By APOLINARI TAIRO
In Summary
Commercial banks in Tanzania have recorded poor performance caused by reduced liquidity and bad debts.
The banks’ deposits have declined after the loss of government
deposits. The largest private bank, CRDB, for example, posted a loss of
Tsh1.9 billion ($1 million) in the third quarter of this year. Twiga
Bancorp also registered a loss of Tsh18 billion ($8.26 million) over the
past year.
“This poses a systematic risk to the stability of the financial
system; the continuation of Twiga operations in its current capital
position is detrimental to the interest of its depositors,” the Bank of
Tanzania (BoT) said in a statement.
The central bank, in its monthly report for October notes that
the decrease in money supply was largely reflected in net foreign
exchange holdings of the BoT and commercial banks.
President John Magufuli has now directed the central bank to
stop supporting under-performing lenders, including Twiga Bancorp, which
is state-owned, saying they pose a risk to the economy.
Government cuts support
“These banks are violating regulations,” he said. “Don’t
hesitate to take action, even on those that belong to government. They
wait for government bailouts. If they can’t survive, let them die.”
Dr Magufuli also directed the BoT to monitor mobile-money
transfers closely to ensure the government receives its share of revenue
from the about Tsh5.5 trillion ($2.5 billion) transacted monthly. He
also asked the central bank to scrutinise foreign-exchange bureaus to
curtail money laundering.
The International Monetary Fund has called on Tanzania to
consider securing new loans — on both concessional and non-concessional
terms — to finance the country’s needs.
A team from the IMF on a 10-day visit to Tanzania from late
October held discussions with senior government officials on how to
address these macroeconomic challenges. The team was led by senior IMF
economist Mauricio Villafuerte.
“In particular, it noted the importance of mobilising external
financing to step up the pace of planned capital spending,” a statement
from the team reads.
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