Credit to agric., manufacturing up

According to the Bank of Tanzania (BoT) monthly economic review for September, credit to agriculture and manufacturing increased by 9.3 per cent and 11.0 per cent respectively in the year ending August as credit to the private sector as a whole grew by only 0.2 per cent in the period under review compared to 13.8 per cent of the corresponding period last year.

Agriculture sector accounts for about one-third of the overall economy and provides employment to over 70 per cent of the population. It is a major source of raw materials for the manufacturing sector which is the vehicle to bring the country to the middle income economy.

Other sectors that benefitted from banks credit extension are building and construction increasing slightly to 17.7 per cent from 17.6 per cent in the period under review. Some of the sectors hit by credit squeeze are trade and personal loans that dropped by negative 7.3 per cent from 9.0 per cent last year and 4.9 per cent from 8.3 per cent respectively.

Others are transport and communication. The slow growth of credit to the private sector is associated with cautious stance taken by banks in extending credit following weakening of the quality of banks’ asset and slowdown in uptake of credit by firms.

Meanwhile commercial banks net claims on the central government increased to 4.81tri/-in August from 3.35tri/- a year earlier reflecting the banks preference for less risky government securities.

The BoT net claims on the government declined by 213.8 per cent in the year ending August from a decline of 8.7 per cent a year earlier on account of strong build-up of government deposits at the Bank by the government following improvement in domestic revenue collection, streamlined expenditure and cumulative effect of the external non-concessional loan received in June.

Credit to the government from the banking system by 29.2 per cent compared to an increase of 5.9 per cent recorded last year attributed to a decrease in the BoT net claims on the government.

However, net lending by commercial banks to the government rose by 43.3 per cent compared with 12.9 per cent in the year to August 2016 reflecting banks preference for government securities.

SOURCE: DAILY NEWS

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