A Rule-Based Medium-Term Fiscal Policy Framework for Tanzania

30 Pages Posted: 24 Nov 2009

See all articles by Daehaeng Kim

Daehaeng Kim

International Monetary Fund (IMF)

Mika Saito

International Monetary Fund (IMF)

Date Written: November 2009

Abstract

A zero net domestic financing (NDF) target has served Tanzania well in recent years, contributing to prudent expenditure policy, improved fiscal sustainability, and macroeconomic stability. Moving to a more flexible fiscal policy, however, may serve Tanzania better. The "diamond rule" proposed in this paper incorporates a permanent hard ceiling on debt and annual benchmark limits on NDF, expenditure growth, and nonconcessional external financing. This rule would provide flexibility for countercyclical policy and help define the fiscal space for infrastructure spending that is consistent with longrun fiscal sustainability. An illustrative simulation shows that Tanzania has considerable fiscal space for development spending.

Keywords: Budgetary policy, Budgeting, Cross country analysis, Debt sustainability, External borrowing, External debt, Fiscal policy, Fiscal sustainability, Government expenditures, Public investment, Revenues, Tanzania

Suggested Citation

Kim, Daehaeng and Saito, Mika, A Rule-Based Medium-Term Fiscal Policy Framework for Tanzania (November 2009). IMF Working Papers, Vol. , pp. 1-29, 2009. Available at SSRN: https://ssrn.com/abstract=1512250

Daehaeng Kim

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Mika Saito

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

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