The Bank of Tanzania (BoT) will to continue with gradual reduction of liquidity during September and October as part of its efforts to tame rising inflationary pressures, while safeguarding economic activities.
This follows Monetary Policy Committee (MPC) approval following its 222nd meeting on 23 rd September 2022, to assess the conduct of monetary policy in July and August 2022 and review performance of the economy.
According to a statement issued at the weekend, the MPC was satisfied with the conduct of monetary policy and noted that the performance provided scope for promoting economic activities, considering the challenging environment of rising inflationary pressures from high commodity prices in the world market.
As regards the performance of the economy, the MPC observed that it was satisfactory in line with projections, but was still facing global challenges of weak growth, high commodity prices, high inflation, tight financial conditions and recurrence of COVID-19 in some countries.
“In the first quarter of 2022, the economy grew by 5.4 per cent in Mainland Tanzania, in line with the projection of 4.7 per cent for the entire year. The performance was mostly contributed by agriculture, construction, manufacturing, and mining,” the statement said.
It noted that the Zanzibar economy grew by 5.1 per cent, compared with the projection of 5.4 per cent for 2022, owing to improvement in activities in the hospitality industry.
“Therefore, there is a high likelihood of realizing the growth projections for 2022,” the statement said.
As for inflation, the MPC observed that it sustained a gradual increase and remained at single digit with inflation in Mainland Tanzania, edging up to 4.6 percent in August 2022 from 3.6 percent in March 2022, below the target of 5.4 percent for 2022/23.
A similar trend of inflation was observed in Zanzibar, where it reached 5.4 percent from 3.5 percent, compared with the target of 5 percent attributable to rising commodity prices in the world market, particularly food and oil prices.
“The MPC expects inflation to remain consistent with the targets throughout the fiscal year, due to the recent easing of oil prices in the world market, expected stability of the exchange rates, and moderation in food prices,” the statement said.
Meanwhile, Money supply and private sector credit growth continued to increase associated with monetary and fiscal policy accommodation, coupled with improved business environment and recovery of private sector activities from the effects of COVID-19.
Private sector credit growth improved significantly in July and August, reaching around 20 per cent, compared with the projection of 10.7 per cent for 2022/23.