The Tanzania Shilling (TZS) remained broadly stable in July 2025 despite mild depreciation pressures. The currency averaged TZS 2,666.79 per USD, a 1.34% monthly decline from June, while annual depreciation slowed to 0.11%, reflecting resilience compared to 0.21% in June. Stability was supported by higher foreign exchange market activity, with IFEM turnover rising 33.7% to USD 162.5 million, boosted by export inflows, while the Bank of Tanzania intervened by selling USD 17.5 million. Importantly, reserves strengthened to USD 6,194.4 million, covering about 5 months of imports, well above EAC (4.5 months) and SADC (3 months) benchmarks, cushioning the currency against external shocks.

1. Exchange Rate Movement
   • The Shilling traded at an average of TZS 2,666.79 per USD in July 2025, compared to TZS 2,631.56 per USD in June 2025.
   • This represents a monthly depreciation of about 1.34%.
   • On an annual basis, the Shilling depreciated at a rate of 0.11%, slightly better than the 0.21% annual depreciation recorded in June 2025.
2. Market Liquidity & Central Bank Intervention
   • Interbank Foreign Exchange Market (IFEM) turnover increased to USD 162.5 million in July 2025, up from USD 121.5 million in June 2025.
   • The Bank of Tanzania intervened by selling USD 17.5 million, compared to USD 6.3 million in the previous month.
   • Seasonal inflows from cash crops and gold exports supported liquidity and moderated depreciation pressure.
3. Reserves Buffer
   • Gross foreign exchange reserves stood at USD 6,194.4 million at the end of July 2025, compared to USD 5,292.2 million in July 2024.
   • This covers about 5 months of imports of goods and services, above both the EAC and SADC benchmarks.
   • Strong reserves have helped cushion the Shilling from sharper depreciation.

Table: Tanzania Shilling Stability (July 2025)

Economic Implications of Tanzania Shilling Stability – July 2025

1. Exchange Rate Movement

• Marginal Depreciation and Resilience: The TZS's 1.34% monthly depreciation to 2,666.79 per USD from June 2025 indicates mild pressure from import demand, yet the annual depreciation slowed to 0.11% from 0.21% in June, highlighting improved stability compared to prior periods. Economically, this controlled weakening helps maintain export competitiveness, particularly for key commodities like gold (exports up to USD 3,977.6 million annually) and cash crops, boosting foreign earnings without triggering inflationary spirals. It reflects a narrowing current account deficit to USD 2,079.2 million in the year to July 2025 (down 23.4% from 2024), driven by a 19.7% rise in goods exports to USD 9,479.4 million, as per the report's external sector data.
• Broader Implications: A stable yet slightly depreciating currency reduces the risk of capital outflows, supporting domestic investment and aligning with BOT's accommodative policy (CBR at 5.75%). However, persistent depreciation could elevate debt servicing costs for USD-denominated external debt (USD 32,955.5 million as of June 2025), though strong reserves mitigate this.

2. Market Liquidity & Central Bank Intervention

• Increased Turnover and Supportive Inflows: The Interbank Foreign Exchange Market (IFEM) turnover surged 33.7% to USD 162.5 million from USD 121.5 million in June 2025, signaling enhanced market liquidity bolstered by seasonal inflows from cash crops (e.g., cashew nuts up significantly) and gold exports. BOT's increased intervention—selling USD 17.5 million versus USD 6.3 million—helped moderate depreciation pressures, ensuring orderly market conditions.
• Economic Meaning: This liquidity boost enhances forex availability for importers, stabilizing supply chains in import-dependent sectors like manufacturing and energy (imports at USD 14,720.3 million annually). It underscores BOT's role in smoothing volatility, fostering business confidence and credit growth (15.9% annually), while aligning with global easing of trade tensions that could further support export-driven liquidity. Overall, it contributes to macroeconomic stability, potentially lowering transaction costs and encouraging foreign direct investment.

3. Reserves Buffer

• Robust Accumulation and Coverage: Gross foreign reserves rose to USD 6,194.4 million by end-July 2025, up 17% from USD 5,292.2 million in July 2024, covering 5 months of imports—exceeding EAC (4.5 months) and SADC (3 months) benchmarks. This buildup, fueled by export growth (e.g., tourism receipts up 3.8% to USD 3,871.9 million), provides a strong buffer against external shocks.
• Economic Significance: High reserves enhance currency credibility, reducing vulnerability to global risks like oil price stability (at USD 69.2 per barrel) and enabling BOT to intervene effectively. It supports fiscal flexibility for development spending (TZS 909.4 billion in June) and debt management (national debt at USD 46,586.6 million), promoting sustainable growth. In a regional context, this positions Tanzania favorably for credit ratings and inflows, aiding long-term projections of 6% GDP growth amid subdued global uncertainties.

Summary of Broader Economic Significance

The TZS's stability in July 2025 reflects a positive interplay of export strength, reserve adequacy, and policy vigilance, mitigating depreciation risks while supporting economic expansion. This fosters a conducive environment for private sector activity, with potential upsides in tourism and agriculture, though monitoring import pressures remains key to avoid imbalances. Compared to earlier depreciations (e.g., 6.1% in 2023), current trends indicate improved resilience, aligning with IMF and World Bank views on Tanzania's stable outlook.

The Bank of Tanzania’s August 2025 review shows that lending and deposit rates continued to adjust in response to the accommodative monetary policy stance. Lending rates eased slightly, with the overall rate at 15.16% in July 2025 (down from 15.23% in June), while short-term lending declined to 15.51% and negotiated prime customer loans to 12.56%. On the deposit side, rates for time deposits increased modestly, with the 12-month rate reaching 9.88%, while negotiated deposits for large savers fell to 10.72%. The spread between short-term lending and deposit rates narrowed to 5.63 percentage points from 6.66 points a year earlier, signaling lower borrowing costs relative to savings returns and supporting private sector credit growth of 15.9% annually.

1. Lending Interest Rates

• Overall lending rate:
  • 15.16% in July 2025, slightly lower than 15.23% in June 2025.
• Short-term lending rate (≤ 1 year):
  • 15.51% in July 2025, down from 15.69% in June 2025.
• Negotiated lending rate (prime customers):
  • 12.56% in July 2025, down from 12.68% in June 2025.
• Trend: Lending rates are easing slightly, reflecting improved liquidity and accommodative monetary policy (CBR cut to 5.75%).

2. Deposit Interest Rates

• Overall deposit rate:
  • 8.83% in July 2025, up from 8.74% in June 2025.
• 12-month deposit rate:
  • 9.88% in July 2025, up from 9.79% in June 2025.
• Negotiated deposit rate (large depositors):
  • 10.72% in July 2025, down from 11.21% in June 2025.
• Savings deposit rate:
  • 2.90%, unchanged from June 2025.
• Trend: Deposit rates have been slightly increasing for time deposits, but declining for large negotiated deposits.

