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By Fumbuka Ng'wanakilala
DAR ES SALAAM, March 22 Tanzania's central bank
has cut the minimum reserve ratio required of commercial lenders
to 8 percent from 10 percent, the latest monetary easing
measure aimed at reducing borrowing costs and stimulating
The change to the statutory minimum reserve requirement
(SMR) will take effect on April 20 and follows the bank's
decision two weeks ago to slash its discount rate to 12 percent
from 16 percent.
Bank of Tanzania Governor Benno Ndulu announced the measure
in a circular to commercial banks dated March 21 and seen by
Reuters on Wednesday. It will apply to both domestic and foreign
currency deposit liabilities.
The International Monetary Fund warned earlier this year
that the slow pace of credit growth posed a risk to Tanzania's
growth forecast of around 7 percent in the fiscal year 2016/17
(July-June). The fund advised Tanzania to ease monetary policy
and boost public spending on infrastructure
The economy has seen a steep decline in lending by
commercial banks to key sectors including agriculture,
manufacturing, transport and construction.
"The reduction of the reserve ratio coupled with the recent
cut in the discount rate by the central bank are expected to
help ease the ongoing liquidity tightness and encourage banks to
lend more money to the private sector," said a trader at a bank
in the commercial capital Dar es Salaam.
Lending to the private sector grew by an anaemic 2.5 percent
in 2016 after expanding 26.8 percent a year earlier, according
to central bank data.
Lending fell dramatically after a spike in non-performing
(Editing by Aaron Maasho and Richard Lough)