Bank of Tanzania cuts rate to 5.75% to boost lending for farmers, traders

The CBR, which acts as a benchmark for the cost of borrowing between the BoT and commercial banks, is a key instrument for managing liquidity in the economy.

A lower rate allows banks to access cheaper funding, which in turn should translate into more affordable loans for individuals and businesses.

“This is the period when people need money the most for crop purchases and business operations,” said BoT Governor Emmanuel Tutuba.

“By reducing the CBR, we are ensuring that banks have adequate funds to support these activities.”

He said the move is expected to increase liquidity in the financial system, improve credit availability and enhance employment and income, particularly in agriculture and trade.

Although the previous 6 percent rate was still seen as appropriate, the central bank acted pre-emptively in response to seasonal cash demands.

Inflation remains under control, averaging 3.2 percent in the second quarter of 2025, which is well within the BoT’s target range of 3 to 5 percent.

Mr Tutuba acknowledged a temporary spike in food prices due to transport disruptions caused by heavy rains, but noted that overall price stability has been preserved.

The Governor also highlighted global market developments affecting the local economy.

Gold prices soared to $3,282.40 per troy ounce by end-June 2025 from $2,855.73 in March, reflecting increased investor demand for safe-haven assets.

In contrast, crude oil prices dropped to $65.92 per barrel, down from an average of $74.35, due to subdued global demand and higher output from OPEC+ members.

Despite global headwinds such as geopolitical tensions and rising trade tariffs, Tanzania’s economy remains resilient.

Mr Tutuba reported that the country’s GDP grew by 5.8 percent in the first quarter and 5.5 percent in the second quarter of 2025.

Growth is projected to accelerate to 6.0 percent in Q3 and 6.9 percent in Q4, driven by agriculture, construction and services.

Private sector credit expanded by 16.7 percent, signalling improved business confidence and stronger lending conditions.

The Tanzanian shilling held stable, depreciating only 0.2 percent against the US dollar, compared to a 12.5 percent depreciation the previous year.

Similar trends were observed in Zanzibar, where inflation dropped to 4.2 percent in May and the archipelago recorded a current account surplus, thanks to a sustained rebound in tourism.

BoT also exceeded its 2024/25 gold purchase target, acquiring 6.6 tonnes valued at $718 million, surpassing the six-tonne goal.

The initiative is part of a broader strategy to boost the country’s financial reserves and economic resilience.

Governor Tutuba said that Tanzania’s broader money supply (M3) grew by an average annual rate of 19.1 percent, an indicator of robust economic activity.

The banking sector, he noted, remains sound, well-capitalised, liquid, and profitable. The ratio of non-performing loans (NPLs) dropped to 3.4 percent in May, significantly below the 5 percent risk threshold.

The country’s current account deficit narrowed to $797.1 million in the second quarter of 2025 from $872.1 million during the same period last year.

For the full 2024/25 financial year, the deficit is projected to shrink to 2.6 percent of GDP, compared to 3.7 percent in 2023/24.

Tanzania’s export performance remains strong, with gold, manufactured products, tourism, and traditional cash crops leading the way.

Zanzibar, on its part, reported a current account surplus of $611.1 million—up from $428.5 million in the previous fiscal year.

Meanwhile, the country’s foreign exchange reserves rose to around $6 billion, enough to cover 4.8 months of imports, underscoring its strong external position.