Africa-Press – Tanzania. A REVERSE repurchase agreement (repo) rate has minutely decreased, but the amount is insignificant to encourage banks to sell back securities.
The rate on average has gone down by 0.1 percentage point to 5.6 per cent in last November compared to 5.7 per cent registered in October.
According to the Bank of Tanzania (BoT) latest monthly economic review, reverse repo worth 327.5bn/- was auctioned, compared to 462.9bn/- in the preceding month.
“The Bank of Tanzania continued to conduct reverse the repurchase agreement to moderate a short-term liquidity position of banks,” the report shows. A decrease in repo rates encourages banks to sell securities back to the government in return for cash. “This increases the money supply available to the general economy,” a money market analyst told the ‘Daily News’.
Conversely, by increasing repo rates, central banks can effectively decrease the money supply by discouraging banks from reselling these securities.
Thus, extended broad money supply (M3) increased by 1.456tri/- in the year ending November, while broad money supply (M2) grew by 8.7 per cent compared to 10.7 per cent.
“The monetary policy stance remained accommodative, driven largely by a need to improve credit flows to the private sector to support higher growth in the economy,” the central bank report says.
The increase in M3 translated into the annual growth rate of 5.2 per cent, compared to 5.9 per cent registered in the year ending October.
“The growth of money supply was largely contributed by an increase in domestic credit,” BoT says.
The domestic credit by the banking system recorded the annual growth of 20 per cent in November compared to 15.4 per cent in October the same year.
Credit extended to the central government through purchases of government securities grew by 49.6 per cent in the year ending November compared to the annual growth of 39.1 per cent in the October.
Bank credit extended to the private sector increased by 1.001tri/-, equivalent to the annual growth of 5.2 per cent, compared to 4.9 per cent in October.
Credit to the private sector was more prominent in personal activities—largely micro, small and medium enterprises—transport, communications, hotels and restaurants.
The private sector credit to various economic activities shows that, personal activities held the largest share of the total outstanding credit (33.6 per cent) followed by trade and manufacturing activities accounting for 15.7 per cent and 9.9 per cent, respectively.
