Extension of credit to agriculture was still souring in October this year following measures put on by the government since last year to encourage financing into the sector.
According to the Monthly Economic Review released by the Bank of Tanzania during the week, annual credit growth to agriculture for the year ending October 2022 stood at 57.7% compared to 46.7% in the preceding month and negative 14% same period last year.
According to the report, the overall credit growth to the private sector set another seven years high, at 23.7%, from 22% the previous month and 5.6% the same period last year.
Other sectors that enjoyed significant credit growth during the period were mining and manufacturing while personal and trade sectors were at their annual average.
The hotels and restaurants sector saw negative growth for the whole year straight following a write-off of non-performing sectorial loans from the pandemic ravage, as banks comply with regulatory requirements.
Credit is souring despite the central banks' move to reduce liquidity from the economy as advised by the Monetary Policy Committee in a statement released at the end of November.
A move to reduce liquidity may be interpreted in the latest Treasury bonds auctions where the central bank has been consistently accepting lower prices bringing the average of all bond prices to a discount while yielding higher than coupon rates.
The market awaits the 25 years Treasury bond auction that will be held on the 21st of December 2022 while the general expectation is rising yields. Also, the consistent issuance of repurchase agreements since August 2022 while halting reverse repo issuances since March same year is another signal of a tightening policy.
The movement of interest rates was indeterminate from the report, as the overall lending rates were static on a monthly basis but 58bps down on an annual basis.
However, the average rate charged on extended loans was 41bps and 68bps up compared to the month before and a similar period last respectively.
The average interest rate offered on deposits was 30bps down on a monthly basis but 103bps up on an annual basis. The advice by the Monetary Policy Committee was guided by the headline inflation which reached five years high of 4.9% in November 2022. Inflation is driven by unprocessed food prices as well as global fuel prices. Fuel prices are stabilizing globally and have fallen two months in a row domestically.
The prices of food are still rising as demand rises following food insecurity in the region. From the BoT report, the price of rice is breaking new price records since June 2022 and consistently rising. In the midst of rising food inflation, core inflation, which excludes unprocessed food and energy, is at 3% which is the bottom of the inflation target range of 3% to 5%.
Core inflation is considered more relevant in policy making due to its stability and exclusion of volatile elements of food and energy.
Also, core inflation accounts for 76% of the total consumer basket. In October, the central bank sold $20mln into the Interbank Foreign Exchange Market (IFEM) to support imports demand, making the annual sales of the greenback into the IFEM by the central bank reach $175.35mln.
The total amount traded on the IFEM was $45.35mln compared to $47.95mln traded during September 2022. The value of the shilling held ground against the greenback and depreciated by a mere 0.07% and 0.65% on a monthly and yearly basis respectively.
Foreign reserves reached five years low during the month, at $4,637.2mln, enough to cover 4.2 months of imports, above the benchmark of 4 months. While exports rose by 23%, imports rose by 50.5% leading to a current account deficit of $4,989.6mln, from $1,856.9mln a year earlier.
The significant rise in imports results from the rise of global fuel prices and the increased volume of fuel imports. The value of oil products imports has gone up 91% on an annual basis given both price and volume, while oil accounts for the largest part of the import bill. On the equity market, Tanga Cement (TCCL) is still feeling pressure from the delay of the acquisition deal, and the ruling of the Fair Competition Tribunal.
As a result, the price of TCCL fell by 6.8% to TZS 1,100/- during the week, making TCCL the largest loser for the week.
TICL also fell by 5.9% to TZS 160/- as the price moves from the net asset value to a fairer price based on cash flows. We value TICL at a fair value of TZS 130/-.
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Other losers were NMB (2.7%), Maendeleo Bank (2.44%) and Swissport (1.5%). Only TOL and CRDB gained during the week, by 7.7% and 1.32% respectively. Both major indices lost points during the week as more counters lost compared to gainers.
The Tanzania Share Index (TSI) lost 11.68 points to close the week at 3,859.64 points while the All Share Index (DSEI) closed at 1,868.58 points after losing 3.64 points. The total equity turnover went up by 4.12% to TZS 1.19bln as the CRDB counterclaims responsibility for 76% of the turnover.
Next to CRDB are NMB and TPCC which account for 10% and 7% respectively. Local participation still dominates activities on the market as foreign remain, net sellers, while general foreign participation is consistently falling.
During the week, foreign purchases accounted for 2.04% of the total investments while foreign sales accounted for 4.48% of the total divestments. The net foreign outflow amounted to TZS 28.79mln.
