Mainland Tanzania and Zanzibar, inflation is expected to remain stable and consistent with the medium-term target of 5 percent.
iii. Owing to the implementation of a less accommodative monetary policy, the growth of monetary aggregates slowed in November 2023.
The Extended broad money supply grew at 13.7 percent compared with 14.5 percent recorded in September 2023, driven by private sector credit growth, which slowed to 18.3 percent from 19.5 percent.
However, the growth of private sector credit, was still above the projection of 16.4 percent by the end of December 2023.
The high investment appetite strengthened by improving the business environment and supportive policies is expected to persist.
iv. Fiscal performance was satisfactory. In the first four months of 2023/24, revenue performance was 96 percent of the target and expenditure continued to be aligned with the available resources.
For Zanzibar, revenue performance was almost on target. The performance was observed in all revenue categories, except tax on imports and non-tax.
v. The current account improved slightly, mainly on account of an increase in foreign exchange earnings from traditional export crops and tourism.
The deficit narrowed to USD 3,265.5 million in the year ending October 2023 compared with USD 4,990.1 million in the corresponding period in 2022 and is expected to continue improving.
As for Zanzibar, the current account deficit widened to USD 447.7 million compared with a deficit of USD 362.8 million, mainly on account of an increase in imports, which outweighed the improvements in exports.
Foreign exchange reserves remained adequate at about USD 5 billion in November 2023, sufficient to cover more than 4 months of imports.
The exchange rate depreciated by around 7.8 percent, year-on-year, reflecting the shortage of foreign currency liquidity. The foreign reserves are projected to remain adequate.
vi. The financial sector remained stable. The banking sector was adequately capitalized and liquid. Asset quality continues to improve, as reflected by a decline in non-performing loans to 5.3 percent in October 2023 from 7.2 percent in the corresponding period in 2022.
The MPC noted with satisfaction the measures implemented by the Bank of Tanzania in addressing the shortage of foreign currency and observed that the implementation of policies by the Government to increase export and import substitution will improve the current account position, boost foreign exchange reserves, and stabilize the exchange rate.
The MPC also applauded the satisfactory implementation of policies and the achievement of targets outlined in the national economic programs, including the IMF-supported Extended Credit Facility.
Additionally, the MPC noted with satisfaction the progress made by the Bank of Tanzania in adopting a new monetary policy framework in January 2024, which will focus on targeting short-term interest rates rather than reserve money, to control inflation and support economic growth.
This new framework is referred to as the interest rate or pricebased monetary policy framework. 3 In the context of the expected low inflationary environment and improving business conditions, the MPC decided to sustain the implementation of a less accommodative monetary policy in December 2023. This conclusion was also reached after considering the unfavourable global economic condition.
GOVERNOR
BANK OF TANZANIA