3. Interest Rate Spread

• The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025, compared to 6.66 percentage points in July 2024.
• This indicates reduced borrowing costs relative to deposit returns, which can stimulate credit growth.

Table: Lending and Deposit Interest Rates (July 2025)

Economic Implications of Lending and Deposit Interest Rates – July 2025

1. Lending Interest Rates

• Slight Decline: The overall lending rate eased to 15.16% from 15.23%, short-term rates (≤ 1 year) dropped to 15.51% from 15.69%, and negotiated rates for prime customers fell to 12.56% from 12.68%.
• Economic Meaning: This modest reduction aligns with the BOT's CBR cut and improved liquidity (e.g., TZS 758.8 billion in reverse repo operations), lowering borrowing costs for businesses and households. The decline, though small, signals policy transmission, encouraging investment and consumption—key drivers of Tanzania's projected 6% GDP growth. Lower short-term rates (15.51%) support working capital needs, while the negotiated rate drop (12.56%) benefits creditworthy firms, potentially boosting sectors like agriculture and manufacturing (supported by food stock increases to 485,930.4 tonnes). However, rates remain high relative to inflation (3.3%), suggesting banks are cautious about risk, possibly due to lingering global uncertainties noted in the global section.

2. Deposit Interest Rates

• Mixed Trends: The overall deposit rate rose to 8.83% from 8.74%, with the 12-month rate increasing to 9.88% from 9.79%, while the negotiated rate for large depositors fell to 10.72% from 11.21%, and savings rates stayed at 2.90%.
• Economic Meaning: The rise in time deposit rates (e.g., 9.88% for 12 months) reflects banks' efforts to attract longer-term savings amid robust M3 growth (19.9%), ensuring liquidity for lending. This competition for funds supports financial deepening, aligning with Tanzania's goal of mobilizing domestic resources (e.g., savings up 18.7% annually). The decline in negotiated rates (10.72%) for large depositors suggests banks are adjusting terms for institutional clients, possibly to manage excess liquidity. Stable savings rates (2.90%) indicate limited incentives for short-term savings, directing funds toward higher-yield investments or consumption, which could fuel demand-led growth.

3. Interest Rate Spread

• Narrowing Gap: The spread between short-term lending and deposit rates narrowed to 5.63 percentage points in July 2025 from 6.66 points in July 2024, reflecting a more balanced cost-benefit for borrowers.
• Economic Significance: A shrinking spread (from 6.66% to 5.63%) enhances borrowing affordability, stimulating credit demand (e.g., private sector credit at 15.9%). This supports the BOT's growth objective, as lower relative borrowing costs can spur business expansion and job creation. However, the spread remains wide compared to advanced economies (typically 2-3%), indicating banks are still prioritizing profitability, possibly due to high operational costs or non-performing loans. This could limit the pace of credit growth unless offset by further policy easing.

Summary of Broader Economic Significance

• Growth and Investment Boost: The easing lending rates and narrowing spread create a more favorable borrowing environment, supporting the BOT's credit growth target (15.9% achieved) and aligning with GDP growth projections. Rising deposit rates for time deposits enhance savings mobilization, providing a stable funding base for banks.
• Policy Effectiveness: The trends reflect successful monetary policy transmission, with the CBR cut and liquidity injections (e.g., reverse repos) influencing rates, though the high base rates suggest room for further easing to match inflation.
• Potential Challenges: High lending rates (above 15%) could deter small borrowers, while the mixed deposit rate trends might signal uneven liquidity management. In a regional context (e.g., EAC inflation within 8%), Tanzania's rate dynamics support stability but require monitoring to avoid overheating risks.
• Comparative Insight: Compared to 2024's wider spreads (6.66%), the 2025 narrowing aligns with global easing trends (e.g., stable oil at USD 69.2/barrel), positioning Tanzania favorably for investment inflows.

The Bank of Tanzania’s August 2025 Monthly Economic Review shows that the financial market remained highly liquid in July 2025, supported by the recent reduction of the Central Bank Rate (CBR) to 5.75%. Government securities were in strong demand, with Treasury bill auctions oversubscribed nearly threefold (TZS 452.1 billion bids vs. TZS 162.0 billion offered) and a decline in the weighted average yield to 8.13% from 8.89% in June. In the bond market, investor preference shifted toward longer maturities, with the 10-year bond oversubscribed at a yield of 13.74%, while shorter tenors recorded slight yield increases. Meanwhile, interbank cash market (IBCM) activity surged, with turnover rising by 30% to TZS 3,746 billion, dominated by 7-day deals, while the average rate eased to 6.62% (from 7.93%), reflecting improved banking sector liquidity and effective monetary policy transmission.

1. Government Securities Market

• In July 2025, the Bank of Tanzania conducted two Treasury bill auctions with a total offer of TZS 162.0 billion.
  • Bids received: TZS 452.1 billion
  • Successful bids: TZS 158.9 billion
  • Weighted Average Yield (WAY): 8.13% (down from 8.89% in June 2025).
• Treasury Bonds:
  • Auctions for 2-, 5-, and 10-year bonds were held.
  • Tender sizes:
    • 2-year: TZS 117.05 billion
    • 5-year: TZS 136.2 billion
    • 10-year: TZS 162.8 billion
  • Bids received: TZS 396.4 billion, of which TZS 351.9 billion were accepted.
  • Yields:
    • 2-year: 12.17% (slight increase)
    • 5-year: 13.18% (slight increase)
    • 10-year: 13.74% (slight decrease).
  • Investor trend: Preference shifted toward longer-term bonds (10-year oversubscribed, while 2- and 5-year were undersubscribed).

2. Interbank Cash Market (IBCM)

• The IBCM continued to play a role in liquidity management.
• Turnover in July 2025: TZS 3,746 billion (up from TZS 2,873.9 billion in June 2025).
• Structure of transactions:
  • 7-day deals dominated: 65.9% of total turnover.
• Interest rates:
  • Overall IBCM rate eased to 6.62% (down from 7.93% in June 2025).
  • Within the Central Bank Rate (CBR) corridor of 3.75% – 7.75%.

Table 1: Treasury Bills Auction (July 2025)

Table 2: Treasury Bonds Auctions (July 2025)

(Arrows indicate direction vs. June 2025 yields)

Table 3: Interbank Cash Market (IBCM), July 2025

Economic Implications of the Financial Market Data (Government Securities and IBCM)

1. Government Securities Market

Government securities (Treasury bills and bonds) are key tools for the BOT and government to manage liquidity, finance budgets, and signal interest rate expectations. The July 2025 data shows strong demand overall, but with nuanced shifts in investor preferences.

