Tanzania’s central bank has injected US$15 million into the interbank foreign exchange market in a bid to ease dollar shortages and stabilise the shilling, amid sustained demand for hard currency from key sectors of the economy.
The Bank of Tanzania (BoT) said in a public notice that the intervention was carried out in line with its Foreign Exchange Intervention Policy adopted in 2023, which allows the bank to step into the market to smooth volatility.
The dollars were sold through an auction that cleared at a weighted average exchange rate of 2,449.18 Tanzanian shillings per US dollar, the BoT said.
The auction attracted strong interest from commercial banks, with total bids amounting to US$17 million, exceeding the initially offered amount of US$10 million, according to the central bank.
Of the bids submitted, US$15 million was ultimately allocated, signalling continued pressure on dollar liquidity in the domestic market.
Auction data showed that the highest bid was placed at 2,450 shillings per dollar, while the lowest bid came in at 2,398 shillings. The lowest accepted bid stood at 2,443.50 shillings per dollar.
A total of 19 commercial banks participated in the auction, with bids from 17 banks accepted.
In its statement, the BoT said the intervention was aimed at ensuring orderly market conditions and providing short-term liquidity, rather than defending any specific exchange rate level.
“The Bank continues to intervene in the foreign exchange market solely to smooth excessive volatility,” the notice said, reiterating that the value of the shilling remains determined by market forces.
Tanzania, like many emerging and frontier economies, has faced intermittent pressure on its currency amid strong import demand, global financial tightening and volatility in commodity prices.
Demand for dollars has been driven by imports of fuel, machinery and industrial inputs, as well as external debt servicing and profit repatriation by foreign companies, market analysts say.
The central bank has stepped up the use of forex auctions in recent years as part of a broader shift toward a more market-oriented exchange rate framework, while retaining the ability to intervene during periods of stress.
Under the 2023 intervention policy, the BoT is permitted to sell or buy foreign currency to address temporary imbalances and maintain financial stability, without resorting to administrative controls.
The policy was introduced as part of reforms aimed at strengthening monetary transmission and boosting confidence in the foreign exchange market.
In recent months, the BoT has stressed that Tanzania’s external position remains broadly stable, supported by tourism receipts, gold exports and steady inflows of foreign direct investment.
However, officials have acknowledged that periodic interventions may be necessary to manage liquidity conditions, particularly during times of heightened seasonal or structural demand for foreign currency.
The notice on the latest auction was issued by the BoT’s Directorate of Financial Markets, which said the bank remained committed to maintaining stability in the financial system while allowing supply and demand to guide currency pricing.
Market participants said further auctions could follow if demand pressures persist, though much will depend on inflows from exports, tourism and external financing in the coming months.
Tanzania Forex Auction system
Tanzania operates a market-based foreign exchange system in which the value of the shilling is determined by supply and demand in the interbank market.
The Bank of Tanzania (BoT) uses foreign exchange auctions as a policy tool to manage short-term liquidity imbalances and curb excessive volatility, rather than to defend a fixed exchange rate.
Under the Foreign Exchange Intervention Policy introduced in 2023, the central bank is permitted to buy or sell foreign currency through transparent auctions when market conditions become disorderly.
Forex auctions are typically conducted among commercial banks, which submit bids specifying the amount of foreign currency they wish to buy or sell and the exchange rate they are willing to accept.
