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Private sector credit to regain in 2020/21 second half

Private sector credit to regain in 2020/21 second half

THE credit extended to the private sector is forecast to regain a growth momentum in the remainder of the fiscal year 2020/21 compared to the preceding period on account of the central bank’s prudent fiscal policy.

According to the Bank of Tanzania (BoT) Monetary Policy Statement Mid-Year Review 2020/21 also the sustained accommodative monetary policy, normalisation of activities owing to re-opening of the global economy, and ongoing measures implemented by the government to improve business environment will contribute to the improvement of the private sector credit.

In the first six months of the 2020/21 fiscal year, credit to the private sector growth averaged 5.1 per cent compared to 9.3 per cent in the corresponding period of 2019.

The subdued growth of credit was attributed to the adverse impact of Covid-19 on the global economy, which spilled over to businesses and investment in the country.

Activities which absorbed much of the credit were personal activities, namely micro, small and medium enterprises, transport and communication and mining and quarrying, while subdued credit was observed in tourism-related businesses due to high exposure to external shocks.

Furthermore, money supply recorded positive growth rates despite challenges emanating from Covid-19. The positive growth outturn of money supply was a reflection of the accommodative monetary policy.

The extended broad money supply grew by 7.1 per cent during July to December last year compared with 9.7 per cent in the corresponding period of 2019.

The growth of money supply was consistent with the target of 10.0 per cent by the end of June 2021. The broad money grew by 9.6 per cent compared to 11.3 per cent.

The reserve money growth averaged 3.3 per cent compared to 8.6 per cent in 2019 and the targeted growth of 9.5 per cent by the end of June 2021.

The growth of money supply matched the rising velocity of money circulation attributable to increased use of digital payments.

Money supply growth is expected to pick up to an average of 10.0 per cent by the end of June 2021 as earlier projected.

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Author: DAILY NEWS REPORTER

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