mansoor, a Karachi-based researcher tracking the crisis, told ThePrint. Ismail, too, echoed the concern that no MSP would mean that farmers pivot away from wheat. 'This would cause farmers to sow less wheat, and we will then become a wheat-deficient country,' he said. The Pakistan government hasn't walked back its reform intent, but it has also undercut its own push with some of its decisions. Last July, it imposed a blanket ban on all wheat trade — both wheat imports and the export of wheat and related products, including flour and semolina— citing a domestic surplus from earlier imports and the need to stabilise prices in the local market. This kind of confusion isn't unfamiliar territory. In 2017, the government procured a record 6.3 million tonnes (63 million quintals) of wheat despite already full stocks. To offload the surplus, it rolled out massive export subsidies, draining public finances and skewing trade balances. Therein lies an important reform roadblock. 'If you remove the support price, then you are going towards market reform. But if you're going towards market reform, then you should also allow farmers to export their wheat,' Ismail said. If wheat in the international market is PKR 80-85 (INR 24-25.50) per kilo, and in Pakistan it's about PKR 60 (INR 18) —or even PKR 55 (INR 16.50) at the farm gate—then farmers are losing money, according to him. 'If the government wants to liberalise the wheat market truly, then it must allow our farmers to sell their products outside Pakistan too. To restrict them to selling only in Pakistan and importing whenever the price of wheat goes up, is rigging the market against farmers,' Ismail added. Pakistan's biggest staple under stress The Pakistan government has presented its wheat policy shift as long-term reform rather than crisis management. The IMF in its May report noted that food inflation had improved and that the reforms would support a more competitive and efficient agricultural sector. 'Provinces have paid off most of the legacy debt related to commodity operations, and the authorities are working towards a new food security framework for wheat that will neither create distortions in the market nor jeopardize fiscal sustainability,' it added. The IMF also asked Pakistan to broaden these efforts to other commodities and strengthen regulatory frameworks. By December 2025, IMF will review existing laws on commodity market intervention and issue recommendations to address anti-competitive behavior through stronger competition policy and less protectionist trade measures. But these reform measures are ill-served by poor planning, climate stress, and short-term price interventions. Around the time MSP was scrapped, Pakistan saw a severe water shortage. Drought alerts were issued in Punjab, Sindh, and Balochistan. Major reservoirs neared depletion. The Ministry of Finance had already warned in February 2025 of lower Rabi yields due to rising temperatures and delayed winter rains. Pakistan, once self-sufficient in wheat, now faces a production-consumption gap. In 2023-24, while wheat output improved—rising to 31.4 million tonnes (314 million quintals) from 27 million tonnes (270 million quintals) in 2023—demand grew even faster, reaching around 31 million tonnes (310 million quintals). The rushed policy execution made a bad situation worse, according to some experts. 'This is not a supply-demand anomaly, it's a policy-induced collapse,' Mansoor said. Without pricing guarantees, many farmers scaled back wheat cultivation. 'The government first flooded markets with grain from public stocks, then refused to announce a support price, banned exports, and watched prices crash by over 50 per cent from their peak from two years ago,' Mansoor added. 'This is not market liberalisation—it's inflation management through price suppression. In fact, it violates the spirit of the IMF's condition that any public sales must not result in price manipulation.' Meanwhile, restrictions on wheat movement in the provinces made it harder for farmers to reach competitive markets and discouraged cultivation. Although Punjab has lifted its ban, such steps matter more during planting season (October-December) than at harvest (April-June), wrote Fakhar in the Express Tribune. This situation was avoidable. The IMF agreement had allowed Pakistan until FY26 to phase out procurement and price-setting. 'The government chose to abandon support prices and procurement in mid-2024, two years ahead of schedule. No transition framework was communicated, no private market institutions were prepared, and no safeguards were put in place to protect producers. This was not reform—it was shock therapy,' said Mansoor. Economist Javed Hassan echoed the view that removing wheat support prices was a 'necessary step' toward market-driven agriculture in Pakistan, but that they lack protections—such as crop insurance and alternative land use—hurt farmers and jeopardised food security. Imports on the horizon? In such a scenario, imports are expected to play a rescue role, as has been done before, most recently in 2023 when Pakistan was the world's 23rd largest wheat importer. 