Bank of Tanzania sets new policy measures to ensure financial stability amidst COVID-19

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■ Sharon Kavhu

 

Windhoek The Bank of Tanzania (BOT) is set to lower the statutory minimum reserve requirement of that country from 7 % to 6 % effective from the 8th of June this year.  This development is meant to safeguard the country’s financial sectors stability amid the COVID-19 outbreak.

This follows a meeting held by the bank’s Monetary Policy Committee (MPC) where several other policy measures were enacted to ensure a continued facilitation of the financial intermediation process.

“The Bank of Tanzania has reduced the discount rate from 7 % to 5 %. This measure will provide additional capacity  for banks to borrow from the Bank of Tanzania at a lower cost, thus signaling lower lending rates by banks,” said Bank of Tanzania Governor Prof Florens Luoga in a statement.

“We have also reduced ratecuts on government securities from 10% to 5 % for treasury bills and from 40% to 20% for Treasury bonds.  The measure will increase the ability of banks to borrow from the Bank of Tanzania with less collateral than before.”

He said the bank’s MPC has also urged banks and other financial institutions to thoroughly assess financial difficulties which are being experienced by the borrowers due to COVID-19 in respect of loan repayment. He also advised banks to relook the possibility of restructuring of loans. Luoga added, “The process is also called a moratorium and it can grant loan rescheduling thereof on a case by case basis. The Bank of Tanzania will provide regulatory flexibility to banks and other financial institutions that will carry out loan restructuring in a transparent and impartial manner.

The MPC of the bank also authorized mobile money operators in that country to increase daily transaction limits to customers from TZS 3 000 000 to TZS 5 000 000 and daily balance from TSZ 5 000 000 to TSZ 10 000 000.

This policy measure according to the MPC is meant to encourage customers to use digital payment platforms for transactions, thereby reducing congestion in the banking premises during this phase of COVID-19 pandemic.

It comes at a time when the world is encouraging the use of digital transactions and payments to promote social distancing to stop the spread of the pandemic.

“Banks are also advised to incentivize their increased usage of digital payment systems for transactions, such as online banking and point of sale systems,” said Luoga.

He said the Bank will continue to monitor the impact of COVD-19 on various sectors of the economy and take appropriate policy actions to limit the impact.

Luoga assured Tanzania that the country has adequate foreign exchange reserves for importation of goods and services.

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