INFLATION TO STAY AT 5 PER CENT TARGET: PROF NDULU

BoT Governor, Prof. Benno Ndulu

BANK of Tanzania (BoT) has said inflation is expected to stay within the national medium-term target of 5 per cent to be supported by lower food prices due to favourable weather conditions, Governor, Prof Benno Ndulu has said.

“In terms of headline inflation, so far in 2017 we have averaged about 5.3 per cent,” he said yesterday during an interview with the Oxford Business Group (OBG), a global research and consultancy company with a presence in over 30 countries, from Africa, the Middle East and Asia to the Americas.

“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 liquidity level, Prof Ndulu said the slower growth in monetary aggregates and credit that has declined to an average between 3 to 5 per cent from 12 to 15 per cent 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.

The decline in foreign currency inflows and debt are contributing to liquidity squeeze, he said highlighting 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...what used to be a common source of funds has been reduced significantly. There always have to be other new sources,” he said.

He said the rising levels of NPLs stemmed from a combination of the economic shocks of 2008, fluctuating commodity prices and Tanzania’s developing business environment. “First, we have a medium- term target of 5 per cent.

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 per cent than above, and it is mainly smaller banks that are exceeding the 5 per cent of NPL rate. We have also pushed the use of better credit rating agencies,” he said.

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