TANZANIA — THE private sector credit growth has been growing at a decreasing rate since quarter four last year, but still remained in the Bank of Tanzania (BoT) targets.
The latest monthly economic report of the Bank of Tanzania (BoT) shows that credit growth to the private sector slowed to 16.6 per cent in the year ending April compared to 22.9 per cent posted in the corresponding period last year.
According to the central bank report, private sector credit growth started a downward trend in September last year (21 per cent) to April this year (16.6 per cent).
The Head, Research & Financial Analytics at Alpha Capital said yesterday that the private sector credit growth is still growing, rather at a decreasing rate, averaging 17 per cent in quarter one this year from 23 per cent in quarter three last year, as per the Monetary Policy Report by the BoT.
The slowdown in private sector credit growth has been in line with monetary policy implementation, gauging the growth towards a set target of 16.4 per cent, according to the Monetary Policy Statement published in February 2024.
Private sector credit growth and aggregate money supply growth have remained above target for the last two years, prompting the central bank to adopt the less accommodative policy in 2022.
The policy was finally abandoned in the end of 2023 as growth of money supply approached within the central bank’s target, albeit remained slightly afloat.
Vertex International Securities Research and Analytics Manager Beatus Mlingi said the BoT’s economic reviews from January to April 2024, highlight a concerning trend of declining credit to the private sector.
Several factors contribute to this decline, each with significant implications to the Tanzania’s economy.
One primary reason for the reduction in credit is the tightening of monetary policy by the BoT.
To control inflation, the central bank decided to increase the Central Bank Rate from 5 per cent in the first quarter of this year to 6 per cent in the second quarter.
This increase in interest rates makes borrowing more expensive, thereby reducing the demand for credit among private sector businesses.
As a result, companies find it more challenging to secure the funds needed for expansion and operations.
Another contributing factor is the increased risk aversion among banks, particularly tier 2 and lower-tier banks.
Rising non-performing loans (NPLs) have led these banks to adopt stricter lending criteria.
When banks perceive lending to the private sector as riskier, especially in uncertain economic conditions, they become more cautious, further restricting credit availability.
Additionally, new regulatory measures aimed at improving the banking sector’s stability might inadvertently tighten credit conditions.
The BoT’s risk assessment parameters for banks can constrain their ability to lend, as they must adhere to stricter regulatory requirements to maintain stability.
The implications of this decline in credit availability for Tanzania’s economy are significant.
Reduced credit hampers business expansion and investment, leading to slower economic growth. The private sector, which is a crucial driver of economic activity, relies heavily on credit for capital expenditures and operational funding.
Without adequate credit, businesses may cut back on hiring or even lay off employees to manage costs, leading to higher unemployment rates and reduced household incomes.
Furthermore, financial constraints on businesses can lead to a decline in consumer confidence, resulting in lower consumer spending.
This reduction in spending can further slowdown economic activity, creating a negative feedback loop that exacerbates economic challenges.
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Long-term investments in infrastructure, technology and other productive assets may also be postponed or canceled, reducing the economy’s productive capacity and growth potential.
An economist-cum-investment banker, Dr Hildebrand Shayo said yesterday that some commercial lenders have funded mega and long term projects which take long time to start operations.
“Some commercial lenders have been financing mega projects which take a long time to commence production thus causing delays in loan payment,” he noted.
Dr Shayo said that some private sector players implementing government projects have been experiencing payment delays thus destabilising liquidity stance of the lenders.
He said also the considerable part of the non-performing loans that most commercial lenders are experiencing is from the private sector players.
Source: allafrica.com
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Air Tanzania Banned From EU Airspace Due to Safety Concerns
Several airports have since locked Air Tanzania, dealing a severe blow to the Tanzanian national carrier that must now work overtime to regain its certification or go the wet lease way
The European Commission has announced the inclusion of Air Tanzania on the EU Air Safety List, effectively banning the airline from operating in European airspace.
