Africa-Press – Tanzania. THE government through the Bank of Tanzania (BoT) has continued to implement the accommodative monetary policy in order to stimulate the growth of credit to the private sector, and revive various economic activities that were affected by Covid-19.
Presenting the State of the National Economic Survey Report for 2021 and the 2022/23 National Development Plan, Minister for Finance and Planning, Dr Mwigulu Nchemba said this condition was supported with a low inflation rate, which has continued to be within the target of 3 to 5 per cent.
He said in order to attain this objective, the BoT has been using various instruments, including the provision of short-term credits to banks, buying foreign currencies from inter- banking foreign exchange markets and the use of a foreign exchange swaps.
Similarly, he said the BoT took additional policy measures to stimulate the increase of soft loans to the private sector, especially in agricultural activities.
“However, following the effects of the war in Ukraine which has exacerbated the challenge of disruption of supply chains and led to an increase in oil prices in the world market, as well as prices of foods such as wheat and edible oil, it has led to an increase in prices in the country and risking further inflation,” said the minister.
This situation has forced BoT to reduce the amount of liquidity in the economy in order to curb the risk of increase of inflation rate in the country and in line with the implementation of the accommodative monetary policy, the money supply continued to grow at a satisfactory rate.
He said during the period of July 2021 to April 2022, the average of reserve money increased by 13.8 per cent compared to 2.7 per cent during the same period in the previous year, and the target of an average of 9.9 per cent in 2021/22.
Similarly, extended broad money supply (M3) grew at an average of 13.1 per cent compared to 6.8 per cent and a target of 10 per cent.
This increase in liquidity in the economy, the minister said, has stimulated various economic activities that were affected by Covid-19 to recover and thus increase in their contribution to the GDP.
He said credits to the private sector have continued to grow at a satisfactory rate due to the implementation of accommodative fiscal and monetary policies as well as the ongoing implementation of policy measures taken by the government to improve the business environment, as well as the measures by the BoT that aim to stimulate credit growth and lowering of interest rate.
Dr Nchemba told the House that credits to the private sector grew by an average of 8.4 percent in the period July 2021 to April 2022 compared to an average growth of 4.3 per cent in the same period in 2020/21, and the target of 10.6 per cent in 2021/22.
In recent months, the growth of credit to the private sector has increased to 13.4 per cent for the year ended April 2022.
The largest share of the credits was directed to personal activities which accounted for 39.3 per cent of total credits, followed by business activities at 16.7 per cent, manufacturing at 10.1 per cent and agriculture at 7.9 per cent.
It is the government’s expectation that the average target of 10.6 per cent for 2021/22 will be achieved following policy measures and an improved business environment in the country.
He said the implementation of monetary policy has helped maintain a sufficient level of liquidity in the banking sector, leading to the stabilization of short-term financial market interest rates at lower rates.
“For example, the overnight interbank cash market interest rate decreased to an average of 3.42 per cent during the period between July 2021 to April 2022, from an average of 3.60 per cent during the same period in 2020/21.
Similarly, the overall Treasury bills rate decreased to an average of 4.17 per cent from an average of 4.62 per cent during the same period in 2021.
The average lending rates decreased at a decreasing rate of 16.44 per cent during the period between July 2021 to April 2022, compared to an average of 16.59 per cent in the same period in 2020/21.
“In addition, the average deposit rate was 6.85 per cent, compared to an average of 6.70 per cent.
It is our expectation that the ongoing policy measures taken by the government through the BoT will help continue to reduce the interest rates in the country and help improve the country’s economy and business environment.
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