Tanzania to continue implementing less accommodative monetary policy to safeguard growth of the economy

Tanzania will continue to implementing a less accommodative monetary policy stance in January and February this year as part of efforts to control inflationary pressures, while safeguarding growth of economic activities.

According to the latest Monetary Policy Committee (MPC) statement released by the Bank of Tanzania (BoT), the policy stance is also consistent with the BoT strategies of achieving monetary policy targets set forth under the IMF Extended Credit Facility (ECF) program.

“The MPC is optimistic that, with inflation staying below the target of 5.4 percent, the monetary policy will facilitate high private sector credit growth, thereby improving output performance,” the statement said.

The MPC noted that the implementation of monetary policy in November and December 2022 was successful.

It noted that liquidity in banks was maintained at adequate levels with private sector credit growth being high at around 21 percent, and monetary targets set forth under the ECF) being achieved.

In respect of the recent performance of the economy, the MPC observed that, global economic challenges continued to undermine activities and exert pressures on inflation in the country, but to a lesser extent than before as the year rolled out.

“This was due to easing of supply-chain disruptions and commodity prices in the world market, as well as interventions made by countries to cushion economies from adverse impact of the war in Ukraine and COVID-19 pandemic,” the statement added.

The statement noted that the economy in Mainland Tanzania and Zanzibar performed satisfactorily in the first three quarters of 2022 with the Mainland Tanzania growing at an averaged 5.2 percent compared with 4.8 percent in similar period in 2021, driven by agriculture, construction and manufacturing activities.

In Zanzibar, the growth was 5.3 percent compared with 5.8 percent, mostly contributed by accommodation and food services, construction, manufacturing and real estate.

“Based on this performance and economic indicators in quarter four, the MPC was optimistic that growth projections for 2022 will be realized. In 2023, output growth is projected to be higher than in the preceding year, reinforced by strong growth of credit to the private sector, public investment, rebound in tourism, improvement in business climate, and supportive fiscal and monetary policies,” the statement said,

The statement also noted that the growth of money supply was broadly in line with the target with money supply (M3) growing by 11.6 percent in December 2022, consistent with the target of 10.3 percent for 2022/23, mostly driven by private sector credit growth.

The external sector however remained sustainable, albeit weakened by the global shocks, which led to widening of the current account deficit.

“Despite the widening of current account deficit, foreign reserves remained adequate at about 5.2 billion at the end of December 2022, sufficient to cover 4.7 months of imports. The import cover was in line with the country benchmark and EAC convergence criteria of at least 4 and 4.5 months, respectively,” the statement said.