Tanzania Central Bank Maintains Key Lending Rate at 6% for Q1
TLDR
- The Bank of Tanzania (BoT) has kept its central bank rate (CBR) unchanged at 6% for a fourth consecutive quarter
- The aim is to maintain financial market stability, support inflation control, and boost economic growth
- The decision aligns with the BoT’s target to keep inflation below 5% and achieve a projected GDP growth rate of 5.7% by the end of Q1 2025
The Bank of Tanzania (BoT) has kept its central bank rate (CBR) unchanged at 6% for a fourth consecutive quarter, aiming to maintain financial market stability, support inflation control, and boost economic growth. The decision aligns with the BoT’s target to keep inflation below 5% and achieve a projected GDP growth rate of 5.7% by the end of Q1 2025, according to Governor Emmanuel Tutuba.
The CBR, introduced in January 2024, replaced a money supply-based policy to address volatility in interbank lending rates. Since its introduction, the rate has been adjusted once, rising from 5.5% to 6% in April 2024. Tanzania’s CBR remains among the lowest in East Africa, with other countries like Kenya (12.75%) and Uganda (10%) grappling with higher rates.
The BoT projects a stable Tanzanian shilling in Q1, supported by $5.5 billion in foreign reserves, enough to cover 4.5 months of imports. Efforts include bolstering gold reserves and enforcing domestic currency use to reduce forex demand.
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Key Takeaways
Tanzania’s decision to maintain its 6% CBR reflects a cautious yet stable monetary policy approach, setting it apart in a region where most East African Community (EAC) members contend with double-digit lending rates. The policy stability supports economic growth while keeping inflation within the BoT’s 5% benchmark. By prioritizing stable foreign exchange reserves and strengthening gold reserves, Tanzania is enhancing its economic resilience against external shocks. The shilling’s stability is further bolstered by strict enforcement of local currency transactions, limiting unnecessary forex demand. With an interbank rate at 7.98% as of January 7, Tanzania continues to balance liquidity and lending costs effectively.
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