Tight liquidity ‘caused non-performing loans’

DAILY NEWS Reporter

THE tight liquidity currently being experienced by the majority of Tanzanians is a result of non-performing loans by commercial banks worth 1.43 trillion/- and has nothing to do with the Revenue Collection Accounts of the Bank of Tanzania (BoT), the Treasury Registrar (TR) said.

TR Lawrence Mafuru told reporters in Dar es Salaam yesterday that the situation should not be linked with the government’s decision to direct all public institutions, parastatals and agencies to open an account with the BoT.

“The banks should tell the public the truth, as of September, this year, they are having 1.43tri/- non-performing loans while our account at the BoT during the same period had 515bn/-“, he stressed.

He added: ‘’You can tell who is responsible for tight liquidity, people have borrowed and are not paying back their loans and during the same period the commercial banks have issued a 16tri/- loans.”

Mr Mafuru said the bank has decided to direct all public institutions to open up an account at the central bank as the government was borrowing money from the commercial banks at very high interest rates.

“The government was borrowing its own money from commercial banks - and at a high interest rate. But the counter has changed whereas BoT is the one giving out the money,” Mr Mafuru pointed out.

He noted that the trend has made things easier as the government, through the Ministry of Finance, can borrow at a reasonable rate and facilitate development projects.

Mr Mafuru said the commercial bank can also access the overnight market at the BoT if they want to borrow from the central bank. He added that tight liquidity can also be attributed by the fact that the government’s priority is development project infrastructure.

“We want to be an industrial economy country. You have to settle your level playing field to meet the requirement and thus when infrastructures are set we have to bear the expenses,” he remarked, adding: “We have purchased aircraft and since we do not make them here, the cash was paid in Canada.

As for the standard gauge railway, the contractor is from China. Its benefits cannot be felt now; so let people be patient.”

He further noted that planning was a priority, comparing the situation to a family deciding to cut down on travel and outings so that the savings can buy a plot while children are likely to applaud the decision.