Tanzania hikes its benchmark interest rate to 6% in response to pressure from inflation

Following its announcement earlier in the month that it will begin using a benchmark interest rate to signal the direction of its monetary policy, the Bank of Tanzania (BoT) announced a rate of 5.5 percent in January.

At a meeting with the CEOs of the nation’s banks, Governor Emmanuel Tutuba stated, “The decision… is based on the macroeconomic forecast made in March… which requires an increase in the scope of monetary policy actions to contain the lingering inflationary pressures.”

Inflation in the country remained below the state’s aim of not more than 5 percent in February, remaining stable at 3 percent year over year, unchanged from one month earlier.

“The stability was due to prudent monetary policy and adequate domestic food supply,” Tutuba stated.

He stated that the economy’s forecast was positive, estimating that it would have increased by roughly 5.1 percent in the first quarter of 2024. The economy is predicted to have grown by roughly 5 percent in 2023, up from 4.7 percent a year earlier.

“The performance is underpinned by public investment, particularly in infrastructure, as part of the measures to facilitate private sector business and investment,” Tutuba stated.

“Due to the expanding business, private sector investment also contributed to the projected growth.”

Among other things, Tanzania’s economy is based on tourism, mining, and agriculture.