Dar es Salaam. Tanzania’s economy remains buoyant, thanks to the stability of major macroeconomic indicators, according to a Bank of Tanzania (BoT) report.
Inflation remained in single digits, while money supply in the economy rose during the year ending May 2019, the BoT says in its Monthly Economic Review (MER) for June 2019.
Another notable development during the period was the rise in the importation of capital goods for ongoing mega infrastructure projects.
This is in line with President John Magufuli’s endeavour to build world-class infrastructure, which is expected to greatly reduce the cost of doing business in the country. The projects include the 2,100-megawatt Stiegler’s Gorge hydroelectricity station and standard gauge railway.
With the government embarking on various measures to improve liquidity in the economy, the cost of borrowing also went down, BoT figures show, while foods prices were generally stable.
These positives outweighed the impact of a fall in exports of goods and services, as well as shrinking foreign exchange reserves and increased national debt, among others.
The review shows that the annual inflation rate remained at 3.5 per cent, which was below the targeted five per cent, and this helped to maintain the stability of prices of goods and services.
Tanzania is also currently food sufficient, although increased demand for maize in neighbouring countries is putting pressure on prices of the commodity in the domestic market.
According to the review, the extended broad money supply growth jumped to 5.8 per cent in May this year from 4.8 per cent recorded during the year ended in May 2018.
The improvement of broad money supply was a result of the growth of domestic credit to both the government and private sector. The recovery of the domestic credit market indicates increased lending to the private sector.
The BoT review shows that credit to the private sector grew by nine per cent from 2.9 per cent, indicating borrowers’ increased confidence in the banking industry.
This was experienced as individual banks were lowering their interest rates as part of implementing an accommodative monetary policy by the BoT. The review shows that the average interest rate dropped to 17.17 per cent from 17.53 per cent, thus stimulating borrowers’ appetite.
A decrease was also recorded in gross official reserves, which amounted to $4.3 billion, covering about 4.2 months of projected imports of goods and services.
However, this was above the country’s benchmark of not less than 4.0 months, but below the East African Community’s 4.5 months.
Another indicator which fell slightly during the period under review was exports of goods and services, which dropped to $8,514.4 million from $8,578.7 million.
Exports of traditional crops declined to $533.9 million from $1,140.3 million, manifested in all traditional crops, except coffee and cotton.
However, non-traditional goods exports, which account for 78.9 per cent of goods exports, increased to $3,499.2 million from $3,142.7 million, largely driven by gold exports.
The value of gold—which accounted for 38.6 per cent and 48.9 per cent of total goods and non-traditional exports, respectively—grew by 15.4 per cent to $1,716.7 million on account of increased volume.
Domestic revenue realised by the government in May 2019 amounted to Sh1,28 trillion from Sh1.30 trillion.
Out of the collections, Sh1.2 trillion was collected by the central government and Sh50.4 billion was local government authorities’ collections from own sources.
Tax collections amounted to Sh1.1 trillion, accounting for 87.4 per cent of domestic revenue.
In May 2019, expenditure amounted to Sh1.8 trillion, of which recurrent expenditure was Sh1.06 trillion and development expenditure was Sh741.7 billion.
The level of external debt stock, comprising public and private sector debt, amounted to $21.6 billion, having increased by $1.07 billion from May 2018.
The increase was mainly on account of new disbursements, with recent sustainability reports indicating that Tanzania’s debt is still stable.