Dodoma. Members of Parliament have warned that the recent increase in Tanzania’s Central Bank Rate (CBR) could push commercial lending rates higher, raising concerns about borrowing costs for businesses and potentially affecting the implementation of national development goals.
The concerns were raised in Parliament during the question-and-answer session, following the Bank of Tanzania’s decision to increase the CBR from 5.75 percent to 6.25 percent for the quarter ending September 2026.
Mtwara Rural MP Arif Premji said the July 2 decision could lead commercial banks to increase interest rates charged to the private sector, with wider implications for economic activity and the implementation of national development goals.
“Banks will go on to raise interest rates for the private sector,” Mr Premji said, asking the government what measures it would take to bring borrowing costs down.
He said the private sector’s contribution and role in the economy made the issue particularly important, warning that higher lending rates could make it more difficult for businesses to access affordable financing.
Mpanda Urban MP Haidary Hemed Sumry also questioned the cost of funds available to commercial banks. He asked when the Bank of Tanzania would reduce the interest rate it charges financial institutions for borrowing, arguing that cheaper funding could enable banks to provide more affordable loans to businesses and ordinary citizens.
Responding on behalf of the Minister for Finance, Deputy Minister for Finance Laurent Deogratius Luswetula said the government does not directly determine the lending rates charged by commercial banks operating in Tanzania.
He said commercial banks set their lending rates according to market conditions, taking into account factors including inflation, credit risk, operating costs and the level of profit targeted by individual banks.
“The government does not directly intervene in the setting of lending rates,” Mr Luswetula told Parliament, stressing that rates are determined by market fundamentals.
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However, he said the government was not standing aside on the issue and was working through the Bank of Tanzania to improve transparency and competition in the financial sector.
Mr Luswetula pointed to the central bank’s price-comparison system, which allows borrowers to obtain clearer information about available credit services and compare the costs offered by financial institutions.
The CBR increase was announced by the Bank of Tanzania’s Monetary Policy Committee on July 2. According to the central bank, the move was intended to contain inflationary pressures arising from higher global energy, fertiliser and transportation costs linked to the geopolitical conflict in the Middle East.
The central bank said inflation in Mainland Tanzania remained within its 3–5 percent target, although annual headline inflation had risen to 4.2 percent in May 2026 from 3.2 percent in March. At the same time, private-sector credit growth averaged 24 percent during the second quarter, supported by demand from productive sectors.
The MPs’ concerns come as policymakers seek to balance price stability with continued access to credit and economic growth. The Bank of Tanzania said economic growth remained strong, with Mainland Tanzania’s real GDP growth estimated at about six percent in the first half of 2026.
The Monetary Policy Committee is scheduled to meet again on October 7, 2026, with the CBR for the fourth quarter expected to be announced the following day.
