Dar es Salaam – The Bank of Tanzania has enacted its Foreign Exchange Intervention Policy of 2023 by participating in the Interbank Foreign Exchange Market (IFEM) to promote monetary stability and support the Tanzanian Shilling. This decisive action highlights the bank’s commitment to maintaining balance in the foreign exchange market while aligning with broader