East African Business Week

DAR ES SALAAM, TANZANIA - The Inter-bank lending rate hit a new high of 12.15 per cent, the highest in three years, indicating soaring borrowing tempo from private sectors.
The three-year high lending rate, however, was short lived and moved down slightly to close the week at 10.85 per cent. Tanzania Securities Business Analyst, Joel Nkya, said last week the high rate kept on shooting higher during last week, before reaching the highest level since 2009.
"This indicates higher borrowing rates for businesses depending on bank loans as source of capital," Mr Nkya said on the brokerage firms' weekly commentary.
The country's Central the Bank of Tanzania (BoT), said during the year ending June 2011, growth of credit to the private sector was 25.6 per cent compared with 16.3 per cent recorded in June 2010.
"In the recent months the pace of credit to private sector growth continued to pick up, reflecting recovery of banks' confidence in the economy following easing of the global financial crisis," BoT said in its latest monthly economic review of July 2011.
 On the other hand, the Central Bank said, net Government borrowing from the banking system was Tshs 821.4billion (US 513.4million )compared with the estimate of Tshs 297billion ($185.6 million).
"The increase in Government borrowing was associated with the need to finance infrastructure developments, owing to delays in realisation of non-concessional borrowing," the monthly report noted. The inter-bank lending rate on August 1, was slightly above 8 per cent and continued to increase to hit the three-year high mark last week. But the trend might make a u-turn after Bank of Tanzania (BoT) increased the Treasury Bills yield rates.
BoT in the last T-Bills auction accepted offers for one-year bills which had a yield rate of almost 12%, in a bid to mop excess liquidity in the market.   
In last week's T-bills auction announcement of Tshs 100 bn ($62.5 m, bidders were expected the Central Bank will increase the yield rates, especially of one, three, and six months coupon.  Bankers expected the auction to be undersubscribed, or the rates would be raised taking cue from the last auction's where investors seemed to unanimously share a feeling that rates had to hike.
"We expect the auction to see a modest move of (between) plus 20 and 50 basis points," Standard Chartered Bank said in its market commentary mid last week..