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.