Bank of Tanzania (BoT) has lately cut down on discount rate by 4 percent and this is expected to improve the credit sector in the private sector.
The current discount rate is 12 percent and it is believed the lending rates too will be reduced by commercial banks. This will further improve in money supply to the national economy.
Since John Magufuli became president in November 2105 this is a major police stance of the central bank.
To improve the money supply the government ordered last year ministries, public corporations and local government authorities to transfer deposited cash in banks to the BoT and this resulted with mopping off commercial banks with Sh600 billion.
Professor Delphin Rwegasira from the University of Dar es Salaam’s economics department said, “The central bank is a last-resort lender and now it’s calling the commercial banks for less expensive credit.”
The professor further added that the new move is a signal of easing monetary policy and this will boost up the money supply as well as credit expansion in the country. It will also encourage the lowering of lending rates by commercial banks.
The private sector in Tanzania has been long crying to easing the tight policy.
An executive from a commercial bank said the impact will not be seen immediately to customers but it will definitely improve the liquidity as well help in reducing the cost of funding by them.
The domestic credit outstanding last year was Sh20.89 trillion.