Tanzania central bank holds key rate, sees strong economic growth

By Nuzulack Dausen

DAR ES SALAAM (Reuters) – Tanzania’s central bank left its key interest rate unchanged at 6%, it said on Thursday, adding that inflation expectations were well below target, the economy was growing strongly and exchange rate pressures were expected to ease.

The Bank of Tanzania introduced a benchmark interest rate in January as part of a new monetary policy framework, first setting it at 5.5% before raising it to 6.0% in April.

The bank targets inflation of 5%, but consumer inflation has stayed comfortably below that, coming in at 3.1% year-on-year in May.

In its latest Monetary Policy Committee (MPC) statement, the central bank said inflation was expected to range from 3%-4% in the second half of 2024.

“The MPC expects Tanzania’s economy to continue growing strongly, food supply to be adequate, and exchange rate pressures to moderate owing to increased foreign exchange inflows from tourism, gold, as well as cash crops and food,” the statement read.

Economic growth for the first and second quarters of the year was estimated around 5.0% and 5.4%, respectively, it said.

The current account deficit in the country of around 65 million people is estimated to have narrowed slightly to $959 million in the quarter ending in June, compared with $978 million in the corresponding quarter in 2023.

The improvement was driven by higher export earnings from gold and crops as well as tourism, the bank said.

Foreign exchange reserves remained adequate, above $5 billion at the end of June, sufficient to cover more than 4 months of projected imports, it said.

In the financial year that ended in June, the central bank bought 418 kg of gold to bolster its reserves and in the current financial year it intends to buy 6 metric tons of gold, deputy governor Yamungu Kayandabila told reporters.

(Reporting by Nuzulack Dausen; Writing by Hereward Holland; Editing by Alexander Winning and Emelia Sithole-Matarise)

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