Tanzania: Apex bank cuts discount rate to 12 percent

Mar 07, 2017

The is aimed at stimulating lending and the economic growth of the country.

For the first time since 2013, the Central Bank of Tanzania has cut its discount rate to 12 percent from 16 percent in order to spur lending and boost economic growth in the nation. The development which was announced in a circular issued by the central bank to commercial banks came into
effect
on Monday. The circular states that "the discount rate which is applicable to banks borrowing from the Bank of Tanzania as a lender of last resort will also be used to discount Treasury securities." Speaking about the cut, Donath Olomi, Chief Executive of the Dar es Salaam-based Institute of Management and Entrepreneurship Development, said the cut is designed to facilitate growth by encouraging banks to lend rather than investing in Treasuries and government bonds. "The government also needs to issue a signal to boost investor confidence, which has fallen because of various actions by public officials that are seen to have undermined the sanctity of private ownership," he said. In 2016, lending to the private sector grew by 2.5 percent after expanding 26.8 percent in 2015. However, following a hike in non-performing loans, new lending to the agriculture, construction, transport and communication sectors was dramatically curtailed.