The decision, made public on December 16, 2024, is based on safety concerns identified by the European Union Aviation Safety Agency (EASA), which also led to the denial of Air Tanzania’s application for a Third Country Operator (TCO) authorisation.
The Commission did not go into the specifics of the safety infringement but industry experts suggest it is possible that the airline could have flown its Airbus A220 well past its scheduled major checks, thus violating the airworthiness directives.
“The decision to include Air Tanzania in the EU Air Safety List underscores our unwavering commitment to ensuring the highest safety standards for passengers in Europe and worldwide,” said Apostolos Tzitzikostas, EU Commissioner for Sustainable Transport and Tourism.
“We strongly urge Air Tanzania to take swift and decisive action to address these safety issues. I have offered the Commission’s assistance to the Tanzanian authorities in enhancing Air Tanzania’s safety performance and achieving full compliance with international aviation standards.”
Air Tanzania has a mixed fleet of modern aircraft types including Boeing 787s, 737 Max jets, and Airbus A220s.
It has been flying the B787 Dreamliner to European destinations like Frankfurt in Germany and Athens in Greece and was looking to add London to its growing list with the A220.
But the ban not only scuppers the London dream but also has seen immediate ripple effect, with several airports – including regional like Kigali and continental – locking out Air Tanzania.
Tanzania operates KLM alongside the national carrier.
The European Commission said Air Tanzania may be permitted to exercise traffic rights by using wet-leased aircraft of an air carrier which is not subject to an operating ban, provided that the relevant safety standards are complied with.
A wet lease is where an airline pays to use an aircraft with a crew, fuel, and insurance all provided by the leasing company at a fee.
Two more to the list
The EU Air Safety List, maintained to ensure passenger safety, is updated periodically based on recommendations from the EU Air Safety Committee.
The latest revision, which followed a meeting of aviation safety experts in Brussels from November 19 to 21, 2024, now includes 129 airlines.
Of these, 100 are certified in 15 states where aviation oversight is deemed insufficient, and 29 are individual airlines with significant safety deficiencies.
Alongside Air Tanzania, other banned carriers include Air Zimbabwe (Zimbabwe), Avior Airlines (Venezuela), and Iran Aseman Airlines (Iran).
Commenting on the broader implications of the list, Tzitzikostas stated, “Our priority remains the safety of every traveler who relies on air transport. We urge all affected airlines to take these bans seriously and work collaboratively with international bodies to resolve the identified issues.”
In a positive development, Pakistan International Airlines (PIA) has been cleared to resume operations in the EU following a four-year suspension. The ban, which began in 2020, was lifted after substantial improvements in safety performance and oversight by PIA and the Pakistan Civil Aviation Authority (PCAA).
“Since the TCO Authorisation was suspended, PIA and PCAA have made remarkable progress in enhancing safety standards,” noted Tzitzikostas. “This demonstrates that safety issues can be resolved through determination and cooperation.”
Another Pakistani airline, Airblue Limited, has also received EASA’s TCO authorisation.
Decisions to include or exclude airlines from the EU Air Safety List are based on rigorous evaluations of international safety standards, particularly those established by the International Civil Aviation Organization (ICAO).
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The process involves thorough review and consultation among EU Member State aviation safety experts, with oversight from the European Commission and support from EASA.
“Where an airline currently on the list believes it complies with the required safety standards, it can request a reassessment,” explained Tzitzikostas. “Our goal is not to penalize but to ensure safety compliance globally.”
Airlines listed on the EU Air Safety List face significant challenges to their international operations, as the bans highlight shortcomings in safety oversight by their home regulatory authorities.
For Air Tanzania, this inclusion signals an urgent need for reform within Tanzania’s aviation sector to address these deficiencies and align with global standards.
The path forward will require immediate and sustained efforts to rectify safety concerns and regain access to one of the world’s most critical aviation markets.
Source: allafrica.com
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