Tanzania: Extended Broad Money Supply Grows Over 9 Pc

THE extended broad money supply grew at an annual rate of 9.5 percent in June this year, higher than 7.7 percent in the corresponding period last year on account of the increase in net foreign assets of the banking system.

The growth is also attributed to positive growth of credit to the private sector.

According to the Bank of Tanzania (BoT) economic bulletin for the quarter ending June, the broad money supply that excludes foreign currency deposit liabilities grew by 10.5 percent, compared to 10.8 percent registered in the year ending June last year.

The net foreign assets of the banking system grew by 15.0 percent in the year ending June this year, compared to a contraction of 12.7 percent in the corresponding period in 2019.

The growth was mainly driven by cumulative build-up of foreign exchange holdings by the central bank that emanated from purchase of foreign exchange from the government and banks.

During the reference quarter, the BoT sustained implementation of accommodative monetary policy and enhanced liquidity, easing measures to cushion the financial sector and the economy from negative impact of Covid-19 pandemic.

The total domestic credit by the banking system recorded an annual growth of 2.5 percent in June, down from 17.4 percent in June last year, which reflects decline in net credit extended to the government following build-up of government deposits in the banking system.

The credit to the private sector grew by 5.5 percent in the year ending June this year, compared to 7.6 percent recorded in the corresponding period of 2019.

This development was attributable to subdued demand for new loans, particularly in trade activities, following lockdown of the economies of main trading partners due to the Covid-19 pandemic.

Much of the credit was extended to building and construction, transport and communication, and personal related activities, including small and medium scale enterprises.

Meanwhile, personal-related activities and trade continued to account for the largest share of the total outstanding credit, accounting for 32.1 percent and 16.7 percent, respectively.