Tanzania's financial markets in November 2024 demonstrated resilience and stability, reflecting sound macroeconomic management. Government securities attracted strong interest in long-term bonds, with yields rising to 15.93% for 25-year bonds, signaling investor confidence in the economy. The interbank cash market maintained balanced liquidity, with a modest overall rate of 8.06%. Meanwhile, the foreign exchange market saw a significant increase in activity, with turnover reaching USD 186.7 million and the Tanzanian shilling appreciating by 2.3% against the US dollar. These trends underscore a stable financial environment conducive to sustained growth and investment.

Details on Financial Markets in November 2024

1. Government Securities Market

The government securities market showed mixed performance in November 2024, with strong interest in long-term maturities. Key details include:

• Treasury Bills:
  • Two auctions were conducted, with a combined tender size of TZS 253.3 billion.
  • Total bids received: TZS 211.7 billion (undersubscribed).
  • Successful bids: TZS 154.8 billion.
  • Weighted average yield (WAY): 12.68%, up from 11.55% in October 2024.
• Treasury Bonds:
  • Two auctions for 20-year and 25-year Treasury bonds were conducted.
  • Combined tender size: TZS 391 billion.
  • Total bids received: TZS 560.7 billion (oversubscribed).
  • Successful bids: TZS 487.5 billion.
  • Weighted average yields:
    • 20-year bond: 15.64%.
    • 25-year bond: 15.93%.

2. Interbank Cash Market (IBCM)

The Interbank Cash Market facilitated shilling liquidity distribution among banks. Highlights include:

• Total Transactions:
  • November 2024: TZS 1,651 billion.
  • October 2024: TZS 2,093.7 billion (indicating reduced market activity).
• Transaction Composition:
  • Overnight transactions accounted for 19.2% of total turnover.
  • 7-day transactions contributed 35.2% of total turnover.
• Interest Rates:
  • The overall IBCM rate: 8.06%, slightly up from 8.04% in October 2024.

3. Interbank Foreign Exchange Market (IFEM)

The foreign exchange market experienced significant activity, reflecting improved liquidity and favorable economic conditions. Key figures:

• Market Turnover:
  • November 2024: USD 186.7 million, a sharp increase from USD 50.7 million in October 2024 and USD 13.1 million in November 2023.
• Bank of Tanzania Participation:
  • Purchases: USD 23 million, compared to USD 4.5 million in October 2024.
• Exchange Rate Performance:
  • Average exchange rate: TZS 2,659.03 per USD, reflecting a 2.3% appreciation from TZS 2,719.91 per USD in October 2024.
  • Annual depreciation slowed to 6.3%, down from 9% in October 2024.

Summary of Figures

Key Insights

1. Government Securities Market: Increased investor appetite for long-term bonds due to stable macroeconomic conditions. Treasury bill auctions faced undersubscription, likely due to lower yields.
2. Interbank Cash Market: A slight decline in activity and marginal rate increase reflects balanced liquidity management among banks.
3. Foreign Exchange Market: Strong activity, with a notable improvement in foreign exchange liquidity and a steady appreciation of the Tanzanian shilling.

The financial market report provides important insights into Tanzania's economic and financial conditions in November 2024

1. Government Securities Market

• Investor Confidence in Long-Term Stability:
  • The oversubscription of 20-year and 25-year Treasury bonds, coupled with increased yields (15.64% and 15.93%, respectively), indicates strong investor confidence in Tanzania's long-term economic stability and macroeconomic policies.
  • The undersubscription of Treasury bills suggests reduced demand for shorter-term investments, possibly due to the relatively lower yields or a preference for more stable, long-term returns.

2. Interbank Cash Market (IBCM)

• Efficient Liquidity Management Among Banks:
  • The decrease in transactions to TZS 1,651 billion (from TZS 2,093.7 billion) reflects reduced borrowing needs in the banking system, potentially due to improved liquidity conditions.
  • The slight increase in the overall IBCM interest rate (8.06% from 8.04%) suggests that liquidity is well-regulated without excessive pressure on interbank lending costs.

3. Interbank Foreign Exchange Market (IFEM)

• Improved Foreign Exchange Liquidity:
  • A sharp increase in market turnover to USD 186.7 million (compared to USD 50.7 million in October 2024 and USD 13.1 million in November 2023) signals robust foreign currency inflows, likely driven by strong tourism performance, cash crop exports, and other international activities.
  • The appreciation of the Tanzanian shilling (2.3% against the USD) reflects improved economic fundamentals, reduced foreign exchange pressures, and confidence in monetary policy management.

What It Tells Us About the Economy

1. Stable Financial Environment:
   • The strong demand for long-term bonds and stable interbank rates indicate a well-functioning financial system with investor confidence and efficient liquidity distribution.
2. Economic Resilience and Foreign Inflows:
   • The surge in foreign exchange market activity and shilling appreciation highlight Tanzania's growing strength in foreign exchange-generating sectors such as tourism and exports.
3. Policy Effectiveness:
   • The financial market trends demonstrate that monetary policy is effectively maintaining balance and fostering stability without excessive inflation or liquidity stress.
4. Opportunities and Risks:
   • The preference for long-term securities over short-term ones and improved foreign exchange conditions present opportunities for investment and growth. However, any global economic shocks or local fiscal pressures could disrupt these favorable trends.

Overall Interpretation

The financial market data shows that Tanzania's economy is on a stable and sustainable path, with growing investor confidence, improved foreign exchange conditions, and efficient liquidity management. These trends are supportive of continued economic recovery and growth.