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| BoT HQ in Dar |
Tanzania might not attain the desired
economic growth because of slowed-down credit to the private sector
which in turn reduces producers' output.
The Bank of Tanzania (BoT) announced a
sharp year-to-year decline of lending to private sector to 16.8 per cent
in August, this year, from 27.5 per cent of the same month last year.
Economists have it that the slowing down
of credit to the private sector, which is the engine of growth, is bad
for the economic performance and may retard the projected GDP.
"… A
number of economic activities recorded slow growth rates in credit in
the year ending August 2012, except for transport and communication,
agriculture, manufacturing, and personal activities," BoT indicates in
September's month economic review.
The University of Dar es Salaam Senior
Lecturer (Economics), Dr Jehovanness Aikael, said the slowing down would
affect the ability of financial sector to facilitate production growth
and hinder GDP growth.
"The trend is not healthy especially if we believe
that the private sector is the engine of growth," Dr Aikael told the
'Daily News', adding, "the sector needs capital (through lending) to
facilitate output growth."
He said should the private sector
lending decrease while credit to government increases this means there
is a crowding out of investment, a phenomenon that contracted GDP
growth.
"As the economy grows, financial sector facilitation to output
also increases." Dr Aikael said the current trend shows "lessening in
lending activities that means reduction of financial sector facilitation
to the production process".
According to BoT, during the period
under review, net claims on government increased by 48.2bn/- compared
with 603.5bn/- recorded in the year ending August last year.
Two sectors
namely transport and communications and, manufacturing registered high
credit growth from negative to 15.8 per cent and 23.8 per cent
respectively.
While others, construction, agriculture,
hospitality, trade and personal loans decreased substantially in
year-to-year comparison.While the credit to private sector dwindles,
lending interest rates increased slightly ranging between 15.55 per cent
and 16.23 per cent in August compared to 14.46 per cent to 15.88 per
cent recorded in the preceding month.
"Overall lending rate recorded an
increase of 15 basis points to 15.83 per cent in August (2012), while
short-term lending rate, up to one year, increased by 9 basis points to
14.55 per cent," BoT said in the review.
Source: The Daily News,http://www.dailynews.co.tz,reported by Abduel Elinaza in Dar es Salaam
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