One analyst has said the current cash-crunch in Tanzania is most probably caused by poor velocity of money resulting from a slightly too tight monetary policy.
By Jaston Binala.
Dar es Salaam Landmark Hotel and Blue Pearl Hotel–both located in the Ubungo area of Tanzania’s business capital–are likely to stop hospitality business operations for lack of customers, this website had reliably learned.
An informed source said the nation-wide cash-crunch that is partly caused by government austerity measures has resulted in a virtual lack of customers in the hospitality industry. Business has almost come to a standstill in the hotels and there is no profitability at all, the source said.
Landmark Hotel is consequently not able to meet its operational costs, he said, adding that the Tanzania Revenue Authority has also been demanding taxes at levels which can not be justified by the kind of revenue the hotel business makes at the moment closing down the business appears the intelligent thing to do.
A number of hotel workers have already been laid-off at Landmark hotel at Ubungo, the source said, adding that the one-star hotel may be transformed into a University of Dar es Salaam hostels building if the the University will consent that Masters and PhD students agree to pay Tsh 10,000/- per day for residence there.
Blue Pearl hotel, which is hardly two kilometers away from Landmark Hotel has a similar problem, the source said. There are no customers there either, where the hotel has to pay rent to the Landlord as well as the inconsiderate taxes demanded by the revenue authority. They may also be closing down the business.
Consumer spending is understood to be extremely low in the country at the moment with the public generally confused about what it all means amid impressive development figures being announced by the Government–which place the economic growth rate at 7% of GDP with the inflation rate posted at around 5.2%.
The Tanzania President, Dr. John Pombe Magufuli joined other Tanzanians on June 22, 2016, to wonder, when he asked the Bank of Tanzania for an explanation on why the inflation rate was so low but the people were broke lacking money to spend.
“Tanzania’s inflation rate has fallen from around 30 per cent (in the 1990s) to 5.2 per cent in 2016. But is this really reflected in the lives of Tanzanians?” the president asked. “Has this single digit inflation rate been reflected in the lives of poor Tanzanians? We can just celebrate these statistical data, but in reality people might feel that the inflation rate has actually increased to 70 per cent.”
One analyst has said the current cash-crunch in Tanzania is most probably caused by poor velocity of money resulting from a slightly too tight monetary policy. The annual rate of growth of extended broad money supply (M3) has remained relatively stable. However, in 2015 it accelerated somewhat from 13.6 percent in the first quarter to approximately 17 percent in the fourth quarter.
The analyst adds that the higher rate of growth was mainly due to an increase in the value of the banking system’s net foreign assets and to the increase in the value of credit to the private sector.
But the Monetary policy remained tight, as reflected by the decline in the growth of reserve money to about 7 percent (year-on-year) in February 2016, from about 10 percent at the same point in 2015.