DAR ES SALAAM: THE Bank of Tanzania (BoT) maintained its central bank rate (CBR) at 6.0 per cent for the third consecutive quarter, signalling continued confidence in the country’s economic stability.
The central bank’s Monetary Policy Committee (MPC), which met on Tuesday, decided to maintain the CBR for the third consecutive quarter since July last year, citing stable inflation levels at the lower end of the target range.
The BoT Governor, Mr Emmanuel Tutuba, said the MPC observed that, keeping the policy rate unchanged would ensure adequate liquidity in the economy, anchor inflation expectations below the target of 5.0 per cent and facilitate high economic growth of around 5.7 per cent between January and March this year.
“This will keep exchange rate pressures muted, thus limiting its impact on inflation and reducing incentives to transact in foreign currency in the country,” said Mr Tutuba yesterday.
The unchanged CBR for this quarter aligns with the prediction of ‘Daily News’ Columnist Mr Kelvin Msangi. In his weekly column, “The Cliff,” Mr Msangi predicted a 70 per cent probability of the central bank maintaining the key rate in this quarter.
“The MPC is likely to recommend maintaining the current CBR with a 70 per cent probability. “The committee is also expected to prioritise sustaining economic growth while ensuring price stability, making a neutral stance the most probable outcome,” Mr Msangi, wrote.
He added that the committee is expected to adopt a cautious approach, aiming to balance growth and stability in the macroeconomic environment.
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In discussing the global economy, the MPC noted that there was a remarkable improvement in the global economic conditions in the fourth quarter (Q4) of last year.
Growth improved, inflation continued to decline in many economies, financial conditions eased and commodity prices, particularly crude oil, moderated, thereby significantly benefiting the country’s economy.
In addition, the MPC expects the improved global economic environment to continue in the first quarter of this year. Notably, growth will improve due to the increase in household consumption, supportive fiscal policy and easing financial conditions.
Mr Tutuba added that inflation is expected to decline in many countries due to moderate commodity prices in the world market.
“The risk to growth and inflation outlook is moderate, but escalation of geopolitical conflicts and trade tensions might slightly affect the projections. “The direction of monetary policy stance is somewhat mixed, as some central banks might cut policy rates; others either maintain or raise,” he added.
The MPC also observed that the country’s economy performed satisfactorily last year, attributed to supportive global economic conditions and to sustained implementation of prudent fiscal and monetary policies as well as economic reforms.
The economies of both Mainland Tanzania and Zanzibar demonstrated robust performance last year, with a growth path reflecting resilience and effective policy implementation.
Mainland Tanzania recorded a growth rate of 5.4 per cent in the first half of last year, and is projected to be 5.6 per cent in the third quarter and 5.7 per cent in the subsequent quarter. The growth of the economy is expected to be in line with a projection of 5.4 per cent for the entire year.
“The growth was primarily driven by strong performances in agriculture, transport, construction and trade activities,” said Mr Tutuba.
Additionally, the Zanzibar economy is also expected to grow strongly. The economy grew at 6.4 per cent and 7.2 per cent in the first and second quarters of last year, respectively and is positioned to be sustained in the subsequent two quarters. This will result in annual growth of 7.2 per cent.
The key drivers included tourism, manufacturing, construction and real estate development. Projections for this year indicate continued strength in both economies with Mainland Tanzania expected to grow at around 6.0 per cent, while Zanzibar at approximately 6.8 per cent.
The positive outlook is underpinned by several factors, including agricultural production, progress in construction projects, improvements in transport and logistics, reliable power supply, and supportive fiscal and monetary policies.
Inflation is projected to remain low in the first quarter this year, at around 3.1 per cent and 4.0 per cent. This is mainly due to sufficient food availability, stable exchange rate, reliable power supply and moderate global commodity prices, particularly crude oil.
The Tanzania Bankers Association’s Chief Executive Officer Ms Tusekelege Joune said the unchanged CBR continues to bring stability in the banking sector.
