BANK of Tanzania (BoT) yesterday dismissed as baseless claims that it has printed new banknotes to cushion the government budget deficit.
The central bank said in a statement that no new notes were introduced in the economy outside the normal procedure of replacing the torn out ones and buffer stock.
The statement came amid information that circulated recently in some online newspapers and social media that the bank has printed new banknotes— seigniorage revenue—to fill the budget revenue and expenditure mismatch gap.
“The Bank of Tanzania has not printed new banknotes in this period. The new banknotes are not issued arbitrarily to finance government budget, they are printed as per the laid down procedures,” the statement stressed.
BoT stated that the notes were issued based on the need of the economy for a certain period, taking into consideration GDP growth, inflation and replacement of torn out and buffer stock.
Critics had it that the central bank printed new notes to rescue the government from current deficit to enable BoT to extend a 1.5tri/- overdraft to treasury in the fiscal year ending June.
However, BoT explained that the treasury can borrow up to 12.5 per cent based on the previous year’s total domestic revenue collections by the government. “This is a normal standard procedure globally, even in Tanzania, the law allows to do the same,” BoT statement explained.
The central bank said people behind the misleading information have looked at the matter pegging their argument on monthly basis instead of the entire activities in the year.
The monthly economic review report for July showed that BoT extended an overdraft of 610bn/- in May to push up the debt to 1.937tri/- at the end of June.
“The increase should not be considered as a one-time overdraft extension for June alone, rather for the full year to June 2018,” the statement showed.
However, BoT noted that the overdraft had decreased by 936.6bn/- from 1.546tri/- to 610bn/-. The decrease was attributed to the normal revenue collection and external loans.
The review showed provisional statistics, indicating that domestic revenue realised in June was 1.829tri/-, of which 1.771tri/- was collection by the central government and the balance by local government authorities.