KEY POINTS
- Tanzania orders gold traders to sell 20% to the central bank.
- This move aims to boost foreign reserves and stabilize the shilling.
- The Central Bank bought 418 kg of gold last year, and plans to buy six metric tons this year.
Tanzania has set a new regulation for gold businessmen and miners in the country to abide by. Gold dealers are required to dedicate 20% of their gold for sale to the country’s central bank starting from October 1. It is expected to enable Tanzania to build up more external reserves and support the domestic currency, the shilling.
Central Bank targets more gold reserves
Last year, the Bank of Tanzania started purchasing gold from small-scale miners. In 12 months, the central bank has purchased 418 kilograms of gold. Now the bank is planning to purchase six metric tons in the next financial year.
To this end, the Tanzania Mining Commission has recently issued a circular to all gold miners and traders operating in the country.
According to a report by Reuters, mining companies are required to set aside 20% of the gold mined as a reserve with the central bank. This gold must be refined at either Eye of Africa Ltd in Dodoma or Mwanza Precious Metals Refinery Ltd in the northern city of Mwanza.
This new policy is contained in the most recent mining law passed in Tanzania. The central bank has been seeking to increase reserves within the country to facilitate international transactions.
Strengthening Tanzania’s Economy
The Bank of Tanzania plans to improve foreign exchange reserves currently at $5.29 billion at the end of July through a higher gold purchase. This amount can only support about 4.3 months of projected imports of goods and services.
The government feels that increased reserves will also support the shilling as global pressurizing factors affect the exchange rate. Gold is considered valuable because of its capability to hold value whenever currencies become worthless. With this strategy, Tanzania seeks to guarantee its economy and the country’s future financial stability.
