Dar es Salaam. The Bank of Tanzania (BoT) announced on Friday its Central Bank Rate (CBR) at 5.5 per cent following the country’s transition to an interest-based monetary system from the former system, which relied on quantity of money.

“The Monetary Policy Committee’s decision on the CBR rate considered the need to contain inflation within the medium-term target of five per cent while supporting economic growth to reach 5.5 per cent or more in 2024 and ensuring the stability of the exchange rate,” reads part of BoT’s statement.

While Tanzania’s inflation is considered to be stable at three per cent according to the Tanzania National Bureau of Statistics (NBS), BoT assesses the ongoing geopolitics tensions in the Middle East and OPEC+ decisions on oil production, could be potential risks for inflation in 2024.

The East African nation has also been facing a significant challenge of U.S. dollar scarcity,  which has, in turn, led to the rapid depreciation of the Tanzanian shilling, reaching 7.8 per cent by November 2023.

Some steps the government took include issuing a new directive to restrict outflows of dollars in the economy, a gold purchasing programme, and the direct selling of the U.S. dollar in the market. 

Between January and September 2023, BoT sold about US$439 million in the market to reduce the dollar shortage.

While Tanzania’s economic outlook is expected to remain positive, attaining about 5.2 per cent in the first quarter, the depreciation of the shilling is expected to increase the country’s debt burden. 

This is because there is a consistent increase in commercial loans, mostly taken to implement some of the infrastructure projects.