EAC central bankers warn of severer impact of financial crisis

Special Report:Global Financial Crisis

DAR ES SALAAM, March 5 (Xinhua) -- Central bank governors from Kenya,
Tanzania and Uganda have cautioned that severer impact of the global financial
crisis would be felt by East Africa that had minimum impact from the first-round
effects.

The warning was sounded when the central bank governors met on Wednesday in
Arusha of northern Tanzania to discuss ways to deal with the ongoing financial
crisis and its yet-to-be-felt adverse impact on the region.

Kenya, Tanzania and Uganda are member states of the East African Community
(EAC) which also includes Burundi and Rwanda.

The central bank governors made it clear in their papers delivered to a
special one-day economic crisis conference that 2009 would be the toughest year
for the region, according to reports reaching here on Thursday.

"As the global economy sinks into depression," said Bank of Tanzania
Governor Benno Ndulu, "prices of key export commodities are bound to fall
further as consumer demand in advanced countries continue to decline."

The central bank governors met just ahead of a scheduled continental
conference for finance ministers and central bank governors to be held in Dar es
Salaam later this month. The conference, co-organized by the International
Monetary Fund and the government of Tanzania, is to discuss the global financial
crisis and its impact on Africa.

Financial indicators mostly right in Tanzania

Special Report:Global Financial Crisis

By Yi Gaochao

DAR ES SALAAM, Feb. 10 (Xinhua) -- The important financial indicators for Tanzanian economy are mostly right despite the inroads of the global financial crisis, according to the chief of Tanzania's central bank.

According to figures released by the central banker to the country's lawmakers in Dodoma, Tanzania's political capital city, 31 of Tanzania's 34 commercial banks had a capital adequacy of 17 percent compared to the required 10 percent.

The banks' liquidity ratio averaged 42 percent, above the required level of 20 percent while deposits stood at 68 percent as against a required limit of 80 percent.

Most encouraging is Tanzania's foreign exchange reserves which by last week stood at 2.8 billion U.S. dollars which are hailed as strong enough to guarantee the country's financial stability and investors' confidence in the country.

Local banks combined to have another foreign exchange reserve of 600 million dollars, according to Bank of Tanzania Governor Benno Ndulu.

The bank governor has assured the general public that the country's financial sector therefore remains strong and safe despite the global economic downturn.

"The inter-bank settlement system continued to be trusted among the key stakeholders," said the central bank governor, "(The) inter-bank cash market is performing well."

He attributed the 15-percent depreciation of the Tanzanian shilling to the U.S. dollar so far to the ongoing economic crunch.

"This drop is not only of the Tanzanian shilling but has also affected currencies such as the Kenyan shilling which has dropped by up to 9.7 percent, Ugandan shilling (by) 20 percent while South African Rand dropped by 50 percent," he added.

Economists and analysts have warned that Tanzania's economic growth may well be affected by such adverse factors as inflation, current account deficit, low level of domestic revenue rather than reduced international aid inflow amid the ongoing financial crisis.

An International Monetary Fund report has earlier warned that lower growth would dampen government revenues in Tanzania, suggesting that the current path of spending would lead to widening fiscal deficits and a financing gap.

The IMF has identified that the real weaknesses of Tanzania's economy was its huge current account deficit which averages 13.3 percent of the country's annual gross domestic product over the 2005-2011 period.

Local economists have added low level of domestic revenue as another adverse factor to affect the country's growth. In the current fiscal year ending in June this year, domestic revenue is projected to account for 16 percent of the GDP. The ratio was 12.5 percent two years back.

Central banker Benno Ndulu has called for sound macro-economic management to mitigate effects of the global economic meltdown.

The governor has also called for financial discipline during the execution of the government budget plan so as to keep the country's financial sector on the right track.