The Bank of Tanzania has lowered its benchmark lending rate from 7 per cent to 5 per cent to cushion banks from Covid-19 impact.
BoT Governor Prof Florens Luoga in a statement on Tuesday said the policy change aims to provide additional space for banks to “borrow at a lower cost thus signalling lower rates by banks.”
“The Bank of Tanzania to reduce the discount rate from 7 per cent to 5 per cent with effect from May 12,” BoT said in a statement.
The regulator said that to spur liquidity, it had resolved to lower Statutory Minimum Reserves (SMR) to six per cent, from seven per cent, effective June 8.
The bank also imposed haircuts on government securities and treasury bonds.
“To decrease haircuts on government securities from 10 per cent to 5 percent for treasury bills from today [Tuesday] and from 40 per cent to 20 per cent for treasury bonds, the measure will increase the ability of banks to borrow from the bank of Tanzania with less collateral than before,” said BoT.
The MPC also urged lenders to consider restructuring their loans on a case by case basis to support debtors through coronavirus pandemic.
BoT also approved the increase mobile money transaction limits from the current reduce congestion in banking halls to prevent further spread of coronavirus.
“Also mobile money operators to increase daily transaction limit to customers from Tsh3,000,000 ($1,291) to Tsh5,000,000 ($2,151) and a daily balance from Tsh5,000,000 ($2,151.) to Tsh10,000,000 ($4,303) this measure will encourage customers to use digital payment platforms for transactions there by will be reducing congestion in banking premises,” added the statement.
Tanzania as at Tuesday had recorded 509 coronavirus cases with 183 recoveries. Death toll stands at 21.