Private sector credit recovers

DAILY NEWS Reporter

CREDIT to private sector recovered to 2.6 per cent in the year to May from 0.8 per cent in the preceding month with significant improvement registered in the manufacturing sector.

The Bank of Tanzania (BoT) monthly economic review for June shows that credit extension to manufacturing sector rose to 11.4 per cent from 10.8 per cent in the year to April.

“In terms of shares to outstanding credit to the private sector, personal and trade activities continued to account for the largest share at 27.3 per cent and 20.6 per cent respectively,” stated the report.

BoT said the reclassification of salaried loans that previously were considered as part of loans to other services in favour of health and education partly explains observed higher growth in personal loans.

The total domestic credit by the banking system comprising credit to the government and private sector contracted by 7.3 per cent compared with a decline of 2.5 per cent in April and growth of 1.2 per cent in the corresponding period last year.

The shrinkage was driven by decrease in credit to the government from the banking system, with much of the decline from government transactions with the central bank following decrease in short term advances to the government and relative increase in government deposits at the BoT.

Increase in government deposits partly arose from improvement in government revenue collections and realisation of external non-concessional loans.

Meanwhile, government continued to borrow from commercial banks through issuance of government securities though at a decreasing rate.

Net government borrowing from commercial banks grew by 5.7 per cent, compared with 14.9 per cent and 28.5 per cent in year to April and last May, respectively.