This archive report was first published on 12 May 2020.
On May 12, 2020, Tanzania's central bank announced a series of measures to mitigate the economic impact of the COVID-19 pandemic. The bank lowered the statutory minimum reserves requirements for commercial banks to 6% from 7% and cut its discount rate for banks to 5% from 7%.
The reduction in reserve requirements will take effect on June 8 and is expected to provide additional liquidity to banks. According to Governor Florens Luoga, the move aims to provide banks with more space to borrow from the Bank of Tanzania at a lower cost, thus signaling lower lending rates by banks.
The central bank also reduced haircuts on government securities to 5% from 10% for Treasury bills and to 20% from 40% for Treasury bonds. This will allow lenders to access funding from the central bank with less collateral than before.
Additionally, lenders will be provided with regulatory flexibility to change the terms of loans for borrowers who might fall into distress due to the crisis.
Tanzania has confirmed 509 cases of the coronavirus, with 21 deaths, according to the World Health Organization. The government has been criticized for not providing regular updates on the spread of the outbreak, and the opposition has accused it of being secretive.
The International Monetary Fund expects Tanzania's economic growth to slide to 2% this year, from 6.3% in 2019.
