Interest rates offered by banks on deposits slightly declined in August this year, while those charged on loans were generally higher than the rates prevailed in the preceding month and the corresponding month in 2016, the Bank of Tanzania has said in its monthly economic review.
Overall time deposit rate decreased to an average of 10.17 percent from 10.55 percent in the preceding month, but was much higher than 8.78 percent recorded in August 2016.
Likewise, 12-months deposit rate averaged at 11.69 percent, compared with 11.89 percent and 11.50 percent in July 2017 and August 2016, respectively.
According to statement, overall lending rate rose to an average of 17.84 percent in August 2017 from 17.63 percent in the preceding month and 15.80 percent in the corresponding month in 2016.
The relative increase in lending rates suggests a rise in risk premium, which is attributed to weakening of banks’ assets quality in the recent months.
During August 2017, the Bank of Tanzania conducted two auctions of Treasury bills at fortnightly intervals for monetary policy and government fiscal operations. Amount offered was worth shillings 340.0 billion compared with shillings 341.8 billion in the preceding month.
Value of (amount tendered by investors) amounted to shillings 528.7 billion, higher than shillings 444.2 billion tendered in the preceding month.
Successful in the Treasury bonds market, the Bank of Tanzania on behalf of the Government, offered 5-year, 7-year and 10-year Treasury bonds worth shillings 90.0 billion, shillings 103.3 billion and shillings 111.4 billion in August 2017,respectively.
The 5-year and 7-year bonds were oversubscribed, with bids worth shillings 120.9billion and shillings 185.2billion,respectively,while 10-year bond was undersubscribed by shillings 9.8 billion.
Successful bids amounted to shillings 58.5 billion, shillings 100.3 billion and shillings 67.4 billion for 5-year, 7-year and 10-year bonds, respectively.
Weighted average yield to maturity rose to 13.96 and 15.75 percent, from 13.07 percent and 14.76 percent for 5-year bond and 10-year bond, respectively.
As for 7-year bond, weighted average yield to maturity declined to 14.28 percent from 16.48 percent .
Total transactions in the interbank cash market amounted to shillings 469.6 billion in August 2017 compared with shillings 406.2 billion in the preceding month. The share of overnight placements in the IBCM rose to 61.3 percent from 32.5 percent in July 2017.
Overnight and overall interbank cash market rates declined to 4.36 percent and 4.87 percent in August 2017, from 4.43 percent 4.92 percent in the preceding In August 2017, the Bank of Tanzania conducted reverse repo with banks to cover temporary liquidity shortages in the banking system. Reverse repo amounted to shillings 45.5 billion compared with TZS 17.7 billion in the preceding month.
Meanwhile, reverse repo worth shillings 50.9 billion that were conducted in July 2017 matured Reverse repo rate rose to an average of 6.62 percent in August 2017 from 4.89 percent in the preceding month.
It is worth to note that during the month, the Bank of Tanzania did not conduct repos which is used to contract liquidity in the banking system.
Transactions in the interbank foreign exchange market (IFEM)amounted to USD 174.0 million in August 2017 compared with USD 102.2 million in the preceding month.
Bank of Tanzania participated in the market, selling USD 13.0 million and purchasing USD 94.3 million.
The shilling remained broadly stable against US dollar, trading at an average of shillings 2,243.5 per US dollar compared with shillings 2,242.3 per US dollar in July 2017.