The Bank of Tanzania (BoT) will this year adopt a price-based monetary policy as it seeks to guard banks against negative effects of economic volatilities.

Currently, the BoT makes use of the quantity-based monetary policy which was adopted in 1995.

"As indicated in our monetary statement of June last year, BoT intends to adopt this framework as part of the modernization of our policies," the BoT director of economic research and policy, Johnson Nyella told journalists here yesterday.

He said with the price-based monetary policy, the interest rate charged by banks will not be affected even if there is an economic volatility. This is contrary to the current one whereby any economic hiccup results into negative effects on interest rates.

He said Tanzania has been late in adopting the framework due to a number of challenges including unreliable data including high frequency GDP data which now comes out on quarterly basis.

Other factors that necessitated a delay in the adoption of the policy include low level of availability of statistic and economic projections rates among others.

He however noted that the government has now equipped its statistics institutions to the level that they now issue reliable data. They are now able to project its future plans and decision.

“It is in view of this that the country will now adopt the policy as a way of harmonizing its price-based monetary framework with other EAC countries,” he said.

He said the environment now accepts the framework following the adoption of the Interbank Cash Market Interest Rate (IBCMR).

"Through this framework, we will have a policy rate which will be guided by a monetary policy committee which will decide the policy rate,” he said

He said that the IBCMR will either mop out or inject cash to either reduce or increase liquidity.-The Citizen