Interbank rate surges to two-week high

Quarter-end tax obligations have pushed up money demand among commercial banks, resulting into surging average overnight rate to a two-week high of 8.19 per cent.

Money analysts said in Dar es Salaam yesterday that apart from tax payments, the new SIM card tax has also impacted on the interbank rate.

The Standard Chartered Bank’s daily commentary has attributed the overnight rise to payments of corporate and SIM card taxes. “(However)…the effect of this is expected to ease in the coming days with normal liquidity levels resuming,” the bank said.

Bank of Tanzania (BoT) data show that the overnight rates ranged between seven and 10 per cent yesterday against the four and 8.5 per cent of the last ten days. Higher overnight rates have negative effect on credit pricing as lenders pass on the extra costs to borrowers, increasing the costs of goods and services in the economy.

Tanzania Securities’ Business Analyst Brenda Rose Massay said the rate went up due to low liquidity that has spurred demand among banks. “Overnight pushes up the interest rates for lending, ultimately increases the costs of borrowings,” Ms Massay told the 'Daily News'.

The higher overnight rate was reflected on the shilling as it continues to appreciate further against the dollar as corporate continue to pay quarter –end tax obligations.

“(The shilling) supply exceeded demand and the main supply was from the mining sector,” Standard Chartered Bank said, adding: “We expect the shilling to maintain same trend today.”

The major mobile phone companies have sought injunctions from the Tax Appeals Tribunal, barring the Tanzania Revenue Authority (TRA) from collecting a 1,000/- tax on each SIM card, effective July 1, 2013. 

The companies, all members of the Mobile Operators Association of Tanzania—Vodacom, Tigo, Airtel, Zantel and TTCL—say about 8 million users will not be able to access the mobile phone services due to the new tax.

But, the treasury and have TRA maintained that the 1,000/- excise duty was legalised by the 2013/14 Finance Act and came into effect on July 1, 2013 and mobile firms should collect the tax on behalf of the government. 

Should the companies agree to pay the tax, each mobile phone subscriber will be charged 3,000/- for the three months that have lapsed so far.
Source: Daily News, reported by Abduel Elinaza from Dar es Salaam, Tanzania

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