June 10, 2019 / 10:40 AM / 6 days ago

UPDATE 1-Tanzania central bank cuts reserve requirement to lift lending

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NAIROBI, June 10 (Reuters) - Tanzania’s central bank will cut the proportion of deposits banks must maintain as reserves to 7% from 8% as of July 1, in order to boost lending, a report seen by Reuters shows.

The East African nation does not set interest rates using a benchmark, instead imposes a statutory minimum reserve requirement to influence private sector credit growth.

Its central bank last cut the reserve requirement in March 2017, when it reduced it to 8% from 10%.

“There is still a need for more growth of credit to the private sector in order to support sustainable economic growth,” the central bank said in a circular to all commercial banks which was seen by Reuters on Monday.

Some investors say that the policies of President John Magufuli’s government have made it harder for them to operate in the gold-producing country since he was elected in 2015.

The government has embarked on an ambitious programme of industrialisation, but foreign investment has fallen after government interventions in mining and agriculture.

Foreign direct investment fell to 2 percent of GDP in 2017, down from about 5 percent in 2014, the World Bank said.

The IMF projected a rate of GDP growth of around 4-5 percent in the medium term, should current policies continue.

That forecast differed from the government’s projection that the economy will grow by 7.3 percent in 2019 after an estimated 7.2 percent expansion last year. (Reporting by Omar Mohamed Writing by Duncan Miriri; editing by John Stonestreet and Alexander Smith)

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