Last week, the Treasury Registrar (TR),
Mr Lawrence Mafuru, directed all accounting officers of Public and
Statutory Corporations to open revenue and collections accounts at BoT
by the end of Sunday.
Some institutions, including commercial
banks have expressed fear that they would lose billions of shillings in
the new move, claiming that it would create confusion in the financial
markets.
Mr Mafuru, however, strongly defended
the move, pointing out that for so long commercial banks have made huge
profits from government resources. He noted that the move would enable
BoT to have sufficient funds to lend commercial banks at lower interest
rates than those offered when commercial banks offer credit to each
other.
The TR noted further that BoT would also
have sufficient money to loan the government at lower interest rates
than those offered to the government when it (the government) borrows
from the commercial banks.
Mr Mafuru said that consequently, the
move would enable commercial banks to lower interest rates to their
customers as they would charge lower interest rates on loans given to
them by BoT.
He also thrashed claims that the move
would affect circulation of money, saying the move would push up money
circulation as BoT will have sufficient money to loan the government and
commercial banks.
In an interview with the ‘Daily News’,
BoT Governor, Professor Beno Ndulu, said the new directive was good
because initially the government was borrowing its money from commercial
banks that were making huge profits from the money that is owned by the
same government.
However, he insisted, BoT would not be
making minor payments although the money will be deposited in various
BoT accounts. “Commercial banks can transfer that money from BoT because
we don’t give minor payments,” he said.
Prof Ndulu said the new move will save
the government’s money that was being used by commercial banks to do
business while the government was not getting profit out of that money.
Addressing members of the business
community at State House just few days after taking oath of office,
President John Magufuli said commercial banks were making huge profits
from government resources.
By then, Dr Magufuli said, the public
firms had deposited 550bn/- in various commercial banks, the money that
was being used by the banks to make huge profits through treasury bills
and bonds at BoT.
According to him, the government was
doing business on its own money deposited in commercial banks, adding
that some of the money did not generate interest. Several financial
analysts also welcomed the move saying for long commercial banks
preferred to invest in government securities instead of giving loans to
productive sectors.
Mr Mafuru said the central bank would be
intervening in case there were imbalances in money markets. “In a bid
to enhance its fiscal effectiveness and efficiencies in cash management
across its three main pillars of Central Government, Local Authorities
and public corporations and institutions, the government has introduced
some changes in how funds will be managed,” reads the directive in part.
The accounts, according to Mr Mafuru,
will be denominated in the relevant currency of collections or revenue.
The TR further ordered the public institutions to direct all new
collections or revenues including subvention from the government into
these new accounts as soon as the new accounts become operational.
According to Mr Mafuru, the public
institutions and corporations will have to transfer to the new accounts
all the credit balances lying in their current accounts in various
commercial banks in the country.
“Accounting Officers or CEOs should
maintain an operational account at their preferred commercial banks with
a minimum balance to cater for their monthly operational expenses as
per their monthly cash flow projections and ensure that all credit
balances in their operational accounts receive not less than the
prevailing interest rate in the market,” stated the directive.
According to Mr Mafuru, to open an
account at BoT, accounting officers or CEOs should obtain guidance from
the Paymaster General who is Permanent Secretary, Ministry of Finance
and Planning.
Economists who spoke to the ‘Daily News’
yesterday said the move by the TR was commendable. Dr Elinami Minja of
the University of Dar es Salaam, said by opening accounts at BoT, the
government will be able to utilize its funds effectively.
“The government was not getting interest
because it was using its own money during purchasing of treasury bills
and bonds at BoT,” he said.
Professor Honest Ngowi of Mzumbe
University said it was a good move although he said commercial banks
were likely to experience economic crunch if the government will decide
not to bank with them. “They are likely to face economic problems
because public firms were their biggest customers in the course of
running their business,” added the don
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