BANK of Tanzania (BoT) has said the country is experiencing shortages of US dollars, the dominant currency in international transactions but insisted that there was no cause for alarm, as the level of reserves was sufficient to cover four months of imports.

BoT Director of Economic Research and Policy, Dr Suleiman Missango told editors in Dar es Salaam yesterday that the stock of foreign exchange reserves declined to 4,881.2 million US dollars at the end of April 2023, from 5,461.4 million US dollars in the similar period in 2022.

Despite the decline, reserves remained adequate, covering 4.4 months of projected imports of goods and services, in line with the country benchmark of at least four months.

“There is a decline in foreign exchanges reserves in the country, however, that is not a crisis, as the level of reserves remains sufficient to cover four months of imports,” insisted Dr Missango.

Dr Missango said much as Tanzania’s external sector continued to be affected by cumulative effects of global shocks, particularly the war between Ukraine and Russia, Covid-19 and climate change, which largely impacted the global commodity prices, the country is grappling with the situation by instituting various measures.

He said that the available stock of foreign exchange which 4.9 billion US dollars is being used prudently to cope with the global dollar scarcity.

He added that BoT is selling 2 million US dollars to local banks every day, in efforts to curb the deficit of US dollars in the market. He said from January 2022 to May 2023, the BoT has traded a total of 376 million US dollars through Inter-Bank Foreign Exchange Market (IFEM).

Another measure initiated by the BoT is that of purchasing gold from the government for its reserve and has so far acquired 418 kilogrammes of the precious metal. Gold reserves have always been an important part of the diversification of global reserves for countries

He said since the move was introduced, BoT has been purchased gold worth 280 million US dollars annually, equivalent to six (6) tonnes as part of the measures to swell the foreign exchange reserve capacity.

He further said that BoT has moved to issue licence to at least 88 Bureau de change in various part of the country to increase the level of forex domestically.

Dr Missango further said that the prices of petroleum products is declining, which is one of the supporting measures being taken by the BoT to reduce use of dollars in transactions.

However, Dr Missango maintained that the situation will recover soon, especially during the tourism peak season — July to September, as well as market season for traditional cash crops, which will pump into the country more dollars.

He also said that BoT will continue to strictly manage foreign exchange reserves, to meet the objectives of the financial markets.

“The objectives of the financial markets are to ensure that the Bank preserves capital, meet liquidity needs and enhances income given the viability of the market environment,” he said.

Recently, the BoT announced strengthened measures of controlling forex exchange in the country, with experts considering it as a part of efforts to curb the deficit of US dollars in the market.

The measures that according to the BoT Governor Emmanuel Tutuba came to effect from May 1^st this year, include the mandatory use of interbank foreign exchange for transaction that exceeds 1 million US dollars

The government has also restricted trading of foreign exchange with international foreign currency brokers, who are not licensed in Tanzania.

“All foreign exchange transactions exceeding 1 million US dollars per transaction in the retail market shall at all-time be traded within the interbank foreign exchange market prevailing quoted prices,” he said.

The governor also instructed that transactions of a single customer in a day shall be summed up for the purpose of determining the amount.

According to him, at all times, foreign exchange dealers are required to strictly observe the procedures for Know Your Customer (KYC) in their undertakings, while the limit for the foreign exchange Net Open Position (NOP) shall be ten per cent of Core Capital and has to be observed at all times.

All Letters of Credit (LCs) for transit cargoes shall be funded by foreign exchange mobilised from respective destination countries.

Activities on the Dar es Salaam Stock Exchange (DSE) increased for the second week running.

Turnover for the week amounted to 3.9bn/-, an increase of 48.20 per cent from the previous week. General market was in bullish mode leading to an increase in both total and domestic market capitalisation.

The top three trading counters within the week were, TBL, CRDB, and NMB, dominating the market with 57.44 per cent, 27.42 per cent, and 10.41 per cent of the overall market turnover, respectively.

Four counters registered price gains within the week, Simba Cement (TCCL) leading the gainers as the Scancem acquisition seems imminent.

Simba cement registered 28.38 per cent gain within the week closing at 1,900/- per share, SWISS gained 6.49 per cent per week ending the week at 1,640/-. NICO as well registering a 2.5 per cent gain within the week closing at 410/- per share, lastly CRDB registered a 2.04 per cent increase within the week to close at 500/- per share

On the loser’s side, DCB Bank dropped by 2.63 per cent closing off the week at 185/- per share.

Total market capitalisation increased by 2.12 per cent to 15.151tri/- and domestic market capitalisation increased by 0.52 per cent closing at 10.934tri/-.

Key benchmark indices

• All Share Index (DSEI) closed at 1,816.97 points increasing by 2.12 per cent.
• Tanzania Share Index (TSI) closed at 4,133.050 points increasing by 0.52 per cent.

Sector Indices

• Industrial and Allied Index (IA) closed at 5,128.51 points, up by 0.46 per cent.
• Bank, Finance and Investment Index closed at 4,029.69 points, up by 0.82 per cent.
• Commercial Services Index closed at 2,161.21 points, down by 0.20 per cent.