• Treasury Bills (Short-Term Securities):
  • Oversubscription and Yield Decline: The auctions offered TZS 162.0 billion but attracted TZS 452.1 billion in bids (nearly 2.8x oversubscribed), with only TZS 158.9 billion accepted (about 35% of bids). The weighted average yield (WAY) fell to 8.13% from 8.89% in June.
  • Economic Meaning: This indicates abundant liquidity in the banking system, as investors (primarily banks and institutional players) are eager to park excess funds in safe, short-term assets. The yield drop reflects the BOT's accommodative policy transmitting to lower short-term borrowing costs for the government. Economically, it signals:
    • Lower Government Financing Costs: Cheaper short-term debt helps ease fiscal pressure, allowing more budget allocation to growth-oriented spending (e.g., infrastructure, as noted in the document's budgetary operations section).
    • Stimulus to Credit and Growth: With yields falling, banks may redirect funds toward private sector lending, aligning with the BOT's goal of boosting credit growth (which was at 15.9% annually in July). This could support sectors like agriculture and manufacturing, contributing to GDP expansion.
    • Potential Risks: Persistent oversubscription might hint at risk aversion if investors prefer safe assets over riskier loans, though the document's strong money supply growth (19.9% for M3) suggests otherwise.
• Treasury Bonds (Medium- to Long-Term Securities):
  • Auction Details and Yield Movements: Tender sizes were TZS 117.05 billion (2-year), TZS 136.2 billion (5-year), and TZS 162.8 billion (10-year). Total bids reached TZS 396.4 billion (oversubscribed overall), with TZS 351.9 billion accepted. Yields rose slightly for 2-year (to 12.17%) and 5-year (to 13.18%) bonds but eased for 10-year (to 13.74%).
  • Investor Shift to Longer Tenors: The 10-year bond was oversubscribed, while shorter ones were undersubscribed, showing a preference for long-term instruments.
  • Economic Meaning: This points to evolving investor confidence and expectations of future rates.
    • Yield Curve Dynamics: The slight increase in short- to medium-term yields contrasted with a dip in long-term yields suggests a flattening yield curve. Investors may anticipate further policy easing (e.g., more CBR cuts) or stable inflation, making long-term bonds attractive for locking in returns. This reflects optimism about Tanzania's medium-term economic stability, supported by the document's notes on resilient global conditions and domestic inflation within the 3-5% target.
    • Confidence in Long-Term Outlook: The shift to 10-year bonds indicates reduced perceived long-term risks, possibly due to improving external factors (e.g., stable commodity prices like oil at USD 69.2/barrel) and strong export performance. It could lower the government's overall debt servicing costs over time, freeing resources for development (as seen in the document's external sector improvements).
    • Fiscal and Growth Implications: Higher acceptance rates (89% of bids) help fund budgetary operations without crowding out private credit. However, undersubscription in shorter bonds might signal caution on near-term liquidity or inflation risks from food price upticks (e.g., rice and millet, as detailed in the inflation section).

Overall, for Government Securities:

• Broad Implications: The market's robustness (high bids, easing yields) underscores effective monetary policy transmission, fostering lower interest rates economy-wide. This supports the BOT's dual mandate of price stability and growth, potentially reducing the cost of capital for businesses and households. From a macroeconomic perspective, it aligns with Tanzania's 2025 growth projections (around 6.5% per IMF estimates), driven by mining, tourism, and agriculture. However, if yields continue falling too sharply, it could encourage speculative borrowing or pressure the shilling (though it remained stable at TZS 2,666.79/USD).

2. Interbank Cash Market (IBCM)

The IBCM is a short-term lending market among banks, crucial for liquidity management and transmitting BOT policy signals. It operates within the CBR corridor (3.75%-7.75% in July).

• Increased Turnover and Easing Rates: Turnover rose ~30% to TZS 3,746 billion from TZS 2,873.9 billion in June, with 7-day deals dominating (65.9%). The overall rate eased to 6.62% from 7.93%.
• Economic Meaning: This reflects improved liquidity conditions in the banking sector, directly tied to the BOT's reverse repo operations (TZS 758.8 billion injected in July, per the document).
  • Ample Liquidity and Policy Effectiveness: Higher turnover and lower rates indicate banks have excess reserves to lend, reducing borrowing pressures. The rate staying within the corridor shows the BOT's success in steering short-term rates toward the CBR, promoting stability.
  • Boost to Banking and Credit: Easier interbank lending lowers funding costs for banks, which can pass savings to customers via cheaper loans. This complements the document's noted private sector credit growth (15.9%), potentially accelerating investment in key sectors.
  • Growth Support Amid Easing: The ~1.3% rate drop signals a loosening environment, encouraging economic activity without stoking inflation (which remained stable due to offsetting food and energy dynamics). It could help mitigate global risks like trade uncertainties (highlighted in the global section).

Summary of Broader Economic Significance

• Positive for Growth and Stability: The data portrays an easing financial environment, with lower yields and rates fostering cheaper credit, higher investment, and fiscal flexibility. This is consistent with the BOT's strategy to counter subdued global demand while maintaining inflation targets, potentially supporting Tanzania's 2025 GDP growth amid resilient exports (e.g., gold and cash crops).
• Liquidity-Driven Trends: Strong demand and easing conditions stem from policy measures like the CBR cut and reverse repos, indicating effective liquidity management. Investors' long-term preference suggests confidence in sustained recovery.
• Potential Challenges: While beneficial, excessive liquidity could lead to asset price inflation or currency depreciation if not monitored. The document's emphasis on stable commodity prices and external improvements mitigates this, but ongoing vigilance is key.
• Comparative Context: Compared to regional peers (e.g., EAC inflation within 8% benchmark), Tanzania's markets appear more liquid and investor-friendly, enhancing its attractiveness for foreign inflows.

As of February 28, 2025, the Bank of Tanzania’s total assets grew by 3.18%, reaching TZS 26.05 trillion, up from TZS 25.24 trillion in January. This growth was driven by a 15% increase in cash reserves (TZS 6.05 trillion) and a 10.2% rise in foreign currency marketable securities (TZS 8.53 trillion). Meanwhile, equity surged by 15.3%, supported by a 16% rise in reserves (TZS 2.41 trillion). However, advances to the government declined by 17.1%, reflecting tighter monetary policy, while currency in circulation fell by 1.4%, signaling a possible shift towards digital transactions or inflation control measures.

1. Total Assets:

• Total: TZS 26.05 trillion (increased from TZS 25.24 trillion in January 2025, a 3.18% increase).
• Main Asset Components:
  • Cash & Cash Equivalent: TZS 6.05 trillion (+15% from January's TZS 5.26 trillion).
  • Foreign Currency Marketable Securities: TZS 8.53 trillion (up from TZS 7.74 trillion, +10.2%).
  • Advances to Governments: TZS 4.70 trillion (declined from TZS 5.68 trillion, -17.1%).
  • Gold Holdings: TZS 87.12 billion (up from TZS 82.18 billion, +6%).
  • Quota in IMF: TZS 1.35 trillion (increased from TZS 1.29 trillion, +4.7%).
  • Government Securities: TZS 2.00 trillion (slight decrease from TZS 2.04 trillion, -1.7%).
  • Loans & Receivables: TZS 1.01 trillion (+6.8% from TZS 946.97 billion).

