Tanzania central bank takes strong measures to combat inflation

In a move to proactively address inflationary pressures, the Bank of Tanzania has increased its key interest rate from 5.5% to 6.0%.

This decision reflects the central bank’s commitment to maintaining stability in the face of global economic developments that could impact the local economy.

Governor Emmanuel Tutuba emphasized the importance of taking decisive action to contain inflationary pressures. The decision was based on macroeconomic forecasts indicating the need for a broader range of monetary policy measures.

Despite inflation holding steady at 3% year on year in February, Tanzanian authorities are taking a preemptive approach to ensure that inflation remains within the government’s target range of not exceeding 5%. Tutuba credited prudent monetary policy and sufficient domestic food supply for the current stability in inflation rates.

Looking ahead, the outlook for the Tanzanian economy appears positive. With an estimated growth rate of around 5% in 2023, the economy is projected to expand by approximately 5.1% in the first quarter of 2024. This growth trajectory underscores the resilience of the Tanzanian economy and the effectiveness of monetary policy measures in supporting sustainable economic development.

Tutuba highlighted that the performance of Tanzania’s economy is significantly supported by public investment in infrastructure, aimed at boosting private sector business and investment. This includes the construction of roads, bridges, and other essential infrastructure that are crucial for businesses to thrive.

The improving business environment in the country has also attracted private sector investment, further driving economic growth. Alongside public investment, private sector contributions have played a key role in the estimated growth of Tanzania’s economy.

The diverse sectors that contribute to Tanzania’s economy such as tourism, mining, and agriculture, also play integral roles in sustaining economic growth and providing employment opportunities for the country’s citizens.

By raising the key interest rate, the Bank of Tanzania aims to reinforce its commitment to price stability and sustainable economic growth. The move signals the central bank’s willingness to take preemptive action to address inflationary pressures and maintain a favorable economic environment for businesses and consumers alike.