Highlights: Debt Market

Primary market

On Wednesday 17th May 2023, the central bank was in the market offering 103bn/- to investors for a new 5-year Treasury bond offering an 8.6 per cent coupon rate annually.

This auction was catered for investors with more preference for medium-term papers.

The auction was subscribed by 46.17 per cent – the auction received bids totalling 47.55bn/- and accepted bids worth 44.15bn/-.

The weighted average yield to maturity has gone up by 17.87 basis points relative to the previous auction held on January 4th 2023 from 9.6670 per cent to 9.8457 per cent.

Average yields have been on an upward trend over the last four auctions gaining 90.77 basis points from the average yield in May 2022. Moreover, the price floor has reached 92.4 from 96.5 in the same period.

This continues to reflect lessened monetary policy accommodation by the central bank to taper inflation.

This 5-year Treasury bond had been undersubscribed, as were the previous two 5-year auctions. This reflects investor’s current appetite for long tenures such as the 25-year Treasury bond due to its higher cash flow appeal.

Additionally, the recent increased stock market activity can also explain the low auction subscription as higher-risk investors’ shift to equities.

Secondary market

Market activities were elevated during the week, the overall turnover for the trading week ending May 19 increased by 114 per cent from 61.68bn/-registered in the previous week to 132.34bn/-.

Moreover, number of trades increased from 45 trades recorded in the previous trading week to 58 trades.

Overall tenures traded were predominately on the long end of the of the yield curve, the on-the-run 20-year T-bond accounting for 45.33 per cent of the traded volume.

There was a fixed income trade during the week involving a NMB corporate bond with a notional value of 6.0m/- and an average price of 85/94.  We expect secondary trading activities to remain elevated in the coming weeks.

Inflation

Inflation rate drops to 4.3 per cent after slightly going down by 0.4 percentage points in April, after the prices of some food and non-food items slightly declined.

The national bureau of statistics (NBS) statement on Wednesday showed that inflation dropped to 4.3 per cent from 4.7 per cent in March.

Impact

The decline in the inflation rate might be a positive sign that the government’s efforts to contain and maintain the inflation rate are working. This creates favourable conditions for investment for both international and domestic investors.

Outlook

Domestically, we understand equities strategies for 2023 should be focused on companies with solid fundamentals, which will show more growth. From a macro-economic perspective, low inflation and resilient cost pressures will be key drivers to compliment the quality of Tanzania equities. Given the strong growth environment in the companies are expected to increase top line and bottom-line growth relative to FY 2022.

In the short-term we might see slight volatility in the weeks ahead as companies begin to exercise their corporate actions.

The bank’s shareholders will receive a dividend per share of Sh45 billion this year, up from last year’s Sh36 billion. “The rise in our profitability and hence our dividend is testament to the success of our five-year medium strategy that ran from 2018 to 2022,” CRDB Bank board chairman Ally Laay told shareholders here at the weekend.

At group level, CRDB Bank’s net profit rose by 31 percent last year to reach Sh351.4 billion, compared to Sh268.2 recorded in 2021.

He said CRDB Bank’s Burundi subsidiary exhibited a splendid performance last year when its net profit rose by about 80 percent to reach Sh23 billion from Sh12.8 billion in 2021.

“This means that the Burundi subsidiary alone contributed 7.0 percent to the Group’s profit,” he said, detailing a number of initiatives that the board and the management will undertake to grow the profits further in that country.

Recently, CRDB Bank was granted a licence by the central bank of the Democratic Republic of the Congo, officially known as Banque Central du Congo (BCC), to commence its operations there.
Similarly, CRDB Bank Group has also introduced an insurance subsidiary, CRDB Insurance Company (CIC), as well as its own foundation this year.

Speaking on the Bank’s performance, the Group CEO and Managing Director, Abdulmajid Nsekela, said in the financial year 2022, the efforts to strengthen income continued to yield positive results, with a growth of 28 percent in operating income to Sh497.7 billion.

The growth was fueled by an increase in net interest income, which grew by 15.5 percent year-on-year to Sh745.8 billion, driven by loan book growth. The Group closed the year with an NPL ratio of 2.8 percent, thus meeting the regulatory requirement of less than 5 percent.

The Bank also recorded strong balance sheet growth, with a year-on-year expansion of 32.0 percent from Sh8.8 trillion in 2021 to Sh11.6 trillion. The growth was contributed by a 26.4 percent increase in customer deposits, reaching Sh8.2 trillion from Sh6.5 trillion reported in 2021.

“Our efforts to enhance the efficiency of our operations continue to bear results with significant improvements in our cost of business as reflected in the cost-to-income ratio, which has improved significantly from 66.7 percent in 2018 to 49.4 percent in 2022,” he said.

DIVIDEND DECLARATION FOR THE FINANCIAL YEAR 2021

The Annual General Meeting (AGM) of the Bank which was held on 25th June,2022 approved the payment of TZS 11 per share as dividend for Financial Year 2021 as submitted by the Board of Directors. Pursuant to the dividend payment declaration, the share Register details shall remain as follows