Govt directive will not cripple banking sector - Dr Kimei

ABDUEL ELINAZA

 

BANKS have said they support government directive for public institutions to transfer their revenue collection accounts to Central Bank, saying it will not cripple the banking industry daily operations.

The government, last month, directed ministries, public corporations and local government authorities to immediately transfer their levy and revenue collections accounts to Bank of Tanzania (BoT) estimated at 500bn/-.

The move, instead, will enable banks to strengthen their services as the private sector increases their output, while the government better manages its collection accounts scattered in various banks. CRDB Bank Managing Director Dr Charles Kimei said they support the directive since it was a better move on the government to properly manage their funds and money in circulation.

“The current situation makes it difficult for the government to follow-up their revenue funds of its own institutions,” Dr Kimei, who is also the chairman of Tanzania Bankers Association, told reporters.

Dr Kimei said the industry may receive a normal short-term shock associated with the announcement as it is a new procedure in the market. The same system is practiced globally. Regionally is implemented in Uganda and Rwanda, with the same end goal of improving management of public funds.

Apart from that it will also assist on controlling money in circulation and inflation, he said adding it will also reduce the issuance of Treasury Bills to mop-out excess liquidity in the system since most funds are in BoT’s vaults.

“We, as macroeconomists, believe that there is no any effect on the directive, apart from normal shocks of a new directive in the economy,” Mr Kimei said.

The issue also would help to strengthen banking industry on serving private sector instead of crowding it out, which analysts say the banks were doing that for quite some time as they concentrated on buying government securities.

But other economists doubted that the move might disequilibrium the banking industry by reducing available cash that the banks need to lend, especially to private sector.

An economist Dr Hildebrand Shayo said he was worried the move might increase price of loans to private sector to lead to decreasing industrial output, retrenchment, for both banks and factories, and money in circulation.

Dar es Salaam Stock Exchange Chief Executive Officer Mr Moremi Marwa said the directive has no negative impact on the bourse operations since the funds in question are not from their stock players.

“On capital markets there is no direct effect. The effect could have come if the market players—pension or insurance—were touched by the directive. “There is no effect on the bourse as far as the directive is concerned…if banks say there is no effect then it won’t affect the exchange as well,” Mr Marwa told Daily News.

But Dr Kimei said banks would eventually not be affected as they will continue to collect on behalf of the government and remit the fund to BoT, while institutions will retain working balance at their respective accounts depending on their daily operation requirements.

Tanzania has 55 banks, where commercial banks are slightly over 30. Others are community banks, microfinance banks and development banks.