The central bank of Tanzania (BOT) has addressed a circular to banks, revising its discount rates downwards to 7% from 9%, effective from Monday 27th August 2018.
The discount rate is applicable to banks borrowing from the central bank as a lender of last resort.
“This review reflects the continued need to promote credit growth for supporting economic activities,” reads the circular.
BOT lastly revised downwards the discount rate from 12% to 9% in August 2017. The discount was meant to be passed on to the customers by lowering commercial banks’ lending rates.
Tanzania Interest Rates and Credit Activity
In its latest Monthly Economic Review dated July 2018, BOT indicates that overall interest rates charged on loans and offered to deposits by Tanzanian banks decreased to an average rate of 17.34% in June 2018, from 17.53% in May 2018.
Total domestic credit by the banking system, comprising of credit extended to the government and private sector, grew by 1.5% during the year to June 2018.
This represents a recovery from a contraction of 3.9% and 7.3% in the corresponding period in 2017 and year to May 2018, respectively.
The expansion was driven by the continued pick up of growth of credit to the private sector, which recorded year-on-year growth of 4.0% in June 2018 compared with 1.3 % in June 2017 and 2.7% in May 2018.