Full interview to feature in first-time country report
Dar es Salaam, 17 October 2017:
Liquidity squeezes and non-performing loans (NPLs) are among the many issues explored in a wide-ranging interview that Benno Ndulu, governor, Bank of Tanzania (BoT), gave recently to Oxford Business Group (OBG).
Ndulu told OBG that the central bank expects inflation to stay within the national lender’s target range of 5%, although lower food prices on the back of favourable weather had become an issue of late.
“In terms of headline inflation, so far in 2017 we have averaged about 5.3%,” he said. “Recently, there has been a bit of pressure from crop prices, which is a regional phenomenon. We anticipate some pressure from northern Africa; however, we believe that we should stay the course.”
On the subject of liquidity, Ndulu acknowledged that slower growth in monetary aggregates and credit, which is down from 12-15% to 3-5% in Tanzania, had prompted the BoT to examine parallels elsewhere in the region.
“This is not an isolated incident. It is happening in Kenya, Uganda and Rwanda. In turn, we have all been looking at what variables we have in common, despite the differing policies among our central banks,” he said.
Ndulu cited foreign money and debt as contributing to the liquidity squeeze, but highlighted the importance of having alternative funding avenues available. “Grants, both concessional and non-concessional, as well as loans have decreased, causing cash flows to dry up,” he said. “What used to be a common source of funds has been reduced significantly. There always have to be other new sources.”
In the interview, the central bank governor also discussed the rising levels of NPLs, which he said stemmed from a combination of the economic shocks of 2008, fluctuating commodity prices and Tanzania’s developing business environment, while mapping out the steps being taken to address the problem.
“First, we have a medium-term target of 5%. Banks that exceed this must submit a strategy as to how they will get within the threshold,” he told OBG. “There are many more banks below 5% than above, and it is mainly smaller banks that are exceeding the 5% NPL rate. We have also pushed the use of better credit rating agencies.”
The full interview with Ndulu will appear in The Report: Tanzania 2017, OBG’s first-time publication on the country’s economy.
The Report: Tanzania 2017 will be a vital guide to the many facets of the country, including its macroeconomics, infrastructure, banking and other sectoral developments. The publication will contain a detailed, sector-by-sector guide for investors, alongside contributions from leading personalities, including: President John Magufuli; Philip Mpango, minister of finance and planning; Charles John Mwijage, minister of industry, trade and investment; Stergomena Lawrence Tax, executive secretary, Southern African Development Community; and Libérat Mfumukeko, secretary-general, East African Community. The report will be available in print and online.