Why money supply in Tanzania has increased in recent months

By The Citizen Reporter

Arusha. The provision of funds to fuel economic activities has improved significantly in recent months, with the government attributing this trend to increased disbursement of development funds.

The Bank of Tanzania (BoT) reports in its February 2022 Monthly Economic Review (MER) that the Broad Money Supply (M3) grew at an annual rate of 14.9% in the year ending January 2022.

Broad money is the most flexible method of measuring an economy’s money supply, accounting for cash and other assets readily convertible into foreign currencies, including large term deposits, institutional money market funds, short-term redemption and larger liquid funds, among others.

According to the BoT, the growth rate of 14.9% was more than double the result of the corresponding period in 2021.

The epic growth means liquidity in the economy, which has grown at a lackluster pace over the past few years and bottomed out at just 3.3% in the year ending January 2019, was again promising.

Adorning a workshop for publishers here yesterday, the Permanent Secretary of the Ministry of Finance and Planning, Mr Emmanuel Tutuba, said the growth was the result of improved and timely disbursement of government funds for development projects.


“The growth of M3 reflects the fact that the disbursement of funds – from domestic and foreign sources – to implement development activities was on track,” he said, noting that so far no projects development had been blocked due to a lack of funds.

In the first eight months of the current financial year, Tutuba said, the government has disbursed a total of 8.4 trillion shillings in development finance.

This suggests the government was on track to disburse a good chunk of its development funding of around 13 trillion shillings for its 36 trillion shillings budget for the 2021/22 financial year.

The good execution of the budget explains the fact that both local and external revenue sources are doing well.

For example, the Tanzania Revenue Authority (TRA) said it collected 11.11 trillion shillings, which is 98% of the forecast of 11.302 trillion shillings between July and December 2021. This is an increase of 20 .2% or 1.87 trillion shillings from 9 trillion shillings. 24 trillion which was collected during the same period of the 2020/21 financial year.

Similarly, President Samia Suluhu Hassan’s recent travels and focus on economic diplomacy have helped unlock Tanzania’s development funds from development partners and concessional loans in recent months.

According to Mr. Tutuba, the flow of money from the government and other sources has resulted in inclusiveness in the conduct of economic activities.

“It could be government to government; from government to private sector; private to private and private to public, but at the end of the day when this money goes into the commercial banks, they will have enough money to lend to individuals and to the productive sector. This is how money comes into circulation,” he said.

His view agrees with that of the BoT which says money supply growth – which was in line with the 10% target for the whole of 2021/22 – was due to accommodative monetary policy and the recovery. credit growth to the private sector, caused by improving trading conditions from the negative impact of the Covid-19 pandemic.

Private sector credit growth was estimated at an annual rate of 10% in the year ending January 2022.

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