By JAMES ANYANZWA

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The Bank of Tanzania’s (BoT) Monetary Policy Committee (MPC) has decided to keep the benchmark lending rate unchanged at six percent, for the next three months to September 30, to boost consumer and business spending and sustain the momentum of economic recovery.

The BoT joins Kenya, Uganda and Rwandan central banks that are cautiously loosening their monetary policy positions to strengthen consumer and business spending powers that have been significantly eroded by high cost of loans and high cost of goods and services which are adversely impacting economic growth rates in the region.

BoT, which held its quarterly meeting on Wednesday, said implementation of monetary policy in the previous two quarters has successfully anchored inflation expectations to below the target of five percent and that the Tanzanian economy is expected to continue growing strongly, food supply to be adequate and exchange rate pressures to moderate owing to increased foreign exchange inflows from tourism, gold, as well as cash crops and food.

“Domestic economic conditions have improved significantly in the recent past, at the back of implementation of policies and reforms for fostering high economic growth. The outlook also is positive, driven by expected favourable weather for agriculture, adequate power supply, improvement in infrastructure (especially railways, roads and ports), as well as policies and reform programmes,” said BoT Governor Emmanuel Tutuba in a statement on Wednesday.

Read: Tanzania raises policy rate to 6pc to tame inflation

The committee forecast the economy to grow by five percent and 5.4 percent in the first and second quarter of this year (2024) respectively.

Kenya and Uganda held their policy rates steady in June following Rwanda, which decided to reduce the policy rate by 50 basis points on May 29.

The Bank of Uganda’s MPC maintained the central bank rate (CBR) at 10.25 percent on June 4 saying domestic inflation has risen moderately, lower than previously projected largely due to the exchange rate stabilising with a bias towards appreciation since March 2024.

In Kenya, the MPC met on June 5, 2024 and decided to retain the policy rate at 13 percent, arguing its previous measures have lowered overall inflation to the mid-point of the target range, stabilised the exchange rate and anchored inflationary expectations.

The National Bank of Rwanda (NBR) on May 29 Rwanda reduced the CBR by 50 basis points to seven percent from 7.5 percent, attributing the policy shift to declining inflation and the slowing pace of exchange rate depreciation.

The Bank of Tanzania, however, increased the policy rate from 5.5 percent to 6 percent on April 3. Tanzanian economy grew by 5.1 percent in 2023 compared to 4.7 percent in 2022 buoyed by improved activity in key sectors such as the agriculture, mining, quarrying, construction, and financial intermediation. Tourism,, also contributed to the strong growth.

Similarly, the Zanzibar economy expanded by 7.4 percent in 2023, compared to 6.8 percent in 2022, driven largely by tourism activities, food services, construction, and real estate.

Tanzania’s inflation remained below the target of 5 percent and consistent with the East Africa Community (EAC) and Southern African Development Community (SADC) convergence criteria.

Read: EA states raise key rates to tame inflation

In April and May 2024, inflation was at three percent and 3.1 percent, respectively largely as a result of low food inflation complemented by prudent monetary and fiscal policies.

Tanzania’s foreign exchange reserves remained adequate, above $ 5 billion at the end of June 2024, sufficient to cover more than 4 months of projected imports, while foreign currency liquidity improved slightly towards the end of June 2024, attributable to a gradual increase in foreign flows from tobacco, gold, and tourism.

“There is anticipation of a further increase in foreign exchange inflows from tourism, mining, traditional exports, and export of food to neighbouring countries,” BoT said.

In January this year, the BoT set its main interest rate at 5.5 percent after adopting an interest rate based monetary policy framework in a bid to contain inflation within its target and boost economic growth.

BoT’s MPC met on January 18, 2024, the first-ever meeting in which the banking regulator began implementing monetary policy using interest rates.

The MPC noted that BoT’s transition from monetary targeting to an interest rate (or price) based monetary policy framework is a significant milestone in monetary policy transformation in the country.