As of January 2024, the Bank of Tanzania (BOT) has made a significant shift in its monetary policy framework, transitioning from a focus on the quantity of money (monetary aggregates) to an interest rate-based approach.
The newly adopted interest rate-based policy is designed to allow the BOT to influence economic conditions more precisely. By adjusting interest rates in response to changes in inflation, the central bank aims to achieve its primary objectives of price stability and sustained economic growth.
According to the Notice, under the new framework, the BOT will introduce a Central Bank Rate (CBR) consistent with low and stable inflation and conducive to the growth of the economy. The CBR will be used as a tool to influence the direction of monetary policy either a tightening or expansionary stance. The CBR will also be used as a guide or benchmark for determination of interest rates.
Pursuant to the Notice, the introduction of the CBR does not imply fixing of interest rates offered by banks and financial institutions. Commercial interest rates will continue to be influenced by market forces, reflecting the dynamic nature of the financial landscape.
Implications on Debt Finance Transactions
This shift in monetary policy, particularly the introduction of the CBR, carries significant implications on debt finance transactions, both locally and in the context of foreign loans. Here are key highlights to consider:
This shift in monetary policy, particularly the introduction of the CBR, carries significant implications on debt finance transactions, both locally and in the context of foreign loans. Here are key highlights to consider:
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