Tanzania expects to open its capital markets further in December by letting foreigners from outside east Africa invest in Treasury bills and other debt, a senior central bank official said on Tuesday. Tanzania has been easing restrictions on its capital markets in line with commitments as a member of the five-nation East African Community bloc. The country, once a bastion of socialist values, has moved more slowly than some of its neighbours.
Joseph Masawe, director of economic research and monetary policy, told Reuters deepening the capital market would make it more responsive to rate moves by the central bank, which could start announcing a benchmark lending rate by late 2016. "We have already started measures to set a central bank rate, and probably by the next year or so we should be able to start also announcing the central bank rate," he said in an interview at Bank of Tanzania's headquarters in Dar es Salaam.
Unlike other EAC states such as Kenya, Uganda and Rwanda, Tanzania does not set a benchmark lending rate. It focuses on managing shilling liquidity by selling and buying government instruments, using that route to guide rates in the market. At present, T-bills and other instruments can only be held by Tanzanians or investors from east Africa, who must keep them for at least a year, a step Masawe said was one of the country's "speed bumps" to prevent volatility.
"We have moved towards liberalising our financial markets for east African residents," Masawe said. "With the rest of the world, we are expecting to have full liberalisation in December." He said whether to keep the "speed bumps" would be reviewed in December. "For us, those are going to be temporary." Like other regional currencies, Tanzania's shilling has weakened against the dollar. Reuters data show the shilling has lost almost 20 percent of is value so far this year. Masawe said global dollar strength was partly to blame but that a central bank decision to reduce bank reserve requirements in December 2014 had contributed.