According to a recent report in the Citizen, senior officials from the Bank of Tanzania (BoT) and the countries Ministry of finance have met in order to discuss a plan to rescue Tanzania banking sector from the effects of the current global financial crisis.
This meeting follows an earlier promise by the minister for Finance and Economic Affairs, Mr. Mustafa Mkulo, that the government has been considering a stimulus package to support the banks against the economic crisis.
The Citizen reported that a high-ranking government official confirmed that the government had decided to begin seriously focusing its attention on this problem after having received various reports from several local banks indicating that their trade finance borrowers were experiencing troubles in the repayment their loans.
Among these local banks is the CRDB Bank, who has recently released a statement in attempting to alleviate some of the fears of the pending credit crisis by saying that it was not anticipating any losses as the result of its expertise in managing risks in the financing of the countries agricultural sector.
According to the banks statement, “the CRDB Bank would like to assure all the shareholders, customers and other stakeholders that the Bank is in a healthy and sound financial position.”
At the same time, the CRDB bank has also allowed for the fact that the recent dramatic decline in crop prices on the global market had had a negative effect on some of its clientele; however, this situation was not particular to its institution.
In addition, the bank indicated that the overall situation had, in fact, improved over the last month as crop prices had begun to improve, which has allowed the clients whose loans had stalled to begin repaying their debts.
Nevertheless, in spite of this improvement, the World Bank Group as well as other partner institutions have joined the G-20 countries in order to begin dealing with the issue of financing trade in poor countries through the support of up to USD 50 billion in trade using the Global Trade Liquidity Program.
The Citizen has reported that Tanzania will begin receiving benefits from this initiative this month with funding being distributed via the Stanbic Bank as well as Standard Chartered.
“We were chosen because of our footprint, financial strength and expertise in this field,” said the head of marketing and corporate affairs for Stanbic Bank Tanzania in the Citizen report, “This is not a stimulus package and nor is it to support us [rather] Standard Bank will get USD 400 million from the IFC to boost trade in Africa.”
In addition, the bank assured that it would not experience any losses as a result of the loans to crop traders because the loans had been secured through a variety of properties.
“CRDB Bank wants the public and stakeholders to know that clients are now selling their stocks at the prevailing market prices, which are better, compared to the November 2008 -March 2009 price levels,” said the bank according to the Citizen, “Most clients are reducing their outstanding loans as compared to the March 2009 position and will be in a position to repay larger portions, if not all, of their debts.”
In spite of the fact that in February, the BoT Governor, Prof. Benno Ndulu, was reported as having said that the central bank was not yet prepared to announce a stimulus package so as to discourage financially sound banks from seeking its help, donors have pledged to contribute funds to a rescue plan.
“We understand there is a rescue package underway for banks that might lose money due to the financial crisis,” said the World Bank country director John McIntire last month, “We want to assure the Government that we will be in a position to help if called upon to do so.”