Fiscal deficits in Tanzania threaten monetary policy effectiveness, warns study.
The study looked at how government spending affects interest rates, exchange rates, and inflation in Tanzania. They found that when the government spends more than it earns, interest rates go up, and the currency value goes down. This can lead to higher prices in the long run. To keep these things stable, the government needs to manage its spending carefully. If the government keeps overspending, it can make it harder for the central bank to control interest rates and inflation. So, it's important for the government to balance its budget to help the central bank do its job effectively.