According to the Bank of Tanzania (BoT) Monetary Policy Statement mid year review, the private sector credit grew by 27.2 per cent, compared to 25.7 per cent projected during the period.
“Government borrowing was below the projected ceiling by 427.7bn/-, mainly due to strong revenue collection and the government's efforts to keep recurrent expenditure on check,” stated the report.
However, credit extended by banks to the private sector was dominated by personal loans which was 20.9 per cent, followed by trade, agriculture and manufacturing activities
The largest share of personal loans in the economy is a sign of high consumptions, increasing aggregate demand that call for more goods and services.
Commenting on the Central Bank's report, the Confederation of Tanzania Industries (CTI) Chairman, Mr Felix Mosha, said in telephone interview yesterday that having largest share of credits directed to individuals than to the productive sectors is economically unhealthy.
“The situation where the largest part of loans goes to agriculture that employs about 70 per cent of the population, could be a catalyst for economic growth,” he said.
He said personal loans are supposed to come at the end after directing substantial amount to the Small and Medium Scale (SMEs) and the manufacturing sector to increase the supply side of the economy.
The Tanzania Private Sector Foundation (TPSF) has been impressed by increased credit to the private sector, a sign of the improved business environment that will impact on the growth of economic activities.
Credit to the private sector for example in the BoT monthly economic review for December last year, grew by 30.3 per cent compared to 19.2 per cent growth recorded in November 2010 despite the slowdown in growth of monetary aggregates.