BY DIRAMAKINI
THE Bank of Tanzania (BoT), through its Monetary Policy Committee (MPC), has maintained the Central Bank Rate (CBR) at 5.75 percent for the second quarter of 2026, signaling a cautious approach aimed at preserving price stability while sustaining economic growth.
The decision was announced in Dar es Salaam today April 2nd, 2026 by the Deputy Governor in charge of Economic and Financial Policies, Dr. Yamungu Kayandabila, on behalf of the MPC Chairman and BoT Governor, Emmanuel Tutuba, following the Committee’s latest meeting.
According to the MPC, the move reflects a measured policy stance designed to balance risks to inflation and the economic growth outlook, particularly in light of escalating geopolitical tensions in the Middle East that continue to disrupt global trade, investment flows, and overall economic stability.
In a further effort to enhance the effectiveness of monetary policy, the Committee also resolved to narrow the CBR corridor from 200 basis points to 150 basis points, effective April 2026.
Consequently, the target band for the 7-day interbank rate will range between 4.25 percent and 7.25 percent during the second quarter. The central bank affirmed its commitment to ensuring the interbank rate remains within this corridor.
The MPC noted that global economic growth is expected to remain resilient in 2026. However, heightened geopolitical tensions in the Middle East have disrupted supply chains and increased volatility in commodity markets, posing risks to the outlook.
Crude oil prices, initially projected to stabilize around USD 60 per barrel in the first quarter of 2026, have surged to above USD 100 per barrel.
In response to rising inflationary pressures, central banks worldwide may consider tightening monetary policy if the conflicts persist or intensify.
Despite global headwinds, Tanzania’s economy has demonstrated strong resilience. Growth in the first quarter of 2026 is estimated at 6.2 percent for Mainland Tanzania and 6.7 percent for Zanzibar, driven by key sectors including construction, agriculture, financial and insurance services, and tourism.
Private sector credit expanded robustly by 22.8 percent, supported by an accommodative monetary policy stance and sustained demand from businesses and households.
The outlook for the second quarter remains positive, with GDP growth projected at 6.1 percent for Mainland Tanzania and 6.6 percent for Zanzibar.
Nevertheless, the MPC cautioned that prolonged or intensified conflict in the Middle East could weigh on future growth prospects.
Inflation has remained within target levels, averaging 3.3 percent in Mainland Tanzania and 4.5 percent in Zanzibar during the first quarter of 2026.
This stability has been underpinned by prudent monetary policy and relatively stable food and energy prices.
The MPC expects inflation to remain within the target range of 3 to 5 percent in the second quarter, despite upward pressure from rising energy and transportation costs.
These pressures are anticipated to be offset by stable exchange rates and lower food prices.
The banking sector continues to exhibit strong fundamentals, characterized by adequate liquidity and capital buffers.
The ratio of non-performing loans declined to 2.9 percent, well below the acceptable threshold of 5 percent, while payment and settlement systems remained efficient and reliable.
The external sector has remained resilient, with the current account deficit narrowing to 2.2 percent of GDP in the year ending March 2026, down from 2.4 percent in 2025.
This improvement was largely driven by strong export performance, particularly in gold, tourism, and agricultural products.
Zanzibar maintained a current account surplus, supported by robust tourism receipts. Meanwhile, foreign exchange reserves rose to over USD 6.2 billion, sufficient to cover 4.8 months of imports-above both the statutory minimum of four months and the East African Community benchmark of 4.5 months.
On the fiscal side, the MPC expressed satisfaction with government revenue performance, noting that tax collections exceeded targets due to improved economic activity and enhanced tax administration and compliance. Public expenditure remained aligned with available resources.
The MPC has urged the central bank to continue closely monitoring the economic implications of ongoing geopolitical developments in the Middle East. The Committee’s next meeting is scheduled for July 2026.