In a strategic move to bolster its foreign reserves, Tanzania has directed gold exporters to contribute a significant portion of their production to the country’s central bank. Starting October 1, all gold mining companies in Tanzania are required to allocate 20% of their gold exports to the Bank of Tanzania (BoT), the country’s central bank, as part of an effort to enhance its reserves and stabilize the national currency.
This new directive comes as Tanzania’s shilling continues to depreciate, prompting the government to take decisive action in safeguarding its economy. The Bank of Tanzania has been acquiring gold from local miners and traders since the last fiscal year, which ended in June, with the goal of diversifying and strengthening its foreign reserves. The central bank reported that it purchased around 418 kilograms of gold during the last fiscal period and plans to increase this to six metric tons in the coming year.
The Tanzanian Mining Commission issued the regulation, specifying that gold exporters must provide 20% of their production to two approved refineries: Eye of Africa Ltd in Dodoma and Mwanza Precious Metals Refinery Ltd in Mwanza. The gold purchases by the Bank of Tanzania will follow pre-determined payment structures agreed upon with the mining companies.
Tanzania is one of East Africa’s largest gold producers, with the commodity playing a vital role in the country’s economy. Gold mining not only contributes to about 4% of Tanzania’s GDP but also generates significant employment and foreign exchange earnings. The government’s latest mandate is expected to further embed gold into the country’s economic strategy, allowing Tanzania to hedge against currency fluctuations and diversify its foreign reserve base.
The decision to channel a substantial portion of gold exports towards the central bank is part of a broader strategy to stabilize the shilling, which has experienced depreciation in recent years. A strong gold reserve is seen as crucial in buffering the economy from external shocks and providing a secure store of value.
Tanzania’s gold trade has also positioned it as a key player in the East African region. In July, reports indicated that Tanzania became Uganda’s primary source of gold imports within the East African Community (EAC), a reflection of the country’s growing importance in regional trade. Uganda, which has a thriving gold refining industry, relies heavily on raw gold imports from Tanzania to fuel its $3 billion gold trade. According to the Tanzanian Ministry of Finance, the country supplied 83% of all East African products sourced by Uganda in the year ending May, with gold being a major component of this trade. This amounted to approximately Shs1.6 trillion out of Shs1.9 trillion in total EAC imports from Tanzania.
By prioritizing the retention of gold reserves, Tanzania aims to strengthen its economic foundation, increase foreign exchange reserves, and ensure greater resilience in the face of global economic volatility. The move aligns with broader efforts by African nations to take greater control over their natural resources and utilize them to drive long-term economic growth.
As Tanzania navigates its evolving role as a major player in the global gold market, its new gold export regulations signal a clear commitment to leveraging its natural resources for national development. The directive, while adding pressure on mining companies, presents a strategic opportunity for the country to harness its wealth of resources to build a more stable and prosperous future. With gold remaining a key contributor to the country’s economy, this bold policy shift could mark the beginning of a new era in Tanzania’s economic planning and regional influence.
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