2. Total Liabilities:

• Total: TZS 23.53 trillion (up from TZS 23.06 trillion, +2%).
• Major Liabilities:
  • Currency in Circulation: TZS 8.04 trillion (slight decrease from TZS 8.15 trillion, -1.4%).
  • Deposits (Banks & Non-Bank Financial Institutions): TZS 4.04 trillion (up from TZS 3.51 trillion, +14.8%).
  • Deposits (Others): TZS 2.95 trillion (down from TZS 3.10 trillion, -4.8%).
  • Foreign Currency Financial Liabilities: TZS 4.61 trillion (+1.1% from TZS 4.56 trillion).
  • IMF-related Liabilities: TZS 1.17 trillion (no change).
  • Special Drawing Rights (SDRs) Allocation: TZS 1.94 trillion (up from TZS 1.86 trillion, +4.7%).

3. Equity:

• Total: TZS 2.51 trillion (up from TZS 2.18 trillion, +15.3%).
• Breakdown:
  • Paid-up Capital: TZS 100 billion (unchanged).
  • Reserves: TZS 2.41 trillion (up from TZS 2.08 trillion, +16%).

Key Takeaways:

✅ Increase in Assets (+3.18%), driven by growth in foreign marketable securities, loans, and cash reserves.
✅ Increase in Liabilities (+2%), with a rise in bank deposits and foreign currency liabilities.
✅ Growth in Equity (+15.3%), mainly due to an increase in reserves.
⚠️ Decline in Advances to Government (-17.1%), indicating reduced central bank lending to the government.
⚠️ Slight decrease in Currency Circulation (-1.4%), potentially reflecting economic factors like lower cash demand.

Analysis of the Bank of Tanzania's Financial Position (As of 28 February 2025)

The financial statement shows key trends in Tanzania’s monetary system and economic conditions.

1. Financial Stability and Growth

✅ Total Assets Increased (+3.18%)

• The growth in total assets to TZS 26.05 trillion suggests a stronger financial position for the central bank.
• The rise in foreign currency marketable securities (+10.2%) indicates increased foreign reserves, which enhances Tanzania’s ability to manage external shocks.
• Higher cash reserves (+15%) signal stronger liquidity and better financial sector stability.

✅ Increase in Equity (+15.3%)

• A rise in reserves (+16%) suggests that the central bank has improved its capital buffer, making it more resilient against financial risks.

2. Monetary Policy Implications

⚠️ Decline in Advances to Government (-17.1%)

• A reduction in lending to the government means the Bank of Tanzania is possibly tightening its monetary policy, aiming to control inflation or reduce fiscal dependency on central bank funding.

⚠️ Decrease in Currency Circulation (-1.4%)

• A drop in money circulation could suggest:
  • Lower cash demand, possibly due to increased digital transactions.
  • Slower economic activity, as businesses and individuals hold less cash.
  • Efforts to control inflation by reducing excess liquidity in the economy.

✅ Increase in Bank Deposits (+14.8%)

• This indicates stronger banking sector liquidity, suggesting that banks have more funds available for lending to businesses and individuals, which can drive economic growth.

3. External Sector and IMF Involvement

✅ Increase in IMF Quota & Special Drawing Rights (SDRs) (+4.7%)

• Tanzania’s higher quota and SDRs mean increased access to IMF financial support if needed, enhancing the country’s external financial stability.

✅ Increase in Foreign Currency Liabilities (+1.1%)

• This could indicate external borrowing or obligations, possibly linked to foreign exchange market interventions or debt management.

4. Potential Risks & Considerations

⚠️ Reduction in Government Securities (-1.7%)

• This could signal lower investment in domestic government debt, potentially affecting fiscal financing.

⚠️ Deposits from Other Sources Dropped (-4.8%)

• A decrease in non-bank deposits might indicate lower private sector liquidity or withdrawals from certain institutional accounts.

Conclusion

✅ The Bank of Tanzania’s financial position is strong, with rising reserves, improved liquidity, and controlled government lending.
⚠️ However, the decline in cash circulation and advances to the government may indicate monetary tightening and a possible slowdown in cash-based economic activities.
💡 Recommendation: Monitor government borrowing and liquidity trends to ensure balanced growth without excessive tightening.

In January 2025, the Tanzanian Shilling traded at an average of TZS 2,454.04 per USD, reflecting a 1.37% depreciation from TZS 2,420.84 in December 2024. However, on an annual basis, the Shilling appreciated by 2.6%, showing long-term stability. Foreign exchange market activity declined, with transactions dropping from USD 95.7 million in December 2024 to USD 16.3 million, while the Bank of Tanzania intervened by selling USD 7 million to stabilize the currency. Despite short-term pressures, foreign exchange reserves rose to USD 5,323.6 million, covering 4.3 months of imports, ensuring continued exchange rate stability.

1. Exchange Rate Movement: Slight Depreciation in January 2025

• In January 2025, the Tanzanian Shilling traded at an average of TZS 2,454.04 per USD, compared to TZS 2,420.84 per USD in December 2024.
• This reflects a monthly depreciation of approximately 1.37%, meaning the Shilling weakened slightly against the US dollar.
• However, on an annual basis, the Shilling appreciated by 2.6% compared to January 2024.

What It Means:

✅ The Shilling remains relatively stable, with only a minor depreciation (1.37%) month-over-month.
✅ Annual appreciation (2.6%) suggests a stronger Shilling compared to early 2024, reflecting better forex reserves and trade performance.
⚠ The slight monthly depreciation indicates short-term pressures, possibly due to increased import demand or external debt repayments.

2. Foreign Exchange Market Activity: Declining Transactions

• Total forex market transactions dropped to USD 16.3 million in January 2025, from USD 95.7 million in December 2024.
• The Bank of Tanzania intervened by selling USD 7 million to stabilize the market and prevent excessive depreciation.

What It Means:

✅ Lower forex market activity suggests reduced speculative trading, contributing to exchange rate stability.
✅ Bank of Tanzania’s intervention helped control excessive depreciation, ensuring Shilling stability.
⚠ A decline in foreign exchange market transactions could indicate lower foreign investment or trade activity.

3. Foreign Exchange Reserves Support Stability

• Foreign exchange reserves stood at USD 5,323.6 million in January 2025, compared to USD 5,107.1 million in January 2024.
• These reserves are sufficient to cover 4.3 months of imports, exceeding the national benchmark of 4 months.

What It Means:

✅ Stronger forex reserves contribute to Shilling stability by ensuring the country can meet external obligations.
✅ Sufficient reserves reduce pressure on the Shilling, helping manage exchange rate fluctuations.

