TANZANIA: THE less accommodative monetary policy implemented by the Bank of Tanzania has continued to keep monetary and financial conditions at the level required to contain inflation below the target of 5 per cent.
The Monetary Policy Committee (MPC) that met early this week noted that the smooth coordination of monetary, fiscal and structural policies made the inflationary pressures remain muted evolving below the target of 5 per cent
As a result, the downward trend of inflation observed since the beginning of the year continued reaching 3.2 per cent in October and last month from 3.3 per cent which persisted for three months consecutively, primarily driven by moderation in food prices.
In Zanzibar, the inflationary pressures were also subdued, with an outturn of 6.5 per cent in October from 7.5 per cent in the preceding month. The decline was driven by both food and non-food inflation.
In Mainland Tanzania and Zanzibar, inflation is expected to remain stable and consistent with the medium-term target of 5 per cent.
Also, owing to the implementation of a less accommodative monetary policy by the central bank, the growth of monetary aggregates slowed last month.
The extended broad money supply grew at 13.7 per cent compared with 14.5 per cent recorded last September driven by private sector credit growth, which slowed to 18.3 per cent from 19.5 per cent.
However, the growth of private sector credit was still above the projection of 16.4 per cent by the end of this month.
The high investment appetite strengthened by improving the business environment and supportive policies is expected to persist.
Further, the less accommodative monetary policy continues to support economic activities and financial sector stability.
Also, supported by fiscal policy and an improvement in proceeds from exports and tourism, the policy stance lessened the pressure on demand for foreign currency in October and last month.
Foreign exchange reserves remained adequate at about 5 billion US dollars last month, sufficient to cover more than four months of imports.
The exchange rate depreciated by around 7.8 per cent, year-on-year, reflecting the shortage of foreign currency liquidity. The foreign reserves are projected to remain adequate.
The MPC noted with satisfaction the measures implemented by the Bank of Tanzania in addressing the shortage of foreign currency and observed that the implementation of policies by the government to increase export and import substitution will improve the current account position, boost foreign exchange reserves and stabilise the exchange rate.
The current account improved slightly, mainly on account of an increase in foreign exchange earnings from traditional export crops and tourism.
The current account deficit narrowed to 3,265.5 million US dollars in the year ending October compared with 4,990.1 million US dollars in the corresponding period last year and is expected to continue improving.
As for Zanzibar, the current account deficit widened to 447.7 million US dollars compared with a deficit of 362.8 million US dollars mainly on account of an increase in imports, which outweighed the improvements in exports.
