BoT sheds light on money flow

THE Bank of Tanzania (BoT) has said there is sufficient money in circulation to keep the economy going while attributing the tight liquidity situation to tight tax collection measures, cost cutting and crackdown on corruption by the government.

BoT Governor, Professor Benno Ndulu, said in Dar es Salaam yesterday that the bank was closely monitoring money in circulation, including all transactions conducted through commercial banks.

 “Nationally, there is enough money in circulation to serve and implement various public projects for the interests of all the people,” he pointed out; adding that what is currently being experienced is the absence of cheap money that was obtained through illicit means.

He stated that the government had plugged loopholes in illicit or cheap means of getting money (popularly known as ‘mission town’), which explains why the mission schemers were now crying out for money.

Similarly, Prof Ndulu said although public firms have shifted their accounts from commercial banks to the BoT, the good thing was that the government entities are still using the same financial institutions to channel their funds into various projects.

 For example, in every 100/-; 36/- pass through commercial banks and 64/- by the people and outside the formal system. On executing the government expenditures for the first six months, the governor said there have been difficulties in obtaining foreign aid due to the world economic crunch, adding, however, that the cost cutting and tax collection measures helped to fund various projects.

 Prof Ndulu said that during the period under review, foreign aid accounted for only one per cent of all revenues, loans 8 per cent while 91 per cent was sourced from domestic borrowing and revenue collection.

 “The ratio between national debt and revenue collection is good. For in 2015/16 revenue grew to 13.5 trillion/- compared to 9.5tri/- in 2014/15,” he said, adding that the government serviced domestic debt using local currency contrary to the foreign debt that should be converted to dollars.

 Prof Ndulu said as of June, this year, the national debt has reached 21 billion US dollars but when computed using the present value, it will definitely go down.

According to him, the debt has not reached the state that the country cannot borrow any more. He noted that currently, Tanzania uses 20/- in every 100/- of its revenue collected to pay back the debt, the level which was still low compared to the average set up of 50/- in every 100/- of revenue.

 “It is contrary to some reports that the national debt has reached dangerous levels,” he insisted.

On the construction sector, Prof Ndulu said there were positive prospects that it would bounce back after slowing down in the first quarter of 2016 due to the mega-infrastructure projects, including central railway line rehabilitation and construction of the oil pipeline to Uganda, Kurasini business centre, roads and bridges to start being implemented before the end of the year.

The central bank governor pointed out that more efforts are needed to boost investment in the agriculture sector that registered 2.7 per cent growth in the first quarter compared to the negative two (2) per cent recorded in the corresponding period last year.

 He said many challenges remain unaddressed in the sector that remains the biggest employer in the country where over 70 per cent of the population relies on it. Prof Ndulu mentioned low investment in technology that could promote productivity, value addition for earning premium revenues in both local and foreign markets as well as reducing wastage of agricultural products during harvest period.

The sector contributes 25 per cent of the Gross Domestic Product (GDP) with the six key cash crops generating less than 9 per cent of the foreign exchange earnings.

 For example, agriculture exports generated 850 million US dollars in the year ended in June. Several other sectors have overtaken agriculture, including tourism that generated over 2 billion US dollars, industries (1.5 billion US dollars), gold mining (1.2 billion US dollars) and transit trade (1.1 billion US dollars).

GOVERNOR’S COMMENTS IN A NUTSHELL: What we see is absence of cheap money obtained illegally.

The government has plugged loopholes in illicit or cheap means of getting money, popularly known as ‘mission town’), which is why schemers are now crying out for money.

 Tight liquidity is due to tight collection measures, cost-cutting and anti-graft fight.