TANZANIA- The Bank of Tanzania (BoT) has announced the benchmark lending rates will remain unchanged at 6% until September 30 to encourage enterprise and consumer spending, maintaining the trajectory of economic recovery.
The announcement mirrors efforts by other central banks in East Africa to encourage business and consumer spending, which have been significantly affected by high inflation.
BoT revealed in its quarterly meeting on July 3 that the implementation of its monetary policies in Q1 and Q2 2024 has been successful in maintaining inflation below 5%. It expects Tanzania’s economy to continue on a positive growth trajectory.
Emmanuel Tutuba, BoT’s Governor, said, “Domestic economic conditions have improved significantly in the recent past, at the back of implementation of policies and reforms for fostering high economic growth.”
“The outlook also is positive, driven by expected favorable weather for agriculture, adequate power supply, improvement in infrastructure (especially railways, roads, and ports), as well as policies and reform programs.”
BoT had increased the policy rate from 5.5% to 6% in April as a means of curbing inflation despite the Tanzanian economy growing by 5.1% in 2023 compared to 4.2% in the previous year. However, favorable economic conditions in Tanzania and East Africa have led to loosening of the monetary policy, which indicates the economic position moving forward.
Q2 2024 saw improved activities in mining, tourism, construction and agriculture informed the decision to not increase policy rates. Inflation was at 3% and 3.1% in April and May respectively, which was mostly due to low food inflation which stood at 1.4% and 1.6% respectively.
The decision to maintain policy rates was also informed by Tanzania’s adequate foreign exchange reserves, totaling US$5 billion by the end of Q2 2024. According to BoT, these reserves are sufficient to cover projected imports for the next 4 months.
Foreign exchange liquidity also improved slightly in Q2 2024, owing to an increase in foreign inflows from tourism, gold, and tobacco.
According to the East African Business Council (EABC), Tanzania’s real GDP growth is predicted to reach 6.3% in 2024, compared to 5.2% in 2023 and 4.2% in 2022.
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