The interbank market has experienced
increased offers that helped the rates to climb down to around 25 per
cent compared to 30 per cent of last week.
The offers which were for overnight
facility went up, thanks to liquidity improvement as the government paid
salaries for April at a tune of 250bn/-.
According to Standard
Chartered Bank Daily Market Report, demand for one month increased as
money circulation has also improved.
“There was appetite for one month
offers and this indicates improved liquidity as a result of spending by
the government,” the bank said yesterday.
The liquidity scarcity has
been caused by the Bank of Tanzania’s tight money measures to curb
foreign exchange volatility and double-digit inflation. The move has
seen the shilling stability but on the other hand affected debt
markets.
On his part, Tanzania Securities Chief
Executive Officer Moremi Marwa said on Tuesday that the liquidity
squeeze has pushed up the cost of fund hence reducing banks
profitability this year. “Its impact is seen on government securities.
Despite the reduction of size, the
Treasury Bills were heavily undersubscribed,” Mr Marwa said. The size
for the two latest Treasury Bills were reduced to 70bn/- from 100bn/-.
The successful bidders in the auction a fortnight ago offered 40bn/-
only.
The impact of the tight liquidity also
saw a mere 5.0 per cent as successful bidders for the ten-year 20bn/-
bond auctioned last week.
Mr Marwa said commercial banks have failed
to participate at full length in the government securities markets as
their liquidity position has been wiped out by last year's measures to
curb shilling fluctuations and high inflation.
“The situation on the ground shows that
banks have no enough funds,” he said. On the other hand, the money
squeeze has helped the shilling to stabilize. Since January, the
shilling has been trading between 1,580/- and 1,600/- per US dollar.
Source: The Daily News, http://dailynews.co.tz, reported by Abduel Elinaza
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