DAR ES SALAAM: ONGOING confidence in the country’s economic stability and stable inflation within the lower end of the target range have been cited as key reasons for the Bank of Tanzania (BoT) maintaining its central bank rate (CBR) at six percent for the fourth consecutive quarter.
The central bank’s Monetary Policy Committee (MPC), meeting on Thursday, decided to keep the CBR at sixper cent –a level maintained since July last year.
The BoT’s Deputy Governor, Dr Yamungu Kayandabila, representing the Governor, Mr Emmanuel Tutuba, stated that the Monetary Policy Committee (MPC) noted that both inflation and economic growth are on track to meet targets.
However, global trade policies and geopolitical tensions pose potential risks to domestic inflation and economic output.
“Therefore, maintaining the central bank rate will help to minimise negative spillover effects of trade tariffs and geopolitical conflicts on the economy,” said Dr Kayandabila in Dar es Salaam yesterday.
The Committee noted that economic activity in advanced economies and emerging markets improved in the first quarter of this year and growth outlook remains strong.
However, trade tariff uncertainty and geopolitical conflicts might undermine global growth.
He added that inflation has substantially eased and converged to targets due to decline of the previous economic shocks and monetary policy tightening.
“Because of this progress and the projected low inflationary environment, many central banks reduced policy rates. However, trade tariff announcements heighten risks to inflation outlook,” he added.
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In discussing the growth on domestic economy, the MPC noted that the domestic economic conditions have continued to improve, and the outlook remains favourable since its previous meeting held in January this year.
Liquidity in banks increased due to fiscal operations and seasonal decline in currency outside banks. As a result, banks reduced demand for reverse repo and borrowing through the Lombard loan facility.
However, the MPC observed that small banks experience difficulties in obtaining liquidity at affordable cost from large banks, contributing to the 7-day interbank rate to fluctuate close to the upper band of the CBR.
The economy sustained strong performance for last year, supported by both public and private sector investment.
In Mainland Tanzania, the economy is estimated to grow at 5.5 per cent in 2024, compared with the projection of 5.4 per cent and 5.1 per cent of the preceding year.
The growth was driven by agriculture, financial and insurance, mining and quarrying, and construction.
In addition, Tourism, a crosscutting activity, also contributed significantly to the growth outturn. For the first quarter of this year, growth is estimated to reach 5.5 per cent.
The Zanzibar economy grew by 7.2 per cent in the fourth quarter of last year, up from 2.2 per cent in the last quarter of 2023, mainly on account of accommodation and food services, which is largely influenced by tourism activity; and wholesale and retail trade activities.
“This strong growth is expected to continue in the second quarter of 2025, reaching 6.1 per cent in Mainland Tanzania and 6.5 per cent in Zanzibar, driven by the same economic activities,” he added.
Moreover, Inflationary pressures remained subdued due to monetary policy action, adequate food supply, prudent fiscal policy, and moderation of global energy prices.
Headline inflation in Mainland Tanzania was 3.1 per cent in last year, lower compared with 3.8 per cent in 2023, below the country’s target of 5.0 per cent and consistent with the Southern African Development Community (SADC) and East Africa Community (EAC) convergence criteria.
During the first quarter of this year, inflation averaged 3.2 per cent in Mainland Tanzania. In Zanzibar, headline inflation eased to 5.1 per cent in 2024 from 6.9 percent in 2023.
In February this year, inflation decreased to 4.8 per cent from 5.3 per cent in the preceding month and 5.1 per cent in a similar month last year because of a decrease in food inflation.
Inflation is projected to remain low at around 3.2 per cent in the second quarter of this year.
Furthermore, money supply growth remained strong, at more than 12 per cent in 2024, consistent with the monetary policy stance.
