Interest rates charged on loans and offered on deposits by banks has remained unchanged from the recent months.
According to the Bank of Tanzania (BoT) monthly economic review for August, the overall and one-year lending interest rates were around 17 per cent, while negotiated lending rate to prime customers was 14 per cent.
The overall and one-year time deposits interest rates averaged 7.35 per cent and 9.12 per cent, respectively. Negotiated deposit rate stabilized at around 9.17 per cent.
However, the ongoing implementation of accommodative monetary policy and the recent policy measures taken by the BoT to promote credit to the private sector and lower interest rates are expected to provide impetus to the reduction of lending rates.
The BoT sustained implementation of liquidity expansion in July this year to facilitate fast recovery of economic activities, particularly those adversely affected by the pandemic.
As a result of the expansionary monetary policy stance, growth of extended broad money supply increased to 11 per cent compared with 8.9 per cent in the year ending July last year.
The growth of broad money supply improved to 12.1 per cent from 10.6 per cent last year.
Growth of domestic credit remained positive, expanding at 8.9 per cent in July this year compared with 6 per cent in the corresponding period last year.
The credit extended to the private sector grew by 4.1 per cent albeit still lower than the 5.5 per cent recorded in July last year.
Much of the credit was directed to small and medium enterprises, commonly referred to as personal loans, followed by mining and quarrying, and trade.
During the period under review, personal activities accounted for the largest share of credit, followed by trade and manufacturing.
Private sector credit growth is projected at 11.6 per cent in 2021/22. The demand for credit is expected to increase owing to policy measures taken by the BoT in July this year to reduce the lending rate and promote credit to the private sector.
The ongoing implementation of measures to improve the business environment and recovery of the global economy will add impetus to private sector growth momentum.