Before the year- end Tanzania is expected to further open her capital markets to allow foreign investors outside the East African region to invest in short and long term government papers.
Currently, only local investors and their counterparts from the East African region, are allowed to participate in the Treasury bills and bonds. Commenting on the initiative, the Dar es Salaam Stock Exchange (DSE) Chief Executive Officer Mr Moremi Marwa said there is expectation of increased trading activities and volume at the secondary bond market.
“It is a significant step that will attract more investments from across the glow into the government papers,” he said, noting that increased competition at the bond market will enable the government to borrow at low interest rates.
The Bank of Tanzania (BoT) said deepening the capital market would make it more responsive to rate moves by the central bank, which could start announcing a benchmark lending rate by late 2016.
Tanzania has been easing restrictions on its capital markets in line with commitments as a member of the five-nation East African Community bloc.
“BoT has started setting rate that will probably be fully operational by next year,” Dr Joseph Massawe, the BoT Director of Economic Research and Policy said in a telephone interview.
He added, “We have liberalised our financial markets for east African residents. We expect to have fully liberalisation for the rest of the world before end of year.” He said Tanzania, unlike other partners in the region does not set a benchmark lending rate.
It focuses on managing shilling liquidity by selling and buying treasury bills and bonds by using that route to guide rates in the market. On inflation, Dr Massawe said it is expected to fall to an average of five per cent by June next year from six per cent before year end and currently 6.4 per cent.