World Bank urges Tanzania to tackle fiscal deficit

DAR ES SALAAM (Reuters) - Tanzania needs urgently to deal with its growing fiscal deficit to boost economic growth, which is expected to reach 7 percent this year, the World Bank said on Thursday. The Washington-based lender said rising pension and creditor arrears, missed revenue targets and delays in disbursement of aid by donors last year forced the government to borrow significant amounts locally. "The main vulnerability of Tanzania's macroeconomic management remains its fiscal policy, and it is imperative for the government to rectify this situation," said Jacques Morisset, the World Bank's lead economist for Tanzania. A group of 12 international donors withheld budget support pledges worth nearly $500 million after a corruption scandal erupted in the energy sector. Tanzania expects its economy to grow 7.4 percent this year, up from an estimated 7.2 percent in 2014. The World Bank said the economy could grow faster if it expanded in tourism, which employs about 500,000 and is the main source of foreign exchange, accounting for close to 20 percent of exports. "There is potential for further growth ... and some of the needed reforms are quite urgent as the status quo could be costly for the country," said Philippe Dongier, the World Bank's country director for Tanzania.