Dar es Salaam. The Bank of Tanzania (BoT) plans to purchase six tonnes of gold this financial year, it was announced in Dar es Salaam on Thursday.
It will be the biggest amount by far since the government began buying the precious metal from small, medium and large-scale miners as part of efforts to diversify the country’s foreign exchange reserves and reduce reliance on a single currency.
BoT deputy governor Yamungu Kayandabila said the decision was reached during a quarterly meeting held on Wednesday.
“So far, the BoT has 418 kilogrammes in gold reserves and our aim is to purchase six tonnes this financial year,” he said.
Dr Kayandabila did not reveal the amount that will be spent in the exercise, which is in line with what Finance minister Mwigulu Nchemba said when he presented the government’s Sh49.35 trillion Budget for 2024/25 in Parliament last month.
Dr Nchemba said BoT had by April 2024 purchased gold worth $26 million.
The target, he added, was to purchase a further six tonnes of gold worth $400 million.
Dr Nchemba said the government’s National Gold Reserve programme was meant to shore up foreign exchange reserves and support the implementation of the Monetary Policy.
“The government continues to encourage local gold refining industries to obtain London Bullion Market Association (LBMA) certification to enhance their quality gold reserves and their marketability,” he added.
Data obtained from the World Gold Council shows that the ten countries with biggest gold reserves in the world are the US (8,133.46 tonnes), Germany (3,352.31 tonnes), Italy (2,451.84 tonnes), France (2,436.8 tonnes), Russia (2,332.74 tonnes), China (2,262.45 tonnes), Switzerland (1,040 tonnes), Japan (845.97 tonnes), India (822.09 tonnes) and the Netherlands (612.45 tonnes).
According to Dr Kayandabila, who is BoT deputy governor responsible for economic and financial policies, Tanzania’s foreign exchange reserves stood at more than $5 billion at the end of June 2024, which were sufficient to cover more than four months’ of imports.
He said foreign currency liquidity improved slightly towards the end of June 2024 due to a gradual increase in foreign exchange inflows from tobacco, gold and tourism.
There is anticipation of a further increase in foreign exchange inflows from tourism, mining, traditional exports and food exports to neighbouring countries.
“The projected improvement in global economic conditions and moderation in commodity prices in the global market will also contribute to the projected increase,” Dr Kayandabila said.
Measures to limit transactions in dollars are expected to reduce demand for foreign exchange and increase reserves.
BoT is expected to step up the diversification of its foreign exchange portfolio through domestic purchase of gold.
Meanwhile, BoT is maintaining the central bank rate (CBR) at six percent for the quarter ending September 2024 as it seeks to maintain the economic growth momentum while keeping key macroeconomic fundamentals within the current levels.
The Monetary Policy Committee said in a statement, signed by BoT governor Emmanuel Tutuba, that the assessment of the economic outlook and balance of risks during its quarterly meeting held on July 3 showed that implementation of the Monetary Policy in the previous two quarters had anchored inflation expectations well below the five percent target. “This also is reinforced by a positive outlook for the global economy, especially expectations of falling inflation in most countries, easing financial conditions in international markets and moderate prices in the world market,” the statement said.
The MPC expects Tanzania’s economy to continue growing swiftly, the food supply to be adequate and exchange rate pressures to ease due to increased foreign exchange inflows from tourism, gold and commercial crops.
The central bank revised its CBR to six percent from 5.5 percent in April to curb inflationary pressures arising from global economic developments.
Data from Monthly Economic Review (MER) reports has proven that the policy was having the desired impact, with headline inflation remaining unchanged at 3.1 percent in May.
The committee expects positive domestic economic conditions driven by favourable weather for agriculture, adequate power supply, improvement in transport infrastructure, as well as policy and reform programmes.
“The MPC forecast growth in the first and second quarters of 2024 also to be high, at around 5 and 5.4 percent, respectively,” the statement said.
Private sector credit continued to be the main driver of money supply in the economy, growing on an annual average of 16.4 percent during the second quarter of 2024 compared to 17.1 percent in the preceding quarter.
The banking sector remained liquid, profitable and adequately capitalised, with deposits, assets and loans all increasing.
“Asset quality improved, as reflected by a lower NPL ratio of 4.4 percent in May 2024, below the tolerable level of 5 percent and 5.5 percent recorded in the corresponding period in 2023.”