Scarcity of money currently being experienced is part of a tight monetary policy taken to help in monitoring and control money in the circulation, this is as stated by Mr Paul Maganga, the Domestic Market Associate Director with the Central Bank.
“Cash squeeze in circulation should be nothing to worry much about as it is part of measures undertaken to control the economy,” the director has said.
According to him, the recent government directive for ministries, local governments and public corporations to transfer their money to the Central Bank, was among the measures which had contributed to the scarcity of money in the circulation.
The sum of money thought to have been held by the public corporations, ministries and local governments in commercial banks totals to about 500bn/-. The measure has however helped the Bank of Tanzania (BoT) to monitor and control money in circulation, he said.
The public entities should maintain an operational account at their preferred commercial bank with a minimum of balance to cater for their monthly operational expenses as per their monthly cash flow projections.
According to CRDB’s Financial Market Highlights liquidity was tight in the market on Monday as interbank volume fell by 67 per cent to 18bn/-, while borrowing rates were up by 50 basis points to a weighted average of 14.22 per cent and a high of 16 per cent.
The tight liquidity in the circulation has also resulted from most corporate engaging in payment of annual taxes last month, thus cutting spending of funds that could have been directed to investments. Similarly, the present situation of dry money in the market is explained by the less government expenditure for both recurrent and development, said Mr Maganga.
Liquidity is expected to remain tight in the market with borrowing rates holding up at current high levels.