The Bank of Tanzania (BoT) has lowered the statutory minimum reserves requirements for commercial banks to 6 percent from 7 percent aimed at cushioning its economy.
It also cut its discount rate for banks. The measures will come into effect June 8 to provide liquidity to the financial institutions according to Florens Luoga, the BoT Governor.
“This measure is expected to provide additional liquidity to banks,” said the statement.
BoT uses the statutory minimum reserve (SMR) requirement to influence credit growth which is a percentage of deposit liabilities of banks collected from the public.
The bank also cut its discount rate for lending to banks to five percent from seven percent to “provide additional space for banks to borrow from the Bank of Tanzania at a lower cost, signalling lower lending rates by banks.”
“The aim of the measures is to safeguard the financial sector stability and continue facilitating the financial intermediation process,” said the statement.
Last week, the central bank maintained its cash injections with an average TZS 25.00Bn offered to market players daily, highlighting a continuously fragmented market. The reverse repo rate declined to 6.01 percent from 6.22 percent on Monday.
Tanzania has confirmed 509 cases of the coronavirus, with 21 deaths, according to the World Health Organization.
Tanzania’s economic growth is projected to decline to two percent this year, from 6.3 percent in 2019.