Interbank Cash Market

The interbank cash market (IBCM) continued to facilitate the trading of Shilling liquidity among banks. In February 2024, the total value of transactions in the IBCM decreased to TZS 1,604.9 billion from TZS 2,187.8 billion traded in the previous month (see Chart 2.4.2). Seven-day transactions dominated the market, accounting for 67.1 percent of the total market turnover. The overall IBCM interest rate decreased to 7.20 percent from 7.27 percent in the preceding month.

Interbank Foreign Exchange Market

The Interbank Foreign Exchange Market (IFEM) witnessed sustained high demand for foreign currencies, particularly the US dollar. This demand is attributed to reduced seasonal inflows from tourism and export crops, coinciding with tightening monetary policies in advanced economies. In response, the Bank intervened by selling USD 35.8 million in the IFEM during the month (see Chart 2.4.3). Reflecting prevailing foreign exchange liquidity conditions, the Shilling traded at an average rate of TZS 2,547.74 per US dollar, compared to TZS 2,520.68 per US dollar in the preceding month. Year-on-year analysis indicates that the Shilling experienced a depreciation of 8.9 percent compared to 0.5 percent in the same period in 2023.

Tanzania's economic development:

Interbank Cash Market (IBCM):

• Decrease in total value of transactions indicates a possible slowdown in economic activity.
• Dominance of 7-day transactions suggests short-term liquidity management among banks.
• Decrease in the overall IBCM interest rate may signal efforts to stimulate borrowing and investment.

Interbank Foreign Exchange Market (IFEM):

• High demand for foreign currencies, especially the US dollar, indicates significant external trade activity.
• Reduced seasonal inflows from tourism and export crops highlight potential vulnerabilities in certain sectors.
• Interventions by the central bank to stabilize the exchange rate reflect efforts to maintain macroeconomic stability.
• Year-on-year depreciation of the Shilling suggests challenges in maintaining currency value, possibly due to factors such as inflation or external pressures.