The Central Bank of Tanzania announced Monday that it is launching a new Domestic Gold Purchase Program aimed at addressing dwindling foreign exchange reserves by purchasing gold from domestic miners and traders in exchange for Tanzanian shillings.
In a statement, Central Bank Governor Emmanuel Tutuba said the program will allow the bank to acquire and hold gold reserves as part of efforts to bolster the country’s falling foreign exchange reserves. He invited all stakeholders in the gold mining and trading industry to actively participate.
“The Bank of Tanzania wishes to inform the public on the commencement of the Domestic Gold Purchasing Program, which aims to bolster foreign exchange reserves through acquiring and holding gold,” Tutuba said. “The Bank is therefore purchasing gold from domestic miners and traders, in Tanzanian Shillings. All stakeholders are invited to actively participate in this initiative.”
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The new gold purchase program aims to address this decline in reserves by building up the central bank’s gold holdings, purchased with local currency to avoid further drawdowns on foreign exchange reserves.
The move comes after the central bank announced stringent new foreign exchange regulations in June, banning all unlicensed international brokers from buying or selling foreign currency and requiring all retail forex transactions over $1 million to be conducted via the interbank market.
Then, Tutuba explained that Tanzania’s foreign exchange reserves had dropped sharply from $5.5 billion in April 2021 to $4.9 billion this year, a decrease he attributed to growing external debt repayments and import pressures. He said the reserves could sustain 4-5 months of imports.
At the time, Tutuba said those measures were aimed at safeguarding the stability of the country’s financial system amid growing forex shortages.
Tanzania now joins other African countries like Kenya, Nigeria, Malawi and Zimbabwe that have also been battling acute shortages of U.S. dollars driven by high external debt repayment pressures.
