Tanzania has maintained its central bank rate (CBR) at six percent for a fourth successive quarter as it anticipates more liquidity and inflation control in the domestic economy during 2025. Emmanuel Tutuba, Governor of the Bank of Tanzania (BoT), said on Wednesday that the decision to keep the CBR unchanged for Q1 of 2025 was aligned to the central bank’s aims of ensuring financial market stability for smooth implementation of its monetary policies.
BoT’s Monetary Policy Committee, meeting in Dar es Salaam on January 7, concluded that the current rate was still feasible for keeping inflation below the Bank’s five percent benchmark and increasing the pace of economic growth to 5.7 percent by the end of the quarter. BoT introduced a benchmark bank interest rate in January 2024 as part of a policy shift aimed at curbing a worrying spike in interbank lending rates. The CBR replaced a previous policy pegged on money supply factors that had become increasingly unpredictable.
The initial rate was 5.5 percent, which was raised to six percent at the first review in April. Since then, it has not changed across three quarters, as other East African Community (EAC) countries have struggled to keep their lending rates below 10 percent.
Kenya’s current CBR is 12.75 percent, Burundi’s 12 percent, and Uganda’s 10 percent. Rwanda is the only other EAC partner state with a single-digit lending rate (6.5 percent).
In Tanzania, the interbank rate is permuted by the central bank every seven days and stood at 7.98 percent on January 7, up from 7.30 percent in April last year. The next CBR review is scheduled for April this year.
Meanwhile, Mr Tutuba said the Tanzanian shilling was expected to remain stable during Q1, thanks in a large part to an elevation of foreign exchange reserves during the last quarter of 2024, to $5.5 billion.
He said this was enough to cover the cost of importing goods and services for at least four and a half months, as global prices of key commodities have continued to stabilise.“We will base our efforts to maintain the forex reserves at the same level throughout Q1 on a variety of measures such as buying more gold from domestic traders as we continue to build a healthy gold reserve alongside,” Mr Tutuba said.
He said the shilling’s stability was also being helped by strict enforcement of Section 26 of the BoT Act, which stipulates use of local currency in all domestic transactions to reduce “unnecessary” demand for forex.
Among indicative mean forex rates on the official BoT board as of January 8, the US dollar was exchanging at Tsh2,400, the pound sterling at Tsh3,010, the euro at Tsh2,495; and the Kenyan shilling at Tsh18.57.
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