Establishment of the BOT

Following the decision to dissolve the EACB and to establish separate Central Banks in Tanzania, Kenya, and Uganda, the Bank of Tanzania Act, 1965, was passed by the National Assembly in December 1965, and the Bank was opened by the first President of Tanzania Mwalimu Julius K. Nyerere on June 14, 1966. The Act empowered the Bank of Tanzania to perform all the traditional central banking functions. However, within eight months of the inauguration of the Bank, in February 1967, the Arusha Declaration was proclaimed, and, with it, the Bank had to reorient its policies. Most of the traditional instruments of indirect monetary policy stipulated in the Act became inoperative, as there was no longer an environment of the type which exists in a competitive system, where indirect instruments are effective. The Annual Finance and Credit Plan (AFCP), supported by a system of administered interest rates, was devised as the main instrument of monetary policy from 1971/72.