Growth of monetary aggregates slows

The growth of monetary aggregates in circulation slowed in the year ending March this year compared to the corresponding period in 2011 partly due to Bank of Tanzania (BoT) measures to curb inflation.

The observations are contained in BoT’s monthly economic review for April this year that measures the change of growth of varied fundamentals for the specific period under review showing how the economy faired.

“In the year ending March 2012, growth of extended broad money continued to slow down to 15.7 per cent from 16.3 per cent in the preceding month and 23.8 per cent in the corresponding period a year earlier,” noted the bank report.

The extended broad money consists of currency in circulation outside banks, demand, time and savings plus foreign currency deposits of Tanzanian residents with depository corporations.

Apart from the BoT measures to curb inflation that reached 18.7 per cent in April 2012, the growth of monetary aggregates was mostly driven by the contraction of the net foreign assets (NFA) and net government borrowing from the banking system.

Similarly, the slowdown in the annual growth of credit to the private sector also contributed to holding back the year-on-year extended broad money in circulation.

Credit to the private sector registered an annual growth of 21.9 per cent in March this year down from 24.3 per cent in the preceding month and 23.3 per cent of the corresponding period in 2011. 

In absolute terms noted the Bank report, domestic credit recorded an annual increase of 2.07tr/-, out of which 66.8 per cent was held by the private sector and the balance by the government.

On monthly basis, domestic claims decreased by 126.1bn/- in March 2012, out of which 42.9 percent of the decline emanated from the private sector and 57.1 per cent was from the government. When compared with the preceding month, most of credit to various economic activities slowed down except for personal activities.

Loans for personal activities continued to hold the largest share of credit to different economic activities accounting to about 21.9 per cent, followed by trade, manufacturing, and agriculture activities.

Building and construction, trade and personal activities recorded higher annual growth in the rhythm 4.3 per cent, 19.9 per cent, 21.9 per cent respectively compared with change in the previous year by 3.4 per cent, 18.6 per cent and 21.7 per cent respectively.

However, annual growth of credit to other activities slowed down and was more pronounced in agriculture to 11.8 per cent from12.5 per cent, transport and communication 7.9 per cent from 9.7 per cent, hotels and restaurant to 4.7 per cent from 4.9 per cent and manufacturing 11.9 per cent from 21.7 per cent. 

On the liabilities side, non-transferable deposits had the largest percentage share to the extended broad money, followed closely by foreign currency and transferrable deposits.

During the month ending March this year, transferrable deposit was the largest contributor amongst the components of extended broad money, accounting for 55 per cent of total change.

Foreign currency deposits had a significant contribution to the annual change in extended broad money, accounting for 31.4 per cent of total change
Source: The Daily News,http://www.dailynews.co.tz, reported by Sebastian Mrindoko

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