Dar es Salaam, May 7, 2025—The Bank of Tanzania (BoT) has intervened in the interbank foreign exchange market, injecting $35 million in an unscheduled move to stabilise liquidity and ease mounting pressure on the Tanzanian shilling.
The intervention, conducted under the central bank’s Foreign Exchange Intervention Policy of 2023, comes amid growing demand for US dollars largely driven by import pressures and global financial tightening.
Though the BoT initially offered $25 million in its May 7 auction, overwhelming demand prompted the sale of an additional $10 million, signaling the bank's readiness to respond decisively to short-term market imbalances.
A total of 21 commercial banks participated in the auction, submitting bids worth $62.75 million—more than double the original offer.
Ultimately, 11 banks were allocated funds at a weighted average exchange rate of Sh2,697.17 per dollar, with accepted bids ranging from Sh2,690 to Sh2,700. Offers below Sh2,690 were rejected, including a low of Sh2,620, as the BoT maintained its stance against sharp currency devaluation.
In a statement following the auction, the BoT said the intervention aimed to “enhance liquidity in the foreign exchange market and ensure smooth execution of foreign exchange transactions by economic agents.”
Analysts interpret the move as a calibrated response to surging dollar demand, intended to cushion the economy from excessive volatility while supporting broader monetary policy objectives.
“This level of demand reflects persistent structural pressures particularly from importers needing foreign currency for energy, machinery, and essential goods,” said Dr. Fatma Nnko, an economist at the University of Dar es Salaam.
“The BoT is clearly trying to strike a balance between defending the currency and ensuring adequate liquidity in the system.”
The move also reflects deeper macroeconomic challenges. Tanzania, like many emerging economies, is grappling with global headwinds including tighter US monetary policy, high freight costs, and uneven commodity flows.
These factors have strained foreign reserves and widened the current account deficit, exacerbating demand-supply mismatches in the foreign exchange market.
By selling more than initially planned, the BoT demonstrated both flexibility and policy intent emphasising its willingness to act as a stabilising force without resorting to rigid currency controls.
The operation was overseen by the Directorate of Financial Markets, which reaffirmed the bank’s commitment to transparent, rule-based interventions.
While the BoT has avoided heavy-handed exchange rate management in recent years, this latest intervention indicates a shift toward more active market engagement.
The central bank hinted at the possibility of further action should market conditions warrant additional support.
“This is not just a liquidity move it’s a signal,” said John Mwakalobo, a financial markets analyst. “The BoT is communicating that it won’t allow destabilising speculation or disorderly depreciation of the shilling.”
The intervention comes as part of a broader toolkit to manage inflationary pressures, support external trade, and anchor expectations within the financial system.
While Tanzania’s foreign exchange reserves remain above the IMF-recommended threshold of four months of import cover, sustained pressure could test the limits of current buffers.
As global uncertainty persists, the BoT's actions will be closely watched by investors, importers, and policymakers alike each looking for clues on the direction of monetary policy and the bank’s capacity to maintain market confidence.