Tanzania: T-bills continue to attract public interest

TREASURY bills have continued to attract massive investments despite low interest rates leading to an overly subscription, a signal that investors are awash with resources.

According to the Bank of Tanzania (BoT) summary of the auction held on Monday this week, total amount tendered was 144.2bn/- against an offer of 100bn/- at an annual average interest rate of 4.7 per cent.


The successful amount also went up by 20.8bn/- above the 100bn/- offered, setting a slight difference with the total amount tendered of 144.2bn/-.

This was a rare and unique situation to happen compared to the money market auctions held in the previous period.

The central bank’s monthly economic review for June this year indicated a continued dwindling money market interest rates from levels registered in January.

The central bank indicated that after an increase of 7.14 per cent in January 2011, the overall Treasury bills interest rates declined gradually to 4.54 per cent in May, reaching a record below of 3.6 in June before picking up again in July and August to an average of 7.0 per cent.

Despite the decline, government securities faired well, recording an oversubscription trend which was an indication of disproportionate investment resources against the opportunities on offer.

In the auction summary, a total of 36.7bn/- was tendered in 364 days against 25bn/- offered at 6.5 per cent interest rates. For 182 days, a sum of 58.8bn/- was tendered against 30bn/- offered at an interest rate of 4.8 per cent.

The total of 41.1bn/- was tendered for 91 days against 30bn/- offered at 3.7 per cent interest rates. However, the 35-day period was undersubscribed by 7.5bn/- against 15bn/- offered at 2.8 per cent interest rates.

According to the Confederation of Tanzania Industries (CTI) Chairman, Mr Felix Mosha, the declining interest rates on government securities is good news as most of the investment resources would be directed to the private sector, an engine of the economy.

Mr Mosha said in an interview recently that pumping more funds to the manufacturing sector for example, could revamp production for both internal and foreign markets that would bring in more foreign currencies.

Consequently, he said inflation rate would drop due to tight monitoring of the central bank on the volume of money supply.

The CTI boss was commenting on the possibility of bringing down inflation from the current 13 per cent to single digit level.

“As interest rates on government securities drop, a trickledown effect is immediately reflected on the declining inflation rates,” he said.