TANZANIA: THE interbank cash market recorded a decline in transaction volumes in August, even as the average interest rate edged higher highlighting changes in shortterm funding activity among commercial banks.
The latest Bank of Tanzania’s September 2026 Monthly Economic Review shows that total interbank cash market transactions fell from 5.63tri/- in July to 4.57tri/- in August.
The market facilitates short-term lending and borrowing between banks to manage their liquidity needs.
The decline represents a 18.8 per cent reduction in turnover, suggesting that banks traded smaller volumes of funds through the market during the month.
Despite the lower transaction volume, the average interbank cash market rate increased slightly, indicating that the cost of short-term funds edged higher.
However, the figures alone do not establish whether the movement reflected tighter liquidity across the banking system or temporary financing needs among individual banks.
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The BoT report shows that seven-day transactions accounted for a substantial share of market activity in August, alongside overnight and other short-term transactions.
These arrangements allow banks to meet immediate funding requirements without maintaining excessive idle balances.
The interbank market also plays an important role in transmitting monetary policy to the wider economy.
Changes in interbank rates influence banks’ funding costs and can affect lending rates, credit availability and the cost of financing for businesses and households.
The BoT uses monetary policy operations to manage liquidity and guide short-term interbank rates towards its policy rate.
Monitoring transaction volumes alongside interest rates therefore helps assess how monetary policy is transmitted through the banking system.