July 28 2021

COVID-19 Pandemic: Tanzanian Government Announces Measures to Support Businesses in Private Sector

Source: IBFD Tax Research Platform News

The government has announced, through the Bank of Tanzania (BOT), additional measures to reduce the economic impact of the COVID-19 pandemic. These measures are aimed at extending credit to the private sector and lowering interest rates on commercial bank credit extended to the private sector.

Before the outbreak, the economy was one of the fastest growing economies in the East Africa region, recording average GDP growth of 6.7% between 2010 and 2019, but slowed to an average of 4.8% after the pandemic.

Proposed policy reforms which took effect on 27 July 2020 are set out below.

  • Reduction of the statutory minimum reserve requirement (SMR) for banks extending credits to the agricultural sector with an interest rate not exceeding 10% per annum.
  • Relaxing the agent banking eligibility criteria by removing the 18-month experience requirement. Applicants will now be required to only possess a national card or national identity card.
  • Limitation of the interest rate paid on mobile money trust accounts to a maximum of the interest rate offered on savings deposit accounts by the relevant bank.
  • The BOT will introduce a special loan (TZS 1 trillion) at a rate of 3% per annum to banks and other financial institutions for lending to the private sector on the condition that the commercial banks will lend at a rate not exceeding 10% per annum.
  • Reduction of the risk weight on loans. The BOT will reduce the risk weight on different categories of loans in the computation of regulatory capital requirements of banks. This measure will provide an opportunity to banks to extend more credit to the private sector than before.