BoT committee: The economy continues to perform satisfactorily

The Monetary Policy Committee (MPC) of the Bank of Tanzania (BoT) has said the economy continues to perform satisfactorily despite spillover effects of the novel COVID-19 crisis.

The team which is part of the Bank of Tanzania’s board, chaired by the governor, said in a statement that the economy will grow at the projected 5.5 per cent in 2020.

The central bank’s MPC is also satisfied that the macroeconomic indicators have continued to remain stable and within agreed regional ranges.

“Inflation has remained low, averaging 3.3 per cent in July-August 2020, and will range between 3-5 per cent in 2020/21, as earlier projected,” said Prof. Florens Luoga, the BoT Governor.

According to BoT Chief, the projection is underpinned by adequate domestic food supply, stable exchange rate, moderate oil prices and prudent monetary and fiscal policies.

Foreign exchange reserves remained adequate, above $5 billion and covering about 6 months of import, and the current account deficit narrowed in the year ending August 2020, owing to increase in exports, particularly gold and cashew nuts.

The central bank MPC pointed out that the level of liquidity in the economy remained adequate and interest rates declined, albeit slightly.

Private sector credit growth was strong notwithstanding challenges on global supply chains attributable to COVID-19.

BoT shows that the annual growth of private sector credit was 6.8 per cent in August 2020, higher than 5.5 per cent in June and July 2020.

The MPC maintained the view that private sector credit growth will grow by 11.6 per cent in 2020/21, as projected, given the supportive monetary condition and resumption of economic activities.

The banking sector remained sound, stable and resilient with enough liquidity and adequate capital to support economic activities.

The MPC observed that external sector developments were becoming increasingly stable as more countries were abandoning the COVID-19 lockdowns and opening up global economic interactions.

The performance of the global economy was sluggish in the first half of 2020, attributed to contraction in output resulting from a near shutdown of many economic activities in most of advanced economies since the beginning of 2020 in pursuit of coronavirus containment measures.

The global growth is projected to improve in the remainder of 2020, as most countries progressively lift restrictions associated with the pandemic.

However, the MPC noted with satisfaction that government fiscal policy execution was on track.

Expenditure remained streamlined towards development projects and enhanced revenue mobilisation.
The MPC exhorted the BoT to continue to implement accommodative monetary policy in a low inflationary environment in the remainder of 2020 in order to further stimulate growth of the economy and safeguard the stability of the financial sector.