According to a recent report in the Daily News, the Bank of Tanzania (BoT), one of the leaders in the Tanzania banking and financial sector, has called for strict macroeconomic management in order to ease the effects of the global economic crisis.
Professor Benno Ndulu, Governor of the BoT, spoke to Members of Parliament last week saying that the financial stability of the country as well as investor’s confidence in the country’s economy was guaranteed as a result of the USD 2.8 billion that was currently being held in the foreign reserves.
Prof. Ndulu went on to say that another positive aspect that could influence the financial stability of the country was the fact that local area banks were also stocked with a total USD 600 million in foreign reserves.
During a special one-day meeting with the MPs, Prof. Ndulu stressed the importance of financial discipline during the execution of government budget plans in order to combat the global financial crisis and its implications on Tanzania.
Currently, according to Prof. Ndulu, the financial system within the country is stable and secure, with 31 out of 34 commercial banks having at least 17 percent capital adequacy, which is above the required 10 per cent rate.
In addition, Prof. Ndulu went on to tell legislators that the average liquidity ratio was also well above the required level of 20 per cent, currently standing at 42 per cent.
Along with this, the deposits are currently measured at 68 percent, which is below the limit of 80 per cent.
Prof. Ndulu also added the fact that the overall inter-bank settlement system was currently receiving praise as well.
According to Prof. Ndulu, in order to fill in the spaces between foreign direct investments (FDI), the need to strengthen domestic revenue collection from both taxable and non-taxable products was of critical importance.
Prof. Ndulu went on to say that the need to encourage domestic savings through the sales of shares was also important; whether it be through Initial Public Offerings (IPO), local loan syndication or local currency sovereign bonds.
In order to alleviate some of the effects and challenges that will be felt as a result of the global financial crisis, Prof. Ndulu spoke to MPs about the possibility of seeking loans through the issuance of sovereign bonds and about the large amount of foreign reserves that were available in China.
To this end, Prof. Ndulu also spoke about the possibility that was available to Tanzania of performing a currency swap with China, where the currency and economy was still stable and thriving.
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