'As long as various government agencies hold about 2.5 to 3 million tonnes (25-30 million quintals) of wheat in strategic storage, which is more than a month's consumption, there will be no food shortage crisis. We can easily import more wheat from abroad at this time,' said Ismail. Pakistan is expected to drop its ban and import at least 1.7 million tonnes (17 million quintals) of wheat in the 2025-26 marketing year (May-April)—a sharp rise from near-zero imports in 2024-25. If final production figures remain low, imports could exceed 2 million tonnes (20 million quintals), given the extremely tight projected carry-over stocks, according to a report by Grain Central. But import reliance, say critics, is a dangerous strategy for a country with poor foreign exchange reserves. 'Imports can't be a safety net forever. If domestic production declines, Pakistan will have to rely on global wheat markets. That's a fragile strategy for a country with poor forex reserves—exposed to freight costs, trade disruptions, and price volatility,' Mansoor said. There are, however, also longer-term attempts to steady the system. Punjab has announced a new relief package: subsidised wheat purchases for flour mills, direct cash support for small farmers, and a system of lending that uses crops as collateral. Also Read: Why is Pakistan going all out on crypto? There's a Donald Trump angle A call for structural reforms Earlier this month, Punjab announced that wheat trade under the Electronic Warehouse Receipts (EWR) system will now take place on the Pakistan Mercantile Exchange (PMEX), the country's only multi-commodity futures platform. Media reports called it a 'major step toward modernising agriculture'. Traditionally, banks demand land as collateral for loans; however, EWRs allow farmers to use their harvested crops as security. Modern, accredited warehouses—though slightly costlier than informal options like middlemen—offer secure storage, crop insurance, and enable instant loans worth up to 70 per cent of the crop's value. To support this system, the government is promoting a province-wide network of modern warehouses linked to PMEX. It is also extending financing and subsidies to small-scale aggregators, bringing formal credit and market access to parts of the supply chain that have long been excluded. But again, implementation has been rocky. 'The current EWR rollout is structurally flawed. It expects small farmers to act like commodity traders—hold stock post-harvest, accept a 30 per cent haircut on financing, and bet on future price recovery. That's a speculative model misaligned with their liquidity needs,' Mansoor said. Quick fixes like subsidised tools aren't enough. 'Can Pakistan rebuild trust with its farmers before the next crop season? Without urgent and coordinated reforms, rural Pakistan will continue to slide—not just into poverty, but into political and social instability that the country can ill afford,' Mansoor said. (Edited by Asavari Singh)
Zawya
30-05-2025
- Business
- Zawya
International Monetary Fund (IMF) Staff Conclude Article IV Discussions and Reach Staff-Level Agreement on the Third Review of the Extended Credit Facility for Ethiopia
IMF staff and the Ethiopian authorities have reached staff-level agreement on economic policies to conclude the third review of the four-year US$3.4 billion Extended Credit Facility arrangement. Once approved by the IMF Executive Board, Ethiopia will gain access to about US$260 million in financing. Ethiopia's macroeconomic performance has exceeded program expectations, with better-than-forecast results for inflation, export growth, and international reserves. Maintaining reform momentum remains essential for consolidating recent gains, correcting macroeconomics imbalances, restoring external debt sustainability, laying the foundations for high, private sector-led growth, and ensuring the success of Ethiopia's homegrown reform agenda. A staff team from the International Monetary Fund (IMF) led by Mr. Alvaro Piris, visited Addis Ababa from April 3 to 17, 2025, to discuss the 2025 Article IV consultation and the third review under the Extended Credit Facility (ECF). Discussions continued at the Spring Meetings in Washington DC, April 21-28, and subsequently. The ECF arrangement was approved by the IMF Executive Board on July 29, 2024, for a total amount of US$3.4 billion (SDR 2.556 billion). Subject to approval by the IMF Executive Board, the third review will make available about US$260 million (SDR191.7 million), bringing total IMF financial support under the ECF arrangement so far to about US$1,849 million (SDR1,406.4 million). Today, Mr Piris issued the following statement: 'The IMF staff team and the Ethiopian authorities have reached staff-level agreement on the third review of Ethiopia's economic program under the ECF arrangement. The agreement is subject to the approval of IMF management and the Executive Board in the coming weeks. A memorandum of understanding with official creditors is expected to be agreed ahead of the IMF Board's consideration of the third review. 