Credit to private sector down

DAILY NEWS Reporter

CREDIT to the private sector grew at 1.3 per cent in February this year lower than 2.1 per cent in the previous month and 4.2 per cent in the corresponding period in 2017.

Bank of Tanzania (BoT) monthly economic review for March shows that the total domestic credit by the banking system contracting by 1.0 per cent compared with contraction of 0.4 per cent in the year to February last year, due to shrinkage in net credit to government from the banking system.

Also the contraction in net credit to the government reflects slowdown in BoT advances coupled with sizable build-up of government deposits at the Bank following great improvement in revenue collection and cumulative effect of proceeds from external non-concessional loan.

Meanwhile, banks’ net credit to the government, which is reflected in the banks’ holding of government securities recorded annual growth of 25.3 per cent compared with 31.2 per cent and 14.6 per cent in the preceding month and corresponding month in 2017, respectively.

In relation to growth of credit to major economic activities, all economic activities recorded expansions except transport and communication, agriculture and trade activities.

Personal loans recorded significant annual growth rate reflecting reclassification of salaried loans that were previously treated as part of loans to other services in favour of health and education.

Annual growth of money supply remained on an upward movement for two months in succession, in the wake of monetary policy easing since the first quarter of 2017 to ensure that liquidity in banks is adequate to support economic activities.

In particular, the extended broad money supply recorded year-on-year growth of 11.2 per cent compared with 9.5 per cent in the preceding month and 1.7 per cent in the corresponding month in 2017, supported by net foreign assets of the banking system and banks’ credit to the private sector.

Net foreign assets (NFA) of the banking system grew by 31.4 per cent compared with 7.3 per cent in the corresponding period in 2017 due to growth of net foreign assets of the BoT that outweighed the impact of massive decline in NFA of banks.

NFA of the BoT grew by 36.3 per cent, year-on year, following cumulative effect of proceeds of external non-concessional loan and purchase of foreign exchange from the domestic financial market.

Meanwhile, increase in banks’ foreign borrowing largely triggered decline in NFA of banks.