The Bank of Tanzania (BoT) is working to reduce interest on Treasury-bills to force down the high lending rates being charged by commercial banks. The central bank has in the past relied heavily on the sale of Treasury-bills to mop up excess liquidity in the financial system. Prof Benno Ndulu, Governor of the Bank of Tanzania, told The EastAfrican in Dar es Salaam that in order to achieve reasonable market-determined interest rates and minimise the adverse impact of high interest rates on domestic credit, the bank had opted to use various strategies. Prof Ndulu said the measures taken included stepped up foreign-exchange sales in the inter-bank market for sterilisation purposes, thereby reducing reliance on Treasury-bills. Due to the need to address high and volatile Treasury-bill rates, the BoT reduced over dependence on Treasury-bills for liquidity management by increasing sales of foreign exchange. Starting January this year, the Bank also reduced the frequency of Treasury-bills auctions from weekly to fortnightly and Treasury bonds to once a month, a move taken mainly to foster competitive bidding and stimulate secondary trading of securities. read more
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