Tanzania MPs warn of rising borrowing costs following central bank rate hike

Members of Parliament in Tanzania have expressed concerns that the Bank of Tanzania’s decision to increase the Central Bank Rate (CBR) from 5.75 percent to 6.25 percent could lead to higher commercial lending rates. Lawmakers warned that increased borrowing costs for the private sector might hinder economic activity and the achievement of national development goals.

During parliamentary sessions, MP Arif Premji noted that higher interest rates could make it difficult for businesses to access affordable financing. Similarly, MP Haidary Hemed Sumry questioned the cost of funds available to commercial banks, suggesting that lower interest rates for financial institutions could result in more affordable loans for citizens and businesses.

In response, Deputy Minister for Finance Laurent Deogratius Luswetula stated that the government does not directly determine the lending rates set by commercial banks. He explained that banks establish these rates based on market conditions, including inflation, credit risk, operating costs, and profit targets.