Summary of Key Trends

Economic Implications of Shilling Stability

🔹 Positive Signs:
✅ Annual appreciation (+2.6%) shows long-term strength of the Shilling.
✅ Sufficient foreign exchange reserves (USD 5.3 billion) provide stability.
✅ Bank of Tanzania’s intervention controlled excessive depreciation.

🔸 Challenges:
⚠ Short-term depreciation (-1.37%) suggests forex market pressure.
⚠ Declining forex market activity may indicate lower trade or investor participation.
⚠ Heavy reliance on USD (68.1% of external debt) increases exchange rate risks.

Key Insights from Tanzania’s Shilling Stability (January 2025)

1. The Shilling Depreciated Slightly in the Short Term (-1.37%)

• The exchange rate moved from TZS 2,420.84 per USD in December 2024 to TZS 2,454.04 per USD in January 2025, showing a 1.37% depreciation.
• This suggests increased demand for USD, possibly for imports, debt servicing, or foreign investment repatriation.
• The Bank of Tanzania sold USD 7 million to stabilize the exchange rate, preventing excessive depreciation.

What it Means:

✅ The depreciation is minimal, meaning the Shilling remains largely stable.
⚠ Increased USD demand could signal rising import costs or capital outflows.
✅ Central Bank intervention helped prevent sharp currency fluctuations.

2. Long-Term Strength: The Shilling Appreciated by 2.6% Year-on-Year

• Compared to January 2024, the Shilling strengthened by 2.6%, meaning it performed better than the previous year.
• This suggests stronger forex reserves, improved exports, or controlled inflation.

What it Means:

✅ Tanzania’s economy is stable enough to maintain long-term Shilling strength.
✅ A stronger Shilling benefits businesses by reducing the cost of imported goods and debt repayments.

3. Forex Market Activity Dropped Significantly

• Forex market transactions declined from USD 95.7 million in December 2024 to USD 16.3 million in January 2025.
• Lower trading volume suggests reduced foreign exchange demand from businesses and investors.

What it Means:

⚠ Reduced forex transactions could indicate lower trade activity or reduced foreign investment inflows.
✅ Lower speculation in the forex market contributes to exchange rate stability.

4. Strong Forex Reserves Support Stability

• Foreign exchange reserves stood at USD 5,323.6 million, enough to cover 4.3 months of imports, above the national target of 4 months.

What it Means:

✅ Sufficient reserves reduce exchange rate risks, ensuring the government can manage forex fluctuations.
✅ The Shilling has a strong backup, reducing the likelihood of a major devaluation.

Overall Economic Implications

🔹 Positive Signs:
✅ The Shilling remains stable overall, with only minor fluctuations.
✅ Long-term appreciation (+2.6%) shows economic resilience.
✅ Strong forex reserves (USD 5.3 billion) help maintain stability.

🔸 Challenges:
⚠ Short-term depreciation (-1.37%) could indicate temporary pressure on the currency.
⚠ Declining forex market transactions suggest lower trade or investor activity.
⚠ High USD-denominated debt (68.1%) makes the economy vulnerable to exchange rate fluctuations.

In October 2024, the Tanzania Shilling showed signs of stabilization, appreciating slightly against the US Dollar after months of depreciation. This shift can be attributed to improved foreign exchange liquidity from key export sectors such as cashew nuts, gold, and tourism, alongside strategic interventions by the Bank of Tanzania. Despite a gradual depreciation trend over the years, recent developments suggest a positive turn in external sector performance and effective exchange rate management.

1. Exchange Rate Movements:

• October 2024:
  • Average exchange rate: TZS 2,719.91 per USD
• September 2024:
  • Average exchange rate: TZS 2,727.41 per USD
• Annual depreciation rate: 8.98% (improved from 10.11% in September 2024)

The Tanzania Shilling showed a slight improvement in October 2024, appreciating by 0.28% compared to September 2024. This indicates a stabilization trend after several months of depreciation. The depreciation rate over the past year has decreased, suggesting that external pressures on the currency may be easing.

2. Key Factors Affecting the Exchange Rate:

A. Improved Foreign Exchange Liquidity:

Several key export sectors have contributed to increased foreign exchange inflows, which helped stabilize the Shilling:

1. Cashew Nut Exports: This is a significant foreign exchange earner for Tanzania. The increased demand for cashew nuts on the global market likely contributed to stronger inflows of foreign currency.
2. Gold Exports: Tanzania is one of the top gold producers in Africa, and higher gold prices globally have boosted foreign currency inflows.
3. Tourism Earnings: As the tourism sector continues to recover post-pandemic, the influx of foreign currency from tourism has provided additional support to the Shilling.

B. Bank of Tanzania Intervention:

1. Limited Market Participation: The central bank has limited its participation in the foreign exchange market in October, intervening less than in previous months.
2. Net Purchase of USD 4.5 Million: The Bank of Tanzania made a modest net purchase of USD 4.5 million in October, which indicates a targeted, cautious approach to stabilizing the currency without overextending reserves.
3. Purpose: The Bank’s primary objective was to mitigate excessive exchange rate volatility. Their strategy seems to have been effective, contributing to the Shilling’s stabilization in October.

3. Historical Exchange Rate Data (2017-2023):

A look at historical data reveals a gradual depreciation trend of the Tanzania Shilling over the years, but with some periods of relative stability:

• 2017: TZS 2,228.9 per USD
• 2018: TZS 2,263.8 per USD
• 2019: TZS 2,288.2 per USD
• 2020: TZS 2,294.1 per USD
• 2021: TZS 2,297.8 per USD
• 2022: TZS 2,303.1 per USD
• 2023: TZS 2,382.1 per USD

From 2017 to 2023, the Shilling depreciated steadily, with the rate increasing by about TZS 150 per USD over the period. This is consistent with inflationary pressures and a growing trade deficit.

4. Interbank Foreign Exchange Market (IFEM) Activity:

The Interbank Foreign Exchange Market (IFEM) activity shows significant changes in the volume of transactions:

• October 2024: USD 50.7 million in transactions
• September 2024: USD 8.35 million in transactions

The sharp increase in market activity reflects growing demand and supply for foreign exchange in the market, indicating heightened foreign exchange transactions. This could be tied to the improved liquidity from exports and the increasing demand for USD in the economy.

5. Summary and Key Insights:

1. Gradual Depreciation Trend: Over the past few years, the Tanzania Shilling has faced a consistent depreciation trend against the US Dollar. However, the pace of depreciation has slowed in recent months, particularly in October 2024.
2. Recent Improvement in Exchange Rate Stability: The exchange rate improved in October 2024, with the Shilling appreciating slightly from September, signaling a positive shift in external sector performance.
3. Reduced Depreciation Pressure: The improved foreign exchange liquidity from key exports like cashew nuts, gold, and tourism earnings helped ease pressure on the Shilling. This has reduced the depreciation pressure that has been prevalent over the past several years.
4. Effective Market Management: The Bank of Tanzania’s careful intervention in the market (with a net purchase of USD 4.5 million) and its efforts to reduce volatility appear to have been effective in stabilizing the Shilling.
5. Growing Market Activity in IFEM: The notable increase in IFEM transactions, from USD 8.35 million in September to USD 50.7 million in October, indicates a more active foreign exchange market. This may suggest more participation by businesses and financial institutions in currency transactions, potentially contributing to exchange rate stabilization.

