The Bank of Tanzania (BoT) is expected to start using the interest rate system in the implementation of monetary policy from January 2024. This step aims at controlling inflation and eenabling economic growth by taking into account the domestic and external economic environment.

Speaking at a seminar for media editors held at the BoT conference hall in Dar es Salaam, the Director of Economic Research and Policy at BoT, Dr. Suleiman Missango, said that the interest rate will be known as the Central Bank Rate and will be based on the inflation target and the growth projections of the economy.

“The Central Bank Rate will be used as a benchmark for setting interest rates for bank customers and other financial institutions in the country,” he said.

Dr. Misssango said that changes in the Central Bank Rate will indicate the direction of monetary policy, where its increase will mean reducing the money supply, while decreasing the interest rate will mean increasing the money supply in the economy.

“BoT has set a ratio of 60% for inflation, 30% for economic growth, and 10% for monetary policy to contribute to maintaining the stability of the exchange rate of the shilling against the US dollar,” he said.

Dr. Missango said that this system will help to improve price stability and boost the economy by taking into account the changes in the economy. He said that the system of using money supply has been losing efficiency due to the unpredictable speed of money circulation, which can change frequently due to the increase of new products of financial services and payment systems.

“Implementation of monetary policy using interest rate will enable the central bank to take quick and timely actions according to the changes in demand and availability of money for commercial banks. This will help to control inflation and stimulate economic growth by taking into account the reality of the economy,” said Dr. Missango.

He also added that this system will increase transparency and accountability of the Central Bank in the implementation of monetary policy, as it will announce the decisions of the Monetary Policy Committee, including the level of the Central Bank Rate to the public.

He also said that this system will be in line with the requirements of the East African Community (EAC) towards the monetary union, as many countries in the EAC and the Southern African Development Community (SADC) are already implementing this system.

However, Dr. Missango emphasized that the system of using interest rate in the implementation of monetary policy is not the only solution in controlling prices and developing the economy. He called on the government and other economic stakeholders to work together with the central bank in improving the environment of investment, production, trade and employment in the country.

Also, the Manager of the Currency Operations Department from the Directorate of Currency Management at BoT, Mr. Ilulu Ilulu, presented a topic on the service of collecting coins that have not been used for a long time, where he said that BoT collect coins of 200, 100 and 50 shillings from citizens or institutions to exchange them with notes.

He said that this step was taken due to a study that revealed the existence of many coins that are not used in the economic cycle and instead are stored or placed at home, office, in cars, business and various institutions in the country.

All citizens who have these coins that have been stored without being used for a long time and would like to exchange them to get notes or store them as deposits in their accounts, are requested to submit them to the offices of the Central Bank or commercial banks for the service.