'The authorities' policy actions in the first year of the program have yielded strong results. The transition to a flexible exchange rate regime has proceeded with little disruption. Measures to modernize monetary policy, mobilize domestic revenues, enhance social safety nets, strengthen state-owned enterprises, and anchor financial stability continue to show encouraging results. Macroeconomic indicators have performed better than expected, with substantially better outcomes than forecast for inflation, goods exports, and international reserves. 'Recent policy action should help deepen the FX market and tackle remaining distortions. While real exchange misalignment has been corrected and FX availability has improved from a year ago, the spread between the official and parallel market widened again in early 2025 and high fees and commissions persist. Actions that are being rolled out to enhance transparency, reduce costs, ease restrictions on current account transactions, and strengthen prudential regulation will help to improve the functioning of the FX market. 'Maintaining reform momentum will be key to consolidating gains and securing sustainable high growth. Continued tight monetary and financial conditions will be important for managing inflation and exchange rate expectations. Further revenue mobilization is needed to provide sustainable financing for critical development spending. Reforms to improve the business environment, ensure fair taxation practices, encourage foreign direct investment, and facilitate open dialogue with business will be important to secure private sector investment. Efforts to end the remaining elements of financial repression and develop the capital market will help to mobilize savings and support the efficient allocation of capital. 'The staff team is grateful to the authorities for the excellent policy discussions and their strong commitment to the success of the IMF-supported economic program. The team met with Minister of Finance Ahmed Shide, Governor of the National Bank of Ethiopia Mamo Mihretu, State Minister of Finance Eyob Tekalign, and other senior officials. Staff also had productive discussions with representatives of banks and businesses that are operating in a range of sectors and representatives of civil society.' Distributed by APO Group on behalf of International Monetary Fund (IMF).
Mada
29-05-2025
- Business
- Mada
IMF still pushing for privatization after otherwise ‘relaxed' Egypt loan review
An International Monetary Fund (IMF) delegation concluded its fifth review of the ongoing US$8 billion loan program with Egypt this week in Cairo with praise for the country's economic performance. However, the fund noted that further steps toward privatization are required, stressing 'the need to accelerate reforms aimed at reducing the state's footprint in the economy.' The current program began in 2022, as Egypt's economy faltered in the economic tailwind caused by Russia's invasion of Ukraine. The agreement has been marked by friction between the IMF and Egyptian authorities, which have been cautious not to spark public anger while implementing recommended policies that undermined Egyptians' purchasing power. The praise Egypt received this time, however, appeared to reflect the degree of 'laxity' shown by Egyptian officials and 'leniency' on the part of the IMF Executive Board during the talks, a government source told Mada Masr on condition of anonymity. Pressure on Egypt has diminished somewhat, according to a member of the House of Representatives' Planning and Budget Committee who attributed the IMF's softened stance to the country's delivery on key loan requirements in ways that 'exceeded expectations.' Liberalizing the exchange rate and monetary tightening are at the forefront of these requirements, the source said. Moving away from a managed peg, the central bank has devalued the Egyptian pound multiple times against the dollar since 2022, allowing daily fluctuations in the exchange rate in recent months. The source also mentioned recent hikes in fuel and electricity prices. Delays in implementing scheduled price increases in both sectors, recommended under the IMF's program to reduce expenditure on subsidies, had been a major stumbling block in completing past reviews. The government has hiked fuel prices by as much as 87 and 207 percent in recent years. During the same period, electricity rates increased by 40-65 percent. Natural gas bracket prices, which had remained unchanged for three years, were raised in September by 15-25 