In a significant move aimed at addressing persistent inflationary pressures influenced by global economic conditions, the Monetary Policy Committee (MPC) has announced an increase in the Central Bank Rate (CBR) from 5.5 percent to 6 percent.
This decision, made during the MPC meeting on April 2, 2024, reflects the macroeconomic forecast established in March 2024.
“The MPC decision to increase the CBR underscores a proactive stance in managing inflationary pressures amidst a backdrop of favorable economic fundamentals. With the outlook for economic performance remaining positive, stakeholders are cautiously optimistic about navigating through evolving global and domestic economic landscapes,” Bank of Tanzania Governor Emmanuel Tutuba said.
Delivering the committee's report at the central bank offices in Dar es Salaam, Mr. Tutuba stated that the adjustment in the CBR, applicable for the second quarter spanning April to June 2024, falls within the band of ±200 basis points.
“This proactive measure highlights the central bank's dedication to maintaining stability amidst evolving economic dynamics,” he said.
The MPC's assessment of global economic conditions indicates a positive trajectory, with advanced and emerging market economies demonstrating improved performance. Output growth has exceeded expectations, inflationary pressures have moderated, and monetary and financial conditions have shown resilience. However, potential impacts from OPEC+ decisions on oil production and geopolitical tensions remain areas of concern.
Domestically, the MPC expresses contentment with the nation's economic performance despite facing external challenges. Noteworthy highlights include robust estimated GDP growth of 5.1 percent in 2023, propelled by substantial public and private sector investments, particularly in infrastructure. Zanzibar's economy also demonstrates commendable growth, primarily driven by thriving tourism activity.
Inflation, aligned with targets, averaged 3.0 percent in the first quarter of 2024, supported by prudent monetary policy and adequate domestic food supply. Successful implementation of monetary policy has maintained the 7-day interbank interest rate within the prescribed band and sustained strong private sector credit growth.
Fiscal performance remains satisfactory, with revenue meeting targets and expenditure aligned with available resources, contributing to sustainable public debt levels. Encouraging improvements in the current account balance, driven by moderate import prices and robust export performance, are also noted.
Acknowledging challenges such as the shortage of foreign exchange, ongoing measures aim to enhance supply and reduce demand for the US dollar, with the expectations of stabilizing the situation in the near term.
Speaking after the announcement of the CBR, the Chairman of the Tanzania Bankers’ Association, Mr. Theobald Sabi, commended the Bank of Tanzania for coming up with the rate based on well-articulated reasons .
He also thanked the Bank of Tanzania for its unceasing support in challenging areas for the financial sector, including availability of foreign exchange.
“The sentiments across the banking industry is that we are happy with a level of support and accommodative policies from the Bank of Tanzania,” he said, the same commendation were made by a representative of the Tanzania Mobile Networks Association (TAMNOA), who expressed the association’s readiness to support the country’s economy.