The Monetary Policy Committee (MPC) held its 28th Meeting on October 27, 2023, to review the implementation of monetary policy and assess the state of the economy.
In light of the current economic conditions, the MPC decided to maintain the less accommodative monetary policy. This policy will continue to be closely coordinated with fiscal and structural policies, and monetary measures will be implemented to achieve the targets set under the Extended Credit Facility Program for the quarter ending December 2023.
Successful Monetary Policy:
The less accommodative monetary policy implemented in August, September, and October 2023 effectively maintained liquidity at appropriate levels. This policy, combined with supportive fiscal and structural measures, helped control inflation, support economic activities, and maintain financial stability.
Global Economic Environment:
The global economic growth remained weak due to factors such as monetary policy tightening, geopolitical tensions, and high oil prices. While inflation eased in many countries, it still exceeded targets, leading central banks to continue monetary policy tightening.
Domestic Economic Performance:
The domestic economy saw satisfactory growth in the first and second quarters of 2023, with a projected annual growth rate of 5.3 percent. Inflation trended downwards, largely due to declining food prices. Money supply (M3) and credit to the private sector grew significantly, driven by an improved business environment and less accommodative monetary policy.
Government Budget Performance:
Government revenue was strong during the first quarter of 2023/24, and expenditure aligned with available resources.
Current Account Deficit:
The current account deficit narrowed year-on-year, but remained high due to increased commodity prices in the world market. The deficit is expected to gradually improve, driven by earnings from tourism, gold, and traditional export crops.
Foreign Exchange Reserves:
Foreign exchange reserves remained above $5 billion, providing adequate import cover. The banking sector remained well-capitalized and profitable, with reduced non-performing loans.
Improved Foreign Currency Situation:
Shortages of foreign currency were gradually improving due to earnings from tourism, minerals, manufacturing, and cash crops. The central bank's efforts to address foreign currency denominated loans extended to importers also contributed to the improvement.
Tanzania's economic performance in 2023 has been positive, with growth, inflation control, and overall economic stability being key features of its performance. The government's fiscal discipline and effective management of the financial sector have also contributed to these positive economic outcomes.
Growth:
Tanzania's economy showed satisfactory growth in the first and second quarters of 2023, with growth rates of 5.4 percent and 5.2 percent, respectively. The annual growth rate is projected to reach 5.3 percent in 2023. This indicates that the Tanzanian economy has been performing well and maintaining a positive growth trajectory.
Inflation:
Inflation in Tanzania trended downward, particularly since June 2023, reaching 3.3 percent in September 2023. This decrease is associated with declining food prices. This suggests that the country has been successful in managing inflationary pressures.
Money Supply and Credit:
Money supply (M3) grew significantly, surpassing the target, driven by strong private sector credit growth. Credit to the private sector also increased, primarily in agricultural activities. This demonstrates robust lending activity and increased business investment.
Government Budget Performance:
Government revenue during the first quarter of 2023/24 was strong, and expenditures were aligned with available resources. This suggests effective fiscal management and budget discipline.
Current Account Deficit:
While the current account deficit narrowed year-on-year, it remained high due to increased commodity prices in the world market. However, there is an expectation of gradual improvement in the deficit, driven by earnings from tourism, gold, and traditional export crops.
Foreign Exchange Reserves:
Tanzania's foreign exchange reserves remained above $5 billion, indicating stability and the ability to cover import requirements.
Banking Sector:
The banking sector in Tanzania was reported to be adequately capitalized, liquid, and profitable. Non-performing loans decreased significantly, which should encourage banks to increase lending to the private sector.
Foreign Currency Situation:
The reported shortage of foreign currency was gradually improving, driven by earnings from various sectors and measures taken by the central bank and the government.