6. Conclusion:

The recent appreciation of the Tanzania Shilling and the improved annual depreciation rate suggest that external sector performance is improving. Factors such as strong export performance, particularly in cashew nuts, gold, and tourism, have bolstered foreign exchange liquidity. Additionally, the Bank of Tanzania's careful market interventions have contributed to the exchange rate’s stability, easing pressure on the Shilling.

As of 31 October 2024, the Bank of Tanzania reported a 0.70% growth in total assets, reaching TZS 26.04 trillion, up from TZS 25.86 trillion in September. Key drivers included a 2.56% increase in cash reserves to TZS 6.03 trillion and a significant 11.00% rise in advances to the government to TZS 4.92 trillion, highlighting active government financing. However, total liabilities grew by 1.02% to TZS 23.19 trillion, driven by a 19% increase in bank and non-bank deposits, while equity declined by 1.86% due to lower reserves. This financial position underscores the BoT's role in stabilizing the economy while adapting to fiscal demands.

1. Assets

• Cash and Cash Equivalents: Increased from TZS 5,878,336,892 to TZS 6,028,657,113 (+2.56%).
• Special Drawing Rights (SDRs): Decreased slightly from TZS 5,836,763 to TZS 5,659,158 (-3.05%).
• Gold: Increased from TZS 84,475,916 to TZS 87,517,489 (+3.60%).
• Quota in IMF: Declined from TZS 1,462,735,502 to TZS 1,418,226,416 (-3.04%).
• Foreign Currency Marketable Securities: Decreased from TZS 8,536,478,436 to TZS 8,280,498,770 (-3.00%).
• Government Securities: Rose from TZS 1,949,033,712 to TZS 2,009,684,508 (+3.11%).
• Advances to Government: Increased significantly from TZS 4,436,239,821 to TZS 4,924,120,304 (+11.00%).
• Loans and Receivables: Dropped from TZS 1,165,276,684 to TZS 632,865,021 (-45.66%).
• Other Assets: Increased from TZS 1,056,699,639 to TZS 1,345,154,889 (+27.29%).

Total Assets: Grew marginally from TZS 25,861,049,022 to TZS 26,040,992,974 (+0.70%).

2. Liabilities

• Currency in Circulation: Increased from TZS 8,466,684,070 to TZS 8,589,148,419 (+1.44%).
• Deposits (Banks and Non-Bank Financial Institutions): Rose significantly from TZS 2,666,954,338 to TZS 3,174,614,584 (+19.01%).
• Deposits (Others): Increased from TZS 1,758,144,907 to TZS 2,105,619,381 (+19.74%).
• Foreign Currency Financial Liabilities: Dropped from TZS 6,114,091,872 to TZS 5,409,925,598 (-11.53%).
• BoT Liquidity Papers: Marginal increase from TZS 529,725,459 to TZS 530,743,366 (+0.19%).

Total Liabilities: Increased from TZS 22,951,123,876 to TZS 23,185,162,980 (+1.02%).

3. Equity

• Reserves: Decreased from TZS 2,809,925,146 to TZS 2,755,829,994 (-1.92%).
• Total Equity: Declined from TZS 2,909,925,146 to TZS 2,855,829,994 (-1.86%).

Summary

• Assets: Total value grew by TZS 179.94 billion (+0.70%), driven by increases in cash, government securities, and advances to the government. However, loans and receivables declined significantly.
• Liabilities: Total liabilities increased by TZS 234.04 billion (+1.02%), with significant contributions from bank and other deposits.
• Equity: Experienced a decline of TZS 54.10 billion (-1.86%) due to reduced reserves.

The Statement of Financial Position for the Bank of Tanzania (BoT) with key insights into the institution's financial health and operational activities as of October 2024.

1. Growth in Total Assets

• The increase in total assets (+0.70%) suggests the BoT has grown its resource base, albeit modestly.
• Key contributors include:
  • Cash and Cash Equivalents: Increased liquidity may reflect robust monetary policy or efficient operations.
  • Government Securities and Advances to the Government: Indicate a rising role in financing government operations, signaling increased public sector borrowing.

The BoT is actively involved in supporting government financial needs while maintaining a stable and growing asset base. However, declines in foreign marketable securities and IMF quotas suggest reduced exposure or participation in international holdings.

2. Liabilities Growth Outpaces Equity

• Liabilities grew (+1.02%) while equity declined (-1.86%). Significant increases in deposits from financial institutions and others highlight:
  • Increased trust and participation of banks and other entities in the BoT's activities.
  • A shift toward reliance on deposits to support financial operations.
• Reduction in foreign currency financial liabilities may point to lower external debt exposure.

The BoT is leveraging more local deposits and reducing international liabilities, which could enhance financial stability but might reduce reserves, reflected in the equity decline.

3. Decline in Loans and Receivables

• A sharp decrease (-45.66%) could mean:
  • Lower lending to local institutions.
  • Recovery or consolidation of prior loans.
• This impacts revenue streams from lending operations.

The BoT might be adopting a cautious approach to lending or focusing on other asset classes.

4. Currency in Circulation

• The modest increase in currency in circulation (+1.44%) suggests stable economic activity. This is a key indicator of public demand for cash and overall economic liquidity.

Economic transactions are steady, aligning with controlled monetary policy.

5. Drop in Reserves and Equity

• The decline in reserves (-1.92%) and total equity (-1.86%) could indicate:
  • Operational expenses or funding requirements that utilized part of the reserves.
  • An ongoing balancing act to support liabilities.

While the BoT remains solvent, reserve management might require attention to maintain long-term stability.

General Observations

• The BoT is playing a significant role in government financing and domestic monetary stability, likely in response to Tanzania's broader fiscal and economic needs.
• A focus on domestic liabilities, reduced foreign exposure, and increased cash holdings indicate prioritization of internal economic stability over external engagements.
• Declining equity and reserves suggest the need for careful balance between asset growth and financial sustainability.

Key Implication

The Bank of Tanzania's financial position reflects stability in monetary policy and active government support, but pressure on equity and reserves calls for prudent fiscal management to ensure long-term resilience.

