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Wednesday, 28 November, 2001, 13:05 GMT
Tanzania gets $3bn debt relief
World Bank and IMF logos
Tanzania is only the fourth country to qualify for relief
After four years of effort, Tanzania has finally won $3bn in debt relief from the World Bank and the International Monetary Fund.

The agreement by the Bank and Fund makes Tanzania the fourth country of a list of more than 36 to have got to this point.

The relief means that by next fiscal year Dar es Salaam should see its interest payments fall to $116m a year from $193m in 1999-2000.

By 2010, the Bank said, the debt repayment should be down to an average of $87m a year.

Until 2020 debt is forecast to remain below 150% of exports - a key target built into the debt relief equations.

All in all, according to Bank and Fund calculations Tanzania will see its external debt drop by 54%.

Half the money should come from the Bank, the Fund and other multilateral creditors, with individual countries and commercial groups - as long as they co-operate - absorbing the rest.

Slow process

The debt relief forms part of the heavily indebted poor countries (HIPC) initiative, of which Tanzania now becomes the fourth beneficiary after Mozambique, Bolivia and Uganda.

HIPC was set up in 1996 and requires countries to go through a two-stage process.

First, countries must stay in line with Bank and Fund requirements for economic policy for at least three years.

Once that has been achieved - a time termed the "decision point" - states must draw up a "poverty reduction strategy paper" (PRSP) and carry it through, along with institutional reforms, for a full year.

Reforms

Tanzania reached the decision point in 2000, and since then has brought in universal free primary education and a wide-ranging programme of immunisation against measles and diphtheria.

Both were part of the PRSP it drew up, and have come as economic growth has increased to above 4% a year while inflation and the balance of payments deficit have fallen.

Anti-corruption activities have also met with Bank and Fund approval. The performance helped Tanzania win a $1.1bn payment in September.

But the improvements in the macro-economic picture have yet to filter through to ordinary Tanzanians, while some are worried that the free schooling programme - while welcome - will fail, as did a similar programme in the 80s.

See also:

01 Nov 01 | Africa
Tanzania's primary education plan
10 Sep 01 | Business
Tanzania secures extra funding
25 Jul 01 | Africa
Timeline: Tanzania
08 Aug 01 | Country profiles
Country profile: Tanzania
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