Money Supply and Domestic Credit

93.              During 2001/02 broad money supply (M₂) increased by shs. 234.5 billion, equivalent to an increase of 21.3 percent, from shs. 1,099 billion in June 2001 to shs. 1,333.5 billion by June 2002.  The increase in money supply during 2001/02 exceeded the planned target, of within a band of 10 to 12 percent per annum.  The increase in money supply in 2001/02 was largely attributed to increases in time deposits, savings deposits and demand deposits.  The increase of time deposits was lower compared to the increase of other types of deposits.  Also the growth of currency in circulation outside the banking system, demand deposits, savings deposits and time deposits increased in 2001/02 compared to 2000/01.  During July – December 2002, broad money supply (M₂) increased further to shs. 1,507.3 billion, from shs. 1,333.5 billion by June 2002, equivalent to an increase of 13 percent.  The contribution of time deposits was smaller compared to the contribution of currency in circulation outside banking system, demand deposits and savings deposits.

 

94.              During 2001/02, domestic credit increased by shs. 37.5 billion, equivalent to an increase of 5.8 percent, from shs. 647.3 billion in June 2001 to shs. 684.9 billion in June 2002.  That increase was attributed to an increase in lending to the non-government sector following a decrease in net claims on government in that period.  Credit to the non-government sector increased from 20.7 percent in 2000/01 to 27.4 percent in 2001/02.  Table No.27 shows a summary of monetary survey, with the respective changes shown in Table No.28.

 

Commercial Banks’ Credit to Various Sectors

95.              During 2001/02 commercial banks’ credit to various sectors amounted to shs. 482 billion having increased by shs. 103.6 billion or 27.4 percent from shs. 378.4 billion in 2000/01.  The sectors of mining, manufacturing and trade and others continued to receive higher proportions of credit followed by agricultural production, buildings and construction.  The increase in the amount of credit to agricultural production was accompanied by an increase in the amount of credit extended for procurement of agricultural crops, following the establishment of an Export Credit Guarantee Scheme (ECGS).  However, the amount of credit extended for procurement of agricultural crops is still low.

 

96.              Commercial banks that have started to offer micro-finance credit include CRDB Bank Ltd., Tanzania Postal Bank (TPB), National Micro-finance Bank (NMB), Akiba Commercial Bank (ACB), CF Union Bank, and Azania Bancorp.

 

97.              During 2001/02, commercial banks’ credit to government through the purchase of government securities amounted to shs. 267,025.3 million, comprising of Treasury Bills valued at shs. 95,665.6 million, and other securities amounting to shs. 171,359.7 million.  During 2000/01, such credit to government amounted to shs. 300,498.5 million.  Thus, commercial banks’ credit to the government during 2001/02 decreased by shs. 33,473.2 million, equivalent to a decline of 11.1 percent, compared to 2000/01.  The decrease in commercial banks’ credit to government during 2001/02 was attributed to a decline in the amount of government securities sold.  During 2001/02, commercial bank’s credit to private sector increased, while credit to the government declined.  The increase in credit to the private sector indicates a sustained recovery in the private sector due to an increase in money demand for improving land, manufacturing, transport and communication, business services, and wholesale and retail trade, including tourism.  Table No.30 shows commercial banks lending by sectors.

 

Deposits in Commercial Banks

98.              During 2001/02 total deposits in commercial banks increased from shs. 1,097,859.9 million in 2000/01 to shs. 1,368,506 million, equivalent to an increase of 19.8 percent.  The contribution of foreign currency deposits to total deposits was 33 percent, time deposits contributed 17.4 percent, while demand deposits contributed 25.9 percent, and savings deposits contributed 23.3 percent.  Low deposit interest rates, especially for time and savings deposits, coupled with the imposition of bank charges on customer savings deposits, have created disincentives to potential depositors.  Table No.31 shows the trend of deposits in commercial banks.

 

99.              During 2001/02, commercial banks continued to compete in providing various types of bank services.  Securing of funds through a special type of account which enable parents to save money for payment of school fees for their children and Automatic Teller Machine (ATM) service are among the newly introduced services in the industry.

 

Trends in Interest Rates

100.          The discount rate which is interest rate charged to commercial banks and government when they borrow from the Bank of Tanzania continued to decline, as has been the case over to the past five years.  The discount rate declined from 9.8 percent in June 2001 to 9.4 percent in June 2002.  It declined further to 9.2 percent by December 2002.  The weighted average savings deposit interest rate offered by commercial banks declined from 4.2 percent in June 2001 to 3.5 percent by June 2002.  It declined further to an average of 3.1 percent by December 2002.  The average fixed deposits interest rates for 3 to 6 months declined from 5.2 percent in June, 2001 to 4.1 percent in June 2002.  By December, 2002, the rate had fallen further to 3.5 percent.

 

101.          The weighted average interest rate on short-term lending by commercial banks declined from an average of 20.9 percent in June 2001 to 14.8 percent in June 2002 and thereafter started to rise, reaching on average of 15.9 percent in December 2002.  Interest rate on medium and long term loans declined from average of 19.2 percent in June, 2001 to 16.8 percent in June, 2002.  By December 2002, the rate had declined further to 15.7 percent.  During 2001/02, commercial banks continued to charge different lending rates to different borrowers for the same types of loans.  Trends in interest rates of commercial banks shows that the spread between lending and deposit rates continues to be wide.  Table No.32 shows trends in interest rates.