In October 2024, Tanzania’s financial markets exhibited mixed dynamics across Treasury securities and the foreign exchange landscape, reflecting broader economic pressures and investor caution. Treasury bill yields rose to 10.85% in September, signaling attractive short-term returns amid heightened government demand, while long-term bond yields also climbed as investors sought higher returns to offset inflationary pressures. Concurrently, the Tanzanian Shilling experienced a 10.1% year-on-year depreciation, with modest stabilization efforts by the Bank of Tanzania. This backdrop of rising borrowing costs, currency pressures, and active foreign exchange trading highlights the delicate balance between government financing needs, currency stability, and investor expectations.

1. Treasury Securities:
   • Treasury Bills: The weighted average yield (WAY) for Treasury bills increased to 10.85% in September 2024, up from 10.61% in the previous month. This rise indicates stronger returns for investors, potentially reflecting higher government demand for short-term funds.
   • Government Bonds: The Bank of Tanzania conducted auctions for long-term government bonds (15-, 20-, and 25-year bonds) with a tender size of TZS 574.9 billion. Bids reached TZS 674.8 billion, of which TZS 520.3 billion were successful. The yields to maturity for these bonds also rose, reaching 15.35%, 15.45%, and 15.42%, respectively. This increase suggests that investors demand higher returns, possibly in response to inflationary pressures and interest rate adjustments.
2. Foreign Exchange:
   • Exchange Rate: The Tanzanian Shilling showed a year-on-year depreciation of 10.1%, trading at an average of TZS 2,727 per USD in September 2024, compared to approximately TZS 2,694 per USD the previous month. This depreciation reflects continued foreign currency demand pressures, though the rate of devaluation stabilized slightly compared to the previous year.
   • Interbank Foreign Exchange Market (IFEM): Transactions in the IFEM totaled USD 8.35 million in September 2024, an increase from USD 4.61 million in August. The Bank of Tanzania reduced its net market participation to a net sale of USD 0.75 million, down from USD 1 million in August, suggesting a cautious approach to stabilizing the Shilling amidst currency pressures.

The recent trends in Tanzania's financial markets indicate a few key economic conditions:

1. Increased Borrowing Costs and Investor Caution:
   • The rising yields on Treasury securities, particularly the increase in the Treasury bill yield to 10.85% and higher yields on long-term bonds (up to 15.45%), suggest that investors are demanding more return on government debt. This is likely due to rising inflationary expectations and perceived risks, as well as the government’s increased reliance on domestic borrowing.
   • Higher yields mean the government is paying more to finance its debt, which could strain fiscal resources if borrowing costs continue to rise. For investors, however, this environment offers more attractive returns, especially in a low-risk investment.
2. Currency Pressure and Import Costs:
   • The 10.1% depreciation of the Tanzanian Shilling year-on-year underscores ongoing pressure on the foreign exchange market. A weaker Shilling makes imports more expensive, which can increase costs for businesses reliant on imported goods or raw materials and may eventually feed into consumer prices.
   • Despite Bank of Tanzania interventions in the foreign exchange market, the Shilling has continued to weaken, reflecting structural imbalances in the demand and supply of foreign currency. Increased IFEM transactions indicate active currency trading, yet the reduction in central bank participation suggests a cautious approach to direct intervention.
3. Investment Appeal in Government Securities:
   • The attractive yields on Treasury bills and bonds may draw in more domestic and international investors, helping the government finance projects and obligations. However, if yields remain high, the government may face higher long-term debt servicing costs.
4. Economic Signals for the Broader Market:
   • These financial market dynamics signal caution within the Tanzanian economy, balancing the need to attract investment and manage currency stability while addressing inflationary risks. If borrowing costs and currency pressures remain high, this could impact Tanzania’s fiscal space, import costs, and overall growth prospects, particularly if global financial conditions tighten further.

In summary, Tanzania’s financial markets reflect a cautious economic climate where the government must balance financing needs, currency stability, and investor expectations amidst external pressures.

The Tanzania Shilling has faced a steady depreciation, recording a 10.1% decline year-on-year as of September 2024, with the average exchange rate reaching TZS 2,727 per USD. This shift reflects both local and global financial pressures, including heightened demand for foreign currency and increasing import costs. Although the Bank of Tanzania has minimized its market interventions, foreign reserves remain robust, covering 4.4 months of imports. These reserves offer a financial cushion, helping Tanzania navigate currency volatility and maintain economic stability amid external shocks and inflation risks.

1. Depreciation Rate: As of September 2024, the Tanzania Shilling depreciated by 10.1% year-on-year, with the average exchange rate reaching TZS 2,727 per USD compared to TZS 2,694 per USD in the previous month. This steady depreciation marks a continued downward trend in the currency's valuereign Exchange Market (IFEM) Transactions**:
   • In September 2024, transactions in the Interbank Foreign Exchange Market (IFEM) increased to USD 8.35 million, up from USD 4.61 million in August. The Bank of Tanzania reduced its net sales in the IFEM to USD 0.75 million, down from USD 1 million in August. This reduced intervention suggests a cautious approach to managing currency supply in the market amid ongoing depreciation.
2. Import Coverage: Despite the depreciation, Tanzania’s foreign exchange reserves remain sufficient, amounting to USD 5,413.6 million by the end of September 2024, enough to cover approximately 4.4 months of imports. This buffer provides a level of economic stability and acts as a safeguard against further currency volatility.

This depreciation external pressures on the Tanzania Shilling, likely stemming from high demand for USD, global economic conditions, and local market dynamics. Despite the decline, Tanzania’s substantial foreign reserves offer a degree of resilience to absorb future external shocks.

The depreciation of the Tanzania Shilling indicates key economic signals:

1. External Pressure on Imports and Costs:
   • The Shilling’s 10.1% depreciation year-on-year implies that imports have become more expensive in Tanzania, which could drive up costs for goods reliant on foreign inputs, such as fuel, machinery, and consumer products. This can potentially increase inflationary pressures on the domestic market, as businesses may pass on higher import costs to consumers.
2. Increased Demand for Foreign Currency:
   • The rise in foreign exchange transactions in the Interbank Foreign Exchange Market (IFEM) to USD 8.35 million from USD 4.61 million in August indicates heightened demand for foreign currency. This demand likely stems from increased imports and dollar-denominated debt payments, placing pressure on the Shilling as more businesses and government entities seek to secure USD.
3. Cautious Central Bank Intervention:
   • The Bank of Tanzania's reduced participation in the foreign exchange market—down to USD 0.75 million in net sales—suggests a careful approach to currency stabilization. By not heavily intervening, the central bank may be preserving its foreign reserves to avoid rapid depletion, especially given the uncertainty in global markets. This cautious intervention reflects a balance between managing the currency’s value and maintaining adequate reserve levels.
4. Resilience through Foreign Reserves:
   • Tanzania’s foreign reserves, covering 4.4 months of imports, offer a level of financial stability. This reserve cushion can protect the economy from sudden shocks, such as volatility in global commodity prices or external funding pressures, though sustained currency depreciation could gradually erode this buffer if not managed carefully.
5. Investment and Inflation Impact:
   • Depreciation can have a mixed effect on foreign investment. While a weaker currency may make Tanzania assets cheaper for foreign investors, it also signals currency risk, which could deter long-term investments. Additionally, if depreciation persists, inflation could rise, leading to tighter monetary policies that further impact borrowing costs.

