bot bank of tanzania 2016 2017 monetary policyBank of Tanzania

The Bank of Tanzania (BOT) is the central bank of Tanzania, established under the Bank of Tanzania Act of 1965.

In 1995, the government decided that the central bank had too many responsibilities, and was thus hindering its other objectives.

As a result, the government introduced the Bank of Tanzania Act of 1995, which gave the bank the single objective of monetary policy.

According to the Act “The primary objective of the Bank shall be to formulate, define and implement monetary policy, directed to the economic objective of maintaining domestic price stability, conducive to a balanced and sustainable growth of the national economy of Tanzania”.

Price stability implies that the rate of inflation, which is measured by the rate of increase of the national consumer price index, has to be kept as low as possible, optimally within a longer-term average range of 0–5%.

The BOT has the sole responsibility of issuing notes and coins in Tanzania to directly influence the amount of currency in circulation outside banks and thereby providing the economy with sufficient, but if possible, non-inflationary liquidity.

In June 2016, the BOT issued its monetary policy targets for 2016–2017 that are in line with the macroeconomic objectives of the Government.

Tanzania’s Government aims at achieving 7.3% real GDP growth in 2016–2017 while maintaining single digit inflation. To support such growth, BOT’s 2016–2017 monetary policy targets include 20.5% annual growth of private sector credit, up to 14.8% annual growth of M3 (broad money supply), up to 13% annual growth of average reserve money, and maintaining adequate levels of gross official reserves.