The government has been advised to take immediate steps to ease Tanzania’s monetary policy as a way of improving liquidity in the economy, the Bank of Africa (BOA) Tanzania has said.
The chairperson of BOA Tanzania board of directors, Ms Mwanaidi Maajar, said the financial sector was facing a number of challenges which should be tackled immediately. The She said such challenges had undermined the ability of banks to lend, heightening potential risks on economic growth targets.
She was speaking at the weekend during the commemorate the bank’s tenth anniversary in Tanzania. “The banking industry’s lending trend has been slowly growing on the back of increasing non-performing loans,” she said, calling upon the government to continue pursuing an inclusive growth by easing the monetary policy as a way of improving liquidity in the economy. This comes at a time when the Bank of Tanzania has however reduced the minimum reserve ratio to 8.0 per cent from 10 per cent during the past few months in order to provide liquidity to banks which will in turn expand their lending base and contribute to the growth of credit to the private sector.
Ms Maajar acknowledges the move but hopes that a further untying of the policy would do much good to the economy.
Monetary policy is the process by which the monetary authority of a country, like the central bank or currency board, controls the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Further goals of a monetary policy are usually to contribute to economic growth and stability, to lower unemployment, and to maintain predictable exchange rates with other currencies. Monetary economics provides insight into how to craft an optimal monetary policy. Since the 1970s, monetary policy has generally been formed separately from fiscal policy.
, which refers to taxation, government spending, and associated borrowing.[