In November 2024, the Bank of Tanzania maintained a cautious yet supportive monetary policy to ensure economic stability. With a 7-day Interbank Cash Market (IBCM) rate averaging 8.29%, slightly above the Central Bank Rate (CBR) of 6%, the policy aimed to balance liquidity amid high seasonal cash demands for crop purchases. The extended broad money supply (M3) grew by 13.6%, driven by foreign asset growth, while private sector credit expanded by 15.3%, highlighting strong economic activity, particularly in agriculture and SME financing. This measured approach reflects the Bank’s commitment to fostering sustainable growth and financial stability.

Policy Implementation

• The Bank of Tanzania maintained a 7-day Interbank Cash Market (IBCM) rate within a corridor of ±200 basis points around the Central Bank Rate (CBR), set at 6%.
• The 7-day IBCM rate averaged 8.29%, slightly above the CBR corridor, due to low liquidity in the banking sector influenced by seasonal cash demands for crop purchases.

Liquidity Management

• Reverse repurchase agreements (reverse repos) decreased to TZS 2,578.5 billion, from TZS 2,887.9 billion in October 2024.
• Lombard facility usage also declined to TZS 3,870.4 billion from TZS 5,601.1 billion in October.

Money Supply

• Extended broad money supply (M3) grew by 13.6%, driven by foreign asset increases in the banking sector.
• Private sector credit expanded by 15.3%, a slight deceleration from 17% in October and 18.3% in November 2023.

Figures

1. Interest Rates:
   • IBCM 7-day rate: Averaged 8.29% in November 2024.
   • Central Bank Rate (CBR): Set at 6%.
2. Monetary Transactions:
   • Reverse repos: TZS 2,578.5 billion.
   • Lombard facility: TZS 3,870.4 billion.
3. Money Supply Components:
   • M3: TZS 49,510.7 billion, growing at 13.6% annually.
   • Private Sector Credit: Grew at 15.3%.
4. Credit Allocation:
   • Significant growth in agriculture (41.9%), personal loans (19.2%), and building & construction (16.6%).

The monetary policy report highlights the Bank of Tanzania's actions and the state of monetary indicators in November 2024, offering insights into the economic environment

Policy Stance

1. Monetary Tightening:
   • The slightly elevated 7-day Interbank Cash Market (IBCM) rate (8.29%) compared to the Central Bank Rate (CBR) (6%) suggests tightened liquidity conditions. This reflects the seasonal cash demand for crop purchases, especially after a bumper harvest.
2. Controlled Liquidity Management:
   • The use of reverse repos and the Lombard facility to manage liquidity declined, indicating an improvement in banking sector liquidity.

Economic Activity Reflected Through Money Supply

1. Money Supply Growth (M3):
   • The 13.6% growth in M3 is healthy and suggests adequate liquidity in the economy to support economic activities.
   • The growth was driven primarily by foreign currency deposits, reflecting the importance of foreign inflows.
2. Private Sector Credit Growth:
   • A 15.3% expansion in private-sector credit shows strong credit demand and confidence in economic activities. However, the slight decline from previous months (17% in October) hints at moderating credit expansion.
3. Sectoral Focus:
   • The highest credit growth in agriculture (41.9%) signals robust demand for financing in the sector, likely tied to crop purchases and investment in production.
   • Personal loans dominate total credit (38.7%), reflecting their importance in consumption and SME financing.

Key Implications

1. Economic Resilience:
   • Despite seasonal liquidity pressures, the monetary system is effectively balanced, ensuring adequate support for economic activities without overheating.
2. Agriculture as a Driver:
   • The strong focus on agriculture financing suggests the sector's critical role in the economy, especially during harvest periods.
3. Sustainable Credit Growth:
   • Moderate private sector credit growth ensures economic expansion without excessive risks of inflation or non-performing loans.
4. Foreign Influence:
   • The prominence of foreign currency deposits highlights Tanzania's reliance on international trade, tourism, and remittances for liquidity.

Policy Outlook

The report suggests the Bank of Tanzania is maintaining a cautious yet supportive monetary stance, balancing liquidity to promote growth while containing inflationary pressures. The focus on agriculture and personal loans supports essential sectors of the economy.