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

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  • Mr. Daehaeng Kim
  • Mika Saito

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.

Suggested Citation

  • Mr. Daehaeng Kim & Mika Saito, 2009. "A Rule-Based Medium-Term Fiscal Policy Framework for Tanzania," IMF Working Papers 2009/244, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2009/244
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    References listed on IDEAS

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    1. Mrs. Teresa Ter-Minassian & Richard Hughes & Alejandro Hajdenberg, 2008. "Creating Sustainable Fiscal Space for Infrastructure: The Case of Tanzania," IMF Working Papers 2008/256, International Monetary Fund.
    2. Mr. George Kopits & Mr. Steven A. Symansky, 1998. "Fiscal Policy Rules," IMF Occasional Papers 1998/011, International Monetary Fund.
    3. Mr. Peter S. Heller, 2005. "Understanding Fiscal Space," IMF Policy Discussion Papers 2005/004, International Monetary Fund.
    4. Cecilia Briceño-Garmendia & Vivien Foster, 2007. "More Fiscal Resources for Infrastructure? Evidence from East Africa," World Bank Publications - Reports 7910, The World Bank Group.
    5. Benno J. Ndulu, 2006. "Infrastructure, Regional Integration and Growth in Sub-Saharan Africa: Dealing with the disadvantages of Geography and Sovereign Fragmentation," Journal of African Economies, Centre for the Study of African Economies, vol. 15(2), pages 212-244, December.
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    2. Bevan, David L., 2010. "Fiscal policy issues for Tanzania," LSE Research Online Documents on Economics 36380, London School of Economics and Political Science, LSE Library.
    3. Franklin Nakpodia & Emmanuel Adegbite & Kenneth Amaeshi & Akintola Owolabi, 2018. "Neither Principles Nor Rules: Making Corporate Governance Work in Sub-Saharan Africa," Journal of Business Ethics, Springer, vol. 151(2), pages 391-408, August.
    4. Bevan, David L., 2012. "Aid, Fiscal Policy, Climate Change, and Growth," WIDER Working Paper Series 077, World Institute for Development Economic Research (UNU-WIDER).
    5. Mr. Ian Lienert, 2010. "Should Advanced Countries Adopt a Fiscal Responsibility Law?," IMF Working Papers 2010/254, International Monetary Fund.
    6. David L. Bevan, 2012. "Aid, Fiscal Policy, Climate Change, and Growth," WIDER Working Paper Series wp-2012-077, World Institute for Development Economic Research (UNU-WIDER).

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