The Bank of Tanzania (BoT) has raised its central bank rate (CBR) from 5.5 percent to 6 percent, a move its central bank said is aimed at containing “the lingering inflationary pressures arising from global economic developments.”
- The new CBR rate, set at the most recent Monetary Policy Committee meeting on April 3rd, will apply for Q2/2024.
- The country’s economy grew by an estimated 5.1 percent in the first quarter of 2024.
- Inflation averaged 3.0 percent and the MPC’s outlook is that the risk of a sharp rise is “moderate.”
“The decision of the MPC is based on the macroeconomic forecast made in March 2024, which requires an increase in the scope of monetary policy actions,” Emmanuel M. Tutuba, Governor of the BoT, said in a statement.
Central banks typically raise interest rates to control inflation. A higher CBR raises the cost of credit, controlling demand and as a result, excess liquidity in the economy.
“Private sector credit growth remained strong, averaging 17 percent, the same as in the preceding quarter,” Gov. Tutuba added. The demand for credit is mostly from agriculture, mining, transport and manufacturing sectors.
BoT is currently addressing a dollar shortage in the country with a raft of measures, which have included selling dollars to commercial banks and pushing hotels to register as foreign exchange bureaus to fight the black market. The MPC expects that these and other measures will increase dollar supply and regulate demand “in the near future.”
Meanwhile, Kenya’s Central Bank retained its benchmark lending rate at 13 percent, while Uganda’s central bank is scheduled to read its MPC statement on Monday April 8th. In its last emergency MPC meeting in early March, the Bank of Uganda (BoU) raised its CBR by 50 basis points to 10 percent, and warned of likely further hikes to control inflation.
“While the main contributors to the rise in inflation are services and energy, fuel, and utilities, this combined with the depreciation of the shilling could spill over into general price increases if not contained,” Michael Atindi-Ego, Deputy Governor of BoU, said in March.
