THE country needs expansionary fiscal and monetary policies to reverse high non-performing loans (NPLs) experienced last year.
The trend, which was on raise curve for
the last three years, reached 9.5 per cent last year amid liquidity
crunch and new austerity measures. Mzumbe University’s Dar es Salaam
Campus Economist, Prof Honesty Ngowi, said reversing NPLs the authority
should introduce low and fewer taxes and low interest rates.
“It takes more than just Credit reference bureau to tame NPLs,” Prof Ngowi told the 'Daily News' yesterday.
He mapped out root causes of high NPLs
to be taxes evading by unfaithful businesspersons who failed to pay
their loan dues after the tax crackdown by new fifth phase government.
“Some had clients who were earning money
through ways that have been disturbed by tax crack down. Some have been
found to be ghost workers. When they were sacked, they got challenges
to pay loans,” Prof Ngowi said.
He also said government austerity
economic measures have disturbed some businesses leading to general
economic slowdown for various reasons, including contraction of fiscal
and monetary policies. “NPLs leads to a negative phenomenal…banks
earnings fall, may lead to financial instability, the financial sector
may collapse,” Prof Ngowi said.
\Bank of Tanzania (BoT) to address
liquidity tightness in the economy late last month slashed discount rate
to 12 per cent from 16 per cent.
Again, fortnight ago the central bank
cut by 2.0per cent statutory minimum reserves requirement for deposit
taking banks to 8.0 per cent giving them ample space to extend credit to
private sector.
A paper conducted by staff of
International Monetary Fund found a correlation where a sustained real
GDP growth for number of years associated with a significant decline in
the NPLs ratio.
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