Economic Trends: BoT on State of the Economy

24Mar 2016
The Guardian Reporter
The Guardian
Economic Trends: BoT on State of the Economy

With three months to go before ushering in the next financial year, the central bank is optimistic of robust overall performance of the national economy in 2015/16 and expects a similar outturn during 2016/17.

The Bank of Tanzania (BoT) says that the domestic economy sustained strong growth momentum and inflation remained at single digits level. Areas where strong performance has been registered include growth of credit to the private sector in line with expansion of various economic activities.

Output

The economy continued to register strong growth in the first three quarters of 2015, growing at 6.9 per cent, close to the projected growth of 7.0 per cent for the year. Apart from credit to the private sector, this performance was attributed to on-going investments in infrastructure developments, and investment in provision of mobile and internet services.

“The domestic economy is expected to continue with the growth momentum, supported by investment in infrastructure, expansion in private and public sector construction activities, growing manufacturing sector, moderation of global oil prices and the expected gradual improvement of the global economy,” reads the current Monetary Policy Statement.

In terms of contribution to growth, the leading activities have been construction (18.4 per cent), agriculture (10.9 per cent), trade (10.7 per cent) and transport (9.9 per cent). The fastest growing activities were construction (13.2 per cent), information and communication (12.4 per cent), and transport (10.9 per cent).

Cost of living and doing business

Inflation is expected to remain at single digits level anchored by low energy prices and stability of the shilling exchange rate, coupled with tight monetary policy, improved expenditure management and enhanced revenue mobilization by the government.

Govt coffers

During the first half of 2015/16, government revenue deposited at the Bank of Tanzania was 6.6trn/-, being 98.1 per cent of estimate for the period and 29.3 per cent higher than the amount deposited during similar period in the preceding year. There was a significant improvement in domestic revenue collections in November and December 2015, with collections surpassing their respective projections by 3.6 percent and 6.2 percent.

Total expenditure amounted to 8.42trn/-, or 92.1 per cent of the estimate, of which recurrent was 6.6trn/- and was fully covered by domestic revenue.

International transactions

The current account is projected to improve further driven by the impact of increasing receipts from tourism and transportation services, manufactured exports and lower global oil prices. During July to December 2015, the current account deficit narrowed by 44.2 per cent to US$1,161.9 million compared to the deficit of US$2,081.1 million recorded in the corresponding period in 2014.

This improvement was mainly explained by an increase in the value of exports of gold, manufactured goods and receipts from tourism and transportation services, coupled with a decline in the import value of oil, building and construction equipment, and food stuffs.

The stock of gross official reserves (at the Bank of Tanzania) amounted to US$4,093.7 million as at the end of December 2015, sufficient to cover about four months of projected imports of goods and services excluding those financed by foreign direct investment.

Public debt
The external debt stock increased by 0.1 per cent to US$15,408.5 million at the end of December 2015, from US$15,395.7 million recorded at the end of June 2015, out of which 84.8 per cent was public debt. Domestic debt increased by 13.2 per cent to nearly 8.6trn/- at the end of December 2015 from 7.59trn/- recorded at the end of June 2015. The increase was on account of issuance of government securities for budget financing.

Banking
The banking sector continued to grow with new institutions starting business, including Tanzania Agricultural Development Bank. The sector remained sound and stable with levels of capital and liquidity above regulatory requirements.

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