Financially pressed Tanzania has ended its 10-month feud with the International Monetary Fund by concluding an agreement for loans of more than $200 million over the next two years, diplomatic sources said today.
In return, the country's socialist government agreed to accept tough IMF conditions for economic changes.
The agreement is to be submitted next month to the IMF's Board of Governors in Washington for ratification. Neither the IMF nor the Tanzanian government has made any announcement concerning the closed-door negotiations, but the IMF team that had spent two weeks in the country left today for Washington.
Tanzania, which is undergoing its worst economic crisis since independence, began talks with the IMF last year but broke off negotiations in October, arguing that the fund's prescriptions for financial recovery were both economically unsound and political unacceptable.
At the time, President Julius Nyerere warned that "people who think Tanzania will change her cherished policies of socialism and self-reliance because of the current economic difficulties are wasting their time."
Last month Tanzania and Jamaica, which is also at loggerheads with the IMF, played leading roles in an international conference held in Arusha, Tanzania, to discuss ways of drastically revamping the fund to better serve the needs of Third World countries.
Under the loan agreement just concluded, Tanzania will receive $200 million in Special Drawing Rights during the next two years for what the IMF terms "standby credit" to support the country's balance of payments.
In addition, the IMF will provide up to $15 million this year in "compensatory financing," should the world market price of Tanzania's export crops fall.
The diplomatic sources said Tanzania has agreed to IMF insistence that it reduce government expenditures despite its earlier argument that this would mean cutting out vital social services.
Tanzania also agreed to put a ceiling on government lending to stateowned institutions and industries and to try to clear up by the end of 1981 approximately $230 million in debts to foreign banks and lending institutions.
On the controversial issue of currency devaluation, Tanzania and the IMF are said to have reached a compromise. Tanzania has agreed to allow the IMF to assist it in reviewing its foreign exchange rate. Tanzania officials, however, say they have not agreed to do anything they would not ordinarily do, the source explained.