percent. Further hikes in fuel and electricity prices are expected in the upcoming fiscal year, the parliamentary source and a former Petroleum Ministry official told Mada Masr. Inflation has slowed overall, and private investment has increased relative to public, the IMF said. Inflation peaked at around 30 percent in 2024 and has slowed by around 13 percent, according to recent figures. The statement the IMF released on Tuesday to mark the end of its delegation's visit to Cairo also praised a 35 percent increase in the share of private investment relative to public investment over fiscal year 2024/25 compared to FY 23/24. Government investment has shrunk over the past three years from around $15 billion annually to less than $10 billion, the parliamentary source noted. The program has included diminishing expenditure on key public services like education and health. Another reason the review went smoothly is the relative easing of the acute dollar shortage that had frozen imports and economic activity in previous years. 'The government has reopened imports, but they remain constrained primarily by falling demand and purchasing power,' the source said. Speaking to Mada Masr, a financial analyst at an investment firm echoed this view, pointing to around $35 billion in hot money inflows that have helped shield Egypt from a dollar gap. This, they said, has given the government some breathing room, especially with the program set to expire in October 2026. $4.8 billion are yet to be disbursed from the IMF's $8 billion loan. What remains unresolved in the program, the parliamentary source added, is the state's role in the economy. Privatization has been a priority for the IMF in successive package reforms it has recommended since 2016. The source said that the government has offered several explanations for its slow progress toward privatization, including a lack of satisfactory bids for state assets and the need to restructure some of them before they can be put up for sale. In its statement, the IMF emphasized the need to accelerate reforms aimed at reducing the state's footprint in the economy, primarily through the sale of state-owned assets in sectors the government had pledged to exit under its State Ownership Policy. This, the statement said, 'will play a critical role in strengthening the ability of the private sector to better contribute to economic growth in Egypt.' It also warned of Egypt's widening budget deficit, driven by a surge in imports and a decline in fuel exports due to falling production levels. A drop in Suez Canal revenues also contributed to the deficit, the statement said, offsetting gains from tourism, remittances and non-oil exports. It stressed the need to boost government revenues by broadening the tax base to bolster the state's capacity for social and developmental spending, while welcoming recent government efforts to streamline tax and customs procedures to 'increase efficiency and build confidence' — reforms it said are starting to yield positive results. The praise came even as the IMF has yet to publish its fourth review's staff report, which the Egyptian government requested be withheld. The review was approved in March, unlocking a $1.2 billion disbursement. At the time, the IMF also approved Egypt's request for a Resilience and Sustainability Facility agreement, allowing it to access an additional $1.3 billion in financing. The program terms are yet to be announced. Meanwhile, Egypt faces over $6 billion in outstanding payments to the fund through the end of next year, including nearly $3.8 billion due in 2025, according to IMF data. This issue falls under what the IMF describes as Egypt's 'deeper reforms' — measures that are expected to 'unlock the country's growth potential, create high-quality jobs for a growing population, and sustainably reduce its vulnerabilities and increase the economy's resilience to shocks.' Egypt began negotiating with the IMF for a $3 billion loan in late 2022, but the program stalled for several months. Talks resumed in late 2023 and concluded with the loan's augmentation adjustment in two years, which brought the dollar to LE50.
Reuters
27-05-2025
- Business
- Reuters
IMF reaches agreement under first review of $1.4 billion El Salvador program
May 27 (Reuters) - The International Monetary Fund said on Tuesday it had reached an agreement with El Salvador to disburse about $120 million, following the first review of a $1.4 billion 40-month program. The disbursement is subject to approval by the IMF executive board. In February, the IMF approved the $1.4 billion extended fund facility arrangement for El Salvador. "Most program targets set for the first review were comfortably met, and implementation of the structural benchmarks is progressing well," the IMF said in a statement. In March, the country separately secured a $500 million loan from the Inter-American Development Bank to shore up its budget.
