The Bank of Tanzania (BOT) has announced its recent intervention in the Interbank Foreign Exchange Market (IFEM) with the purchase of USD 23 million from two banks. This marks a significant shift in the market, as the BOT had been predominantly on the selling side for the past 33 months.
The last net purchase by the Bank in the Interbank FX Market occurred in 2021, when the BOT was active on the buying side from September to December, culminating in an annual total purchase of USD 362 million in the year. However, due to persistent dollar shortages, the BOT shifted its role to the supply side, selling dollars while commercial banks conducted minimal market activities.
In 2022, the BOT sold USD 217 million, with commercial banks contributing 54% of the forex liquidity in the interbank market. By 2023, the BOT’s sales had risen to USD 560.8 million, providing 71% of the market’s liquidity. Up to September 2024, the BOT sold USD 198 million, accounting for 81% of market liquidity.
READ MORE: Infographic: Tanzania Interbank Foreign Exchange Market (2021-2024)
“The Bank of Tanzania intervened in the Interbank Foreign Exchange Market (IFEM) according to its Foreign Exchange Intervention Policy, 2023,” reads the recent statement released by BOT on November 20, 2024. “In this intervention, the Bank purchased USD 23.00 million through an auction at a weighted average exchange rate of TZS 2,655.13 per USD,” the statement continued.
“The aim of this auction was to accumulate foreign exchange reserves in response to a recent increase in liquidity in the foreign exchange market,” the statement concluded.
Since October 2024, Tanzania has experienced a notable increase in dollar liquidity after nearly two years of scarcity. For more insights, you can read The Chanzo analysis on the rising dollar liquidity in Tanzania.
