Tanzania’s central bank announced on Thursday that it would maintain its key interest rate at 6%, citing inflation expectations comfortably below target, robust economic growth, and anticipated easing of exchange rate pressures.
In January, Tanzania’s central bank introduced a benchmark interest rate under a new monetary policy framework, starting at 5.5% and later increasing to 6.0% in April.
The central bank aims for a 5% inflation target, but consumer inflation in May was 3.1% year-on-year, falling short of this goal.
In its recent Monetary Policy Committee (MPC) statement, the bank forecasted that inflation would stay between 3% and 4% in the second half of 2024.
“The MPC expects Tanzania’s economy to continue growing strongly, with adequate food supply and moderated exchange rate pressures due to increased foreign exchange inflows from tourism, gold, cash crops, and food,” the statement read.
It also noted that economic growth for the first and second quarters of the year was estimated at approximately 5.0% and 5.4%, respectively.
In the quarter ending June, the current account deficit in the country, which has a population of approximately 65 million, is estimated to have narrowed slightly to $959 million from $978 million in the corresponding quarter of 2023.
This improvement was driven by higher export earnings from gold, crops, and tourism, according to the bank.
It was reported that foreign exchange reserves remained adequate, standing above $5 billion as of the end of June.
This amount is deemed sufficient to cover more than 4 months of projected imports.
Deputy Governor Yamungu Kayandabila informed reporters that in the financial year ending in June, the central bank purchased 418 kg of gold to strengthen its reserves.
He also stated that in the current financial year, the bank plans to buy 6 metric tons of gold.