Borrowing fears as interbank rate reaches its highest level in 11 months

Dar es Salaam. The interbank rate reached its highest level in 11 months last Friday, raising fears that the cost of borrowing will increase soon. Daily Bank of Tanzania (BoT) financial market reports have shown that commercial bank lending rates (day-to-day interbank rates) have risen to the weighted average rate (WAR) of 2.98 % last Friday, the highest level since December 15, 2017 when the rate was 3%. On Friday, the highest rate was 3.5% and the lowest was 2.3%, or 2.98% for the war.

Although last week, we had only four days of trading, Tuesday being a holiday for Muslims and, despite a more intense war, the day-to-day trade amounted to 123 billion shillings. 105.85 billion shillings and 86 billion shillings in the weeks ended 16 and 9 November, respectively.

According to analysts and players in the banking sector, the increase in the number of WARs could be the result of insufficient liquidity in the commercial banking system, which would trigger supply and demand problems.

Musa Juma, chief financial officer at the Zanzibar People's Bank Limited, told The Citizen that demand for liquidity was increasing among banks, leading to higher rates.

"Deposits of banks in many commercial banks have decreased, resulting in liquidity problems," he explained, explaining that to cover these costs, they are forced to borrow from others banks.

Professor of Economics and Finance Dickson Pastory, of the College of Business Education (CBE), said that it seemed like the banks did not have many options to choose from. loan. "This will affect borrowers in the near future, because to reduce borrowing costs, banks will dump on borrowers (depositors) by reducing the deposit borrowing rate or increasing borrowing rates," did he declare.