19 April 2017

Tanzania: Bank of Tanzania - No Bias When Delivering Service to Mainland and Zanzibar

Zanzibar — Just as it offers service to the Mainland, the Bank of Tanzania (BoT) gives the same to Zanzibar, according to Lusajo Mwankemwa of the Directorate of Economic Policy and Research, who has dismissed as false and misleading claims that the Islands have been sidelined by the bank.

At a recent media forum on 'Business and Economy issues reporting, the BoT official said Zanzibar has been benefiting from the bank's services and there has been no hitch. "In fact we have a permanent BoT economist whose role is to advise the Isles' government.

In addition, the monetary policy board include members from Isles government,' Mr Mwankemwa said. "BoT activities include 'providing loans', and 'supervision of Banks and Financial Institutions' and Zanzibar has been benefiting from borrowing.

The People's Bank of Zanzibar (PBZ) has been performing well after surviving some years of financial shocks, " he said. Other roles include to issue notes and coins and ensure non-inflationary liquidity; the Bankers' Bank (commercial banks); the Governments' Bank; the advisor to the Governments (Zanzibar and Union); the Guardian of the Country's International Reserve; and Promotion of Financial Development.

He said both the Union government and Zanzibar economies are on track with many investments comingup. "Basing on our research, people in Mainland and Zanzibar should expect to see economic boom in the near future,' the BoT economist emphasized.

Mr Mwankemwa said Tanzania has been recording steady growth of economy and is one of the impressing indicators of development, with GDP considered to be the best in sub-Saharan Africa. While economic growth last year was seven percent, other countries such as Burundi was (-0.5), Kenya and Rwanda (6.0), Uganda (4.9), Zambia (3.0), Malawi (2.7), and Congo-DRC (3.9).

This was 6 percent or bellow. Tanzania's economic growth is attributed to increased mining activities (15.8 percent), improved transport services and cargo handling (15.5 percent), improved Information and communication (13.4 percent) and financial services (11.5 percent).

Economic growth was anticipated to be 7.2 percent by early this year but the projection could not be reached because of poor performance in agriculture production (2.1 percent down the projection of 2.6), trade recorded low at only 5.6 percent instead of the estimated 7.6 percent.

Economy instability in Europe and China, our leading trade and investment partners also performed poorly economically, affecting Tanzania's growth, he said. Chinese economic growth dropped from 6.9 in 2015 to 6.6 last year.

The BoT economist said inflation is another indicator of smooth economic growth, and that so far the inflation in Tanzania is acceptable as it remains in single digit, and below the 'eight percent' set by the East Africa Community member states. The inflation dropped from 6.5 percent in January to 4.5 percent in September in 2016 before rising again to above 5 percent in recent months.

"The Inflation is expected to remain at single digit this year because of reliable energy/electricity, budget stability, little changes of fuel price in the world market, and the anticipated stability of Tanzania currency against the US dollar.

"It is unfortunate that the hope for stable inflation may be stained by unpredictable price in the global market and the emerging prolonged drought which may definitely affect food production resulting in food price hike."

Inflation in neighbouring countries: Kenya 6.3 percent last year, and Uganda was 5.4 percent, as the strength of Tanzania's shilling against the US dollar remained relatively strong until the start of this year (2017), an indication of stable economy.

But from January this year the US dollar gained strength against other currencies. In the East African Region, China's Yen and the United Kingdom's (UK) sterling pound suffered a devaluation. Another growth indicator was the drop of current account deficit by 48.8 percent from USD 4,011.6 in 2015 to 2,054.8 last year. Thanks to rise in value and price of minerals for export mainly Gold in world market, increased revenue from tourism sector, and decline of imports of commodities.

He said that liquidity (measured by multiple indicators credits, capital, and ratio of liquid assets and demand liabilities in short period of need or in emergencies) has been good. The ratio has been currently 42.4 percent up from 37.2 percent in 2015 and that 20 percent is the legal requirement. However, the economist said, demand liabilities in Banks declined slightly from 20.73 trillion TZS in 2015 to 20.57 trillion TZS last September

. This was because of Government's decision to shift public funds from commercial banks to BoT, leaving only 3 percent of its liabilities to the private Banks. Bank assets have been increasing from worth 26,917.2bn/= in December 2015 to 27, 978.2bn/= in December last year (equivalent to 2.6 percent), while borrowing (loaning) in the private sector only increased by 7.2 percent last year compared to 24.8 percent in 2015, the decline is attributed to increased Non Performing Loans (NPLs).

Mr Mwankemwa said decline in loaning in private sector has not been the case for Tanzania alone, but also in several countries in the East African region like Kenya and Uganda, where banks also witnessed decline in borrowing last year.

Tanzanians, particularly members of the business community should understand that the only public institutions where directed to close account in private banks and open at the BoT. Commercial banks still plays big role in financial businesses in the country.

The decision of pushing the public institutions/ or revenue collection institution to open an account with BoT is "to push commercial banks to extend their services to people in villages instead of remaining in urban areas to trade with corporate sector and the government institutions, and it is wrong to observe that the changes led to 'scarcity of money in peoples' pockets.'

Talking about the National Debt and the chances of the government to continue borrowing, the economist said both domestic and foreign debt stock increased to USD 19,021.9 million last December up from USD 18,459.3 million in June, 2016. This excludes USD 1,725.8 million debts from the Social Security Funds.

The debts are paid by treasury bills and not linked to Treasury bonds, loans from BoT and Commercial Banks. The national debt increased by 3.5 percent because of loans acquired for several development programs including Railway, construction of bridges, roads, natural gas projects, electricity and water projects.

The government can settle the debts as it matures and that the current debt average time to maturity is 11.9 years, with low refinance risk on national budget. The government has been paying its debts gradually as it matures, for example it spend over 2,570.1bn/= billion to settle domestic (1,822.3bn/=) and matured foreign debt (747.8bn/=) last year

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