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Tanzania is strengthening its foreign reserves with gold acquisition

Tanzania is strengthening its foreign reserves with gold acquisition Tanzania is strengthening its foreign reserves with gold acquisition
Tanzania is strengthening its foreign reserves with gold acquisition.

Tanzania, a country known for its vast mineral resources, is taking proactive measures to strengthen its foreign reserves through the acquisition of gold.

The Bank of Tanzania has launched a gold-buying initiative, aiming to support the mining industry and bolster the country’s foreign exchange reserves.

Tanzania is strengthening its foreign reserves with gold acquisition
Tanzania is strengthening its foreign reserves with gold acquisition.

Emmanuel Tutuba, the Governor of the Bank of Tanzania, recently announced the gold acquisition strategy during his visit to the Geita Gold Refinery and the Mwanza Precious Metals Refinery Co Ltd. As part of this initiative, the BoT has already acquired and refined 418 kilograms of gold.

In his statement, Governor Tutuba highlighted the government’s commitment to purchasing gold, as mentioned in the budget presented by Finance Minister Dr Mwigulu Nchemba. The BoT’s target for this year is to procure six tonnes of gold from various mining scales – small-scale, middle-scale, and large-scale.

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Emphasising the importance of diversifying the country’s foreign exchange reserve, Governor Tutuba explained that the acquisition of gold serves as a strategic move to reduce reliance on a single currency. This diversification aims to protect Tanzania’s wealth from currency devaluation or economic instability caused by global shocks.

Previously, Tanzania relied solely on the US dollar as its foreign exchange reserve. However, with the introduction of the gold acquisition initiative, the country now boasts both a gold and dollar reserve. This marks a significant step towards economic stability and further strengthens Tanzania’s position in the global market.

Like many other economies, Tanzania has been impacted by the aggressive rate hikes implemented by the United States’ Federal Reserve. These measures were taken to combat domestic inflation within the US economy. Consequently, Tanzania has witnessed the effects of increased global financial instability, making it imperative for the country to diversify its foreign reserves.

Central banks around the world have taken measures to decrease the circulation of dollars, resulting in a significant depreciation of domestic currencies and an increase in prices for imported goods and products, such as petroleum.

In Tanzania, there has been a decline in foreign exchange while the import bill continues to rise. The Bank of Tanzania stated in its Monthly Economic Review for August that foreign exchange reserves remained satisfactory due to external loans and grants received by the government. However, they mentioned that foreign exchange inflows from exports were completely absorbed by the growing import bill.

As of July 2023, the reserves amounted to $5.247 billion, slightly lower compared to July 2022. This decrease was due to sales made in the interbank foreign exchange market in order to support imports. The reserves are adequate to cover about 4.7 months of projected imports, which aligns with both national and East African Community benchmarks of at least 4 and 4.5 months respectively.

Furthermore, the government has intensified its involvement in the mining sector as part of a broader effort to oversee mineral exports and enhance their contribution to the country’s GDP. This includes strengthening regulations, establishing a national gold reserve, and opening mineral shops across more than 22 regions throughout Tanzania.

Tanzania is strengthening its foreign reserves with gold acquisition
Tanzania is strengthening its foreign reserves with gold acquisition.

In addition, Tutuba emphasised the commitment of the Bank of Tanzania (BoT) to enhance exports and improve the quality of domestically produced goods for international markets through the Export Credit Guarantee Scheme.

“We are actively engaged in discussions to explore ways to support small-scale miners, helping them secure funds, operate mines, and sell their gold to refining facilities. Ultimately, this gold will contribute to the Central Bank’s reserves,” he stated.

Tutuba also called upon major gold traders to adhere to foreign exchange regulations that require repatriation of foreign earnings from gold sales within 90 days. This compliance is crucial for fostering economic growth in the country.

Tanzania boasts several large-scale gold mining companies such as Geita Gold, Bulyanhulu, North Mara, and Buzwagi. Additionally, there are millions of local artisans and small-scale miners spread throughout the nation.

The Chief Executive Officer of State Mining Corporation (Stamico), Venance Mwase, expressed appreciation towards the government for facilitating the establishment of gold refining facilities within Tanzania. He emphasised that these facilities will empower the Central Bank to procure and accumulate gold stocks, thereby strengthening foreign exchange reserves and fortifying the national economy.

“We are excited to announce a close collaboration between Stamico and BoT, aimed at providing small-scale miners with loan guarantees. This partnership will enable them to increase their gold production and deliver it to our state-of-the-art gold refining facility in Mwanza. As a result, we expect a significant boost in the Central Bank’s gold reserves,” stated Mr. Nchemba.

The establishment of the National Gold Reserve was a key announcement made during the 2023-24 budget presentation by the late former president, John Magufuli. This initiative highlights Tanzania’s commitment to addressing issues within the mining sector and ensuring that its citizens benefit from the country’s abundant natural resources.

The decision to regulate the mining sector came as a response to allegations of fraudulent activities, smuggling, and underreporting of production and profits. Inconsistencies in gold exports and production statistics further reinforced this determination.

Furthermore, BoT’s active participation in the Sixth Mining Technology Exhibition, scheduled for September 20 to September 30, 2023, at Bombambili grounds in Geita, presents an invaluable opportunity to strengthen collaboration between the Central Bank and the mining sector in Tanzania.


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