(3 Minutes Read)
The Bank of Tanzania (BOT) Monetary Policy Committee (MPC) reviewed the conduct of monetary policy and the performance of the economy. Based on the performance, combined with leading economic indicators for the second half of the year, GDP growth outturn for the whole of 2023 might be above the projection of 5%.
MPC observed that the performance of the Tanzanian economy was satisfactory in 2023 and is expected to further improve in the subsequent year, on account of the implementation of growth-enhancing policies and increased private sector investment. Specifically, GDP growth in the first and second quarters of 2023 was 5.4% and 5.2%, respectively, bolstered by the diversified nature of economic activities.
The less accommodative monetary policy continued to keep monetary and financial conditions at the level required to contain inflation below the target of 5% while continuing to support economic activities and financial sector stability. Also, supported by fiscal policy and an improvement in proceeds from exports and tourism, the policy stance lessened the pressure on demand for foreign currency in October and November 2023.
The MPC also discussed the global economic outlook and noted that the situation has been relatively weak for most of 2023, largely due to geo-political tensions, tightened financial conditions, and high energy prices. The condition might improve in 2024, conditional on the fading of geo-political conflicts, decline in energy prices in the world market, and easing of monetary policy tightening in advanced economies.
A recovery in economic activities was also observed in Zanzibar, owing to a remarkable improvement in tourism and public and private investment. As a result, growth was 5% in the second quarter and is expected to reach an annual target of 7.1% in 2023
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The MPC noted with satisfaction the progress made by the Bank of Tanzania in adopting a new monetary policy framework in January 2024, which will focus on targeting short-term interest rates rather than reserve money, to control inflation and support economic growth. This new framework is referred to as the interest rate or price-based monetary policy framework. In the context of the expected low inflationary environment and improving business conditions, the MPC decided to sustain the implementation of a less accommodative monetary policy in December 2023. This conclusion was also reached after considering the unfavorable global economic condition.