 

Bank of Tanzania (BOT)

102.          During 2001/02, the official exchange rate (mean selling rate) of Tanzanian shilling against US dollar increased from sh. 888.0 in June 2001 to shs. 946.9 by June 2002, which is equivalent to a depreciation of the Tanzanian shilling by 6.6 percent, compared to a depreciation of 11.1 percent in 2000/01.  During the same period, forex bureaux exchange rate (mean selling rate) for the Tanzanian shilling against the US dollar increased from shs. 887.0 in June 2001, to shs. 975.0 by June 2002, which is equivalent to a depreciation of 10 percent.  From July 2002, the Tanzanian shilling continued to depreciate against US dollar in the Inter-bank Foreign Exchange Market (IFEM), reaching an average exchange rate of shs. 976.7 per US dollar by December 2002.  During that period, the forex bureaux exchange rate for the Tanzanian shilling against US dollar (mean selling rate) reached shs. 989.2 per US dollar.  Table No.29 shows the trend of exchange rates of the Tanzania shilling against the US dollar.

 

103.          During 2001/02, government deposits in the Bank of Tanzania increased by shs. 32.8 billion, equivalent to an increase of 22.2 percent from shs. 147.7 billion at end-June 2001 to shs. 180.6 billion by end-June 2002.  The increase in government deposits in the Bank of Tanzania was mainly attributed to an increase in funds from HIPC debt relief.  During that period commercial banks’ deposits in the Bank of Tanzania increased from sh. 100.2 billion at end June 2001 to shs. 106.6 billion by end June 2002, equivalent to an increase of 6.4 percent.

 

Parastatal Pension Fund (PPF)

104.          The Parastatal Pension Fund (PPF) was established in 1978 to provide pensions and other allied benefits to its members, most of whom were employees in the parastatals.  With the advent of the market economy, PPF expanded its services to private companies as well.  By the end of 2002, PPF had 460 member companies, compared to 411 member companies in 2001.  Benefits given by PPF include pension, gratuity, death and survivor withdrawal claims.

 

105.          The value of investments of PPF increased from shs. 91.87 billion in 2001 to shs. 103.90 billion in 2002, equivalent to an increase of 13.1 percent.  Investments in treasury bills and other government securities decreased from shs. 7.7 billion in 2001 to shs. 5.91 billion in 2002, equivalent to a decrease of 23.2  percent.  PPF’s collections from its members increased from shs. 31.5 billion in 2001 to shs. 32.7 billion in 2002.  Paid benefits reached shs. 17.65 billion in 2002, compared to shs. 16.56 billion in 2001.  During 2002, the number of PPF members reached 105,188, compared to 78,000 members in 2001.

 

National Social Security Fund (NSSF)

106.          The National Social Security Fund (NSSF) mobilizes workers’ contributions from employers in the private sector, Non Government Organization (NGOs) parastatal organizations and other employers in the private sector.  Members’ funds are invested in various economic ventures including government securities, shares in companies and real estates with the objective of increasing the Fund’s income, so as to enhance benefits to its members.  Currently, offered benefits include old age, invalidity, inheritance, burial and maternity benefits.  During 2001/02 benefits paid amounted to shs. 13,307.3 million, compared to shs. 12,872.3 million paid during 2000/01.

 

107.          The number of NSSF members reached 351,975 in 2001/02 compared to 325,744 members in 2000/01.  The value of NSSF investments reached sh. 186,141.9 million in 2001/02. compared to shs. 156,182 million in 2000/01.  Investment in government securities decreased from shs. 86,324 million in 2000/01 to shs. 83,628.9 million in 2001/02.  Funds collected from NSSF members increased from shs. 39,907 million in 2000/01 to shs. 45,602 million in 2001/02.  The number of NSSF members increased during 2001/02 following an increase in employment in various enterprises compared with the previous year.

 

Tanzania Postal Bank (TPB)

108.          During 2002, the Tanzania Postal Bank continued with mobilization of deposits from its customers through Ordinary Savings Accounts, Domicile Quick Accounts, Time Deposits Accounts, Call Accounts and Save as You Earn Accounts and lending.  During 2002, the Bank earned a profit of shs. 346 million compared to shs. 951 million in 2001.  The Bank continued to operate through its branches of Mkwepu, Kariakoo, Manzese and Metropolitan in Dar es Salaam and one branch in Zanzibar.  Besides using its branches, the Bank conducted business through regional operating units, whereby by December the Bank had 15 units.  Also, the Bank continued utilise the Tanzania Postal Corporation network which has 113 branches, in providing its services.  Customers deposits increased from shs. 41,470 million in 2001 to shs. 45,127.6 million in 2002, equivalent to an increase of 8.8 percent.  In 2002, the number of customers reached 1,079,225, compared to 1,038,243 customers in 2001.

 

109.          The Tanzania Postal Bank has expanded its services by starting to offer  local money transfer services in the country.  The Bank has also expanded its foreign exchange services.  In addition to the provision of local money transfer services the Bank continued to provide Western Union Money Transfer (WUMT) service as the main agent in the country.  This service, is offered at 20 centres of the Bank and 40 centres of the Tanzania Postal Corporation, on agency basis.  Thus, the number of centers, providing Western Union Money Transfer (WUMT) services reached 60 in 2002, compared to 33 centers in 2001.  The Bank continued to invest in short term government securities, time deposits in other banks, and lending.  By December 2002, the total value of investments of the Bank had reached shs. 41,664.5 million, compared to shs. 39,373 million in 2001.

 

110.          During 2002, the Bank continued to provide business loans, soft micro-credits to groups of people and individuals, personal loans and consumer loans for permanent employees.  By December 2002, the value of all loans provided by the Bank amounted to shs. 5,219.8 million, compared to shs. 2,541.1 million in 2001, equivalent to an increase of twice the amount in that period.  By the end of 2002, a total of 676 groups on pilot basis, benefited from loans amounting to shs. 1,731 million provided by the Bank.  Also, loans amounting to shs. 1,072.2 million, were provided to 756 employees.

Table No.27

Table No.28

Table No.29

Table No.30

Table No.31

Table No.32