The Bank of Tanzania (BoT) has initiated a significant gold-buying program from its locals, aligning with its strategic efforts to bolster the mining industry and fortify foreign exchange reserves.
Gold is a leading foreign exchange earner for Tanzania.
This announcement was made by Emmanuel Tutuba, the Governor of the Bank of Tanzania, during his visit to the Geita Gold Refinery and the Mwanza Precious Metals Refinery Co Ltd.
Under this program, BoT has already procured and refined 418 kilograms of gold. Governor Tutuba highlighted that the government has allocated funds for gold purchases, with a target of acquiring six tonnes of gold this year from small-scale, middle-scale, and large-scale miners.
“As highlighted in the budget by the Minister for Finance Dr Mwigulu Nchemba, the government has allocated funds for the purchase of gold. This year, our target is to procure six tonnes of gold, both from small-scale, middle-scale, and large-scale miners,” he said.
This endeavor serves the dual purpose of diversifying Tanzania’s foreign exchange reserves and reducing dependency on a single currency. This diversification aims to safeguard Tanzania’s economic stability against currency devaluation or global economic shocks.
“Now for the first time, we have both a gold and dollar reserve. Previously, we only had the US dollar as a foreign exchange reserve,” he added.
In recent months, Tanzania, like many other economies, has been impacted by the U.S. Federal Reserve’s aggressive rate hikes, resulting in a reduction in the circulation of dollars and depreciation of domestic currencies.
This has driven up the prices of imported goods, including petroleum, and placed pressure on foreign exchange reserves.
Despite these challenges, BoT reports that foreign exchange reserves have remained adequate, largely due to external loans and grants. However, foreign exchange inflows from exports have been absorbed by the rising import bill.
BoT says the reserves amounted to $5.247 billion (Tsh13.1 trillion) at the end of July 2023, slightly below the level reached at the end of July 2022, on account of sales in the interbank foreign exchange market to support the importation of goods and services.
The reserves were sufficient to cover about 4.7 months of projected imports which the BoT says were consistent with the country and EAC benchmarks of at least 4 and 4.5 months, respectively.
As part of a broader strategy to oversee mineral exports and boost the mining sector’s contribution to GDP, the government has increased its engagement in the sector.
This includes strengthening regulations, establishing a national gold reserve, and setting up mineral shops across the country.
Governor Tutuba also emphasized BoT’s commitment to boosting exports and improving the quality of domestically manufactured goods for international markets through the Export Credit Guarantee Scheme.
Furthermore, BoT is actively exploring ways to assist small-scale miners in securing funds for mining operations and selling their gold to refining facilities, ultimately contributing to the Central Bank’s gold reserves.
Governor Tutuba urged major gold traders to adhere to foreign exchange regulations, ensuring the repatriation of foreign exchange earnings from gold sales within 90 days, which would support the nation’s economic growth.
Tanzania is home to both large-scale gold miners and millions of artisanal and small-scale miners.
The establishment of the National Gold Reserve is a pivotal step in addressing issues in the mining sector and ensuring greater benefits for Tanzanians from the country’s abundant natural resources.
The establishment of the National Gold Reserve was announced by Nchemba during the 2023–24 budget presentation, an initiative by former president, the late John Magufuli.
This decisive step was to address issues in the mining sector and ensure Tanzanians benefit more from its vast natural resources.
Tanzania’s determination to regulate the mining sector arose from allegations of fraud, smuggling, and underreporting of production and profits.
BoT’s active participation in the Sixth Mining Technology Exhibition signifies a valuable opportunity to strengthen collaboration between the Central Bank and the mining sector in Tanzania.