In summary, the Tanzania Shilling’s depreciation reflects structural challenges in balancing foreign currency supply and demand, managing inflation risks, and maintaining investor confidence. The central bank’s cautious stance underscores the need for a sustainable approach to currency management, aiming to support economic stability amidst external and internal pressures.

The Bank of Tanzania's Statement of Financial Position as of September 30, 2024, reflects significant developments in the country's economic landscape. Total assets grew by 1% to TZS 25.86 trillion, driven by a 66.7% increase in loans and receivables and a 5.4% rise in foreign currency marketable securities. At the same time, advances to the government decreased by 10.6%, indicating fiscal discipline. The bank’s equity rose by 7%, with reserves growing by 7.4%, showcasing stronger financial stability. These trends highlight key aspects of Tanzania’s economic development, focusing on sustainable growth and investment stability.

Assets

• Cash and Cash Equivalents: TZS 5.88 trillion, a slight decrease from TZS 6.09 trillion in August 2024.
• Special Drawing Rights (SDRs): TZS 5.84 billion, an increase from TZS 5.74 billion the previous month.
• Gold: TZS 84.48 billion, up from TZS 79.66 billion in August, reflecting a 6% increase.
• Quota in IMF: TZS 1.46 trillion, up from TZS 1.44 trillion, representing a marginal increase.
• Foreign Currency Marketable Securities: TZS 8.54 trillion, up from TZS 8.10 trillion, showing a 5.4% increase.
• Government Securities: TZS 1.95 trillion, slightly up from TZS 1.91 trillion.
• Advances to Government: TZS 4.44 trillion, down significantly from TZS 4.96 trillion, representing a decrease of around 10.6%.
• Loans and Receivables: TZS 1.17 trillion, up from TZS 699.11 billion, indicating a notable 66.7% increase.
• Equity Investments: TZS 157.48 billion, up from TZS 140.56 billion (a 12% increase).
• Other Assets: TZS 1.06 trillion, a small decline from TZS 1.11 trillion in August.

Total Assets

• The total assets of the bank as of September 30, 2024, amounted to TZS 25.86 trillion, compared to TZS 25.61 trillion at the end of August 2024, representing a growth of 1% month-on-month.

Liabilities

• Currency in Circulation: TZS 8.47 trillion, up from TZS 8.32 trillion, an increase of 1.7%.
• Deposits from Banks and Non-Bank Financial Institutions: TZS 2.67 trillion, down slightly from TZS 2.73 trillion.
• Foreign Currency Financial Liabilities: TZS 6.11 trillion, up from TZS 5.83 trillion, indicating a 4.9% increase.
• BoT Liquidity Papers: TZS 529.73 billion, down from TZS 536.83 billion.
• IMF Related Liabilities: TZS 1.17 trillion, unchanged from the previous month.

Total Liabilities

• The total liabilities stood at TZS 22.95 trillion, compared to TZS 22.90 trillion at the end of August, showing a slight increase of 0.2%.

Equity

• Authorized and Paid-up Capital: TZS 100 billion, unchanged.
• Reserves: TZS 2.81 trillion, up from TZS 2.62 trillion, reflecting a 7.4% increase.

Total Equity

• The total equity increased to TZS 2.91 trillion from TZS 2.72 trillion, representing a growth of 7%.

Summary

• The Bank of Tanzania saw a moderate increase in both its total assets and liabilities between August and September 2024. The most notable changes were in advances to the government, which dropped by 10.6%, and loans and receivables, which rose by 66.7%. Additionally, equity growth was largely driven by an increase in reserves, marking a 7.4% rise.

Key insights into Tanzania’s economic development by reflecting the central bank’s financial activities and its role in supporting the economy

1. Increase in Foreign Currency Marketable Securities

• The growth of foreign currency marketable securities (up 5.4% from August to September 2024) indicates a higher investment in foreign assets. This reflects an increase in Tanzania's foreign reserves, which supports the country's external trade and provides a buffer against external shocks like fluctuating commodity prices or global financial instability. Strong foreign reserves are a positive signal of economic stability and can improve investor confidence.

2. Reduction in Advances to the Government

• The 10.6% decline in advances to the government (from TZS 4.96 trillion to TZS 4.44 trillion) suggests a reduction in central bank lending to the government, which could signal improved fiscal discipline or alternative sources of government funding (such as tax revenues or external financing). This is important for Tanzania's economic stability, as overreliance on central bank borrowing can lead to inflationary pressures. The reduction could also indicate that the government is focusing on sustainable debt management practices, which contributes to long-term economic growth.

3. Loans and Receivables Growth

• The 66.7% increase in loans and receivables points to a rise in lending to the private sector or other entities, which is essential for economic development. Increased credit availability can drive business investment, expand production capacity, and boost employment opportunities, thereby stimulating economic growth. This growth in loans might be supporting sectors such as agriculture, manufacturing, and services, which are critical for Tanzania’s development.

4. Growth in Currency in Circulation

• The increase in currency in circulation by 1.7% (from TZS 8.32 trillion to TZS 8.47 trillion) could indicate a growing economy with rising demand for cash as businesses expand and consumer spending increases. This is a sign of economic activity and a more robust domestic market. However, excessive currency issuance without corresponding growth in goods and services can lead to inflation, so maintaining a balance is important.

5. Stable IMF and Foreign Liabilities

• The stability of IMF-related liabilities and moderate increases in foreign currency financial liabilities suggest that Tanzania is managing its external obligations in a stable manner. This is crucial for maintaining a positive international reputation and avoiding excessive debt burdens that could slow economic progress.

6. Increase in Gold and SDRs Holdings

• The increase in gold reserves (up 6%) and Special Drawing Rights (SDRs, up 1.6%) signifies that Tanzania is strengthening its reserve assets, which enhances financial stability. These reserves can be used to support the shilling in times of exchange rate volatility or economic distress, promoting macroeconomic stability.

7. Reserves and Equity Growth

• The 7.4% increase in reserves and a 7% rise in total equity reflect the Bank of Tanzania's efforts to build a stronger financial position. Higher reserves provide a buffer for economic risks and allow the central bank to better support the economy through monetary policy, which is essential for fostering growth and controlling inflation.

Conclusion

• The Bank of Tanzania’s financial position reveals positive signs for the country's economic development. The central bank’s strategy of increasing foreign reserves, reducing government dependency on central bank advances, and expanding loans and receivables aligns with key development goals such as fostering fiscal stability, supporting private sector growth, and maintaining monetary stability. These trends support Tanzania’s long-term goals of sustainable economic growth, diversification, and poverty reduction.