AfricaPress-Tanzania: INTEREST rates charged by banks on loans and those offered on deposits exhibited a general downward trend in the year ending May, reflecting the impact of a sustained accommodative monetary condition.
The Bank of Tanzania (BoT) monthly economic review for June shows that the overall lending rate decreased by 38 basis points to 16.83 per cent from 17.21 per cent in the corresponding month of 2019, while the one-year lending rate declined by 22 basis points to 16.86 per cent.
Likewise, the overall deposit rates softened to an average of 6.80 per cent in May this year from 7.35 per cent recorded in the corresponding month of 2019, while the one-year deposit rate declined to 8.57 per cent from 8.75 per cent registered in May 2019.
As a result, the spread between the one-year deposit rate and the one-year lending rate narrowed to 8.28 percentage points in May this year from 8.33 percentage points recorded in a similar period of 2019.
The decline interest rates made the domestic credit by the banking system credit extended to the central government and private sector to grow by 3.5 per cent in the year ending May this year, compared to 4.4 per cent in the preceding month. Credit to the private sector grew by 5.1 per cent from 5.8 per cent.
The slow growth was on account of repayment of loans by some borrowers, coupled with subdued demand for loans by the hospitality industry and schools owing to the coronavirus pandemic.
The sectoral decomposition of credit indicates fast growth of loans extended to building, construction, transport, communication and personal-related economic activities (mostly small and medium enterprises).
The profile of loans outstanding indicates much of the credit was extended personal-related activities, trade and manufacturing. Their shares to loans outstanding were 31.7 per cent, 17.3 per cent and 11.5 per cent.
Money supply growth remained strong, reflecting the impact of the accommodative monetary policy to limit the impact of the pandemic on the economy, combined with moderate growth of credit to the private sector.
Extended broad money supply (M3) grew at an annual rate of 11.9 per cent in May 2020, compared to 12.2 per cent in the preceding month and 5.8 per cent in May 2019.
Broad money supply (M2) grew by 12.9 per cent compared to 13.9 per cent and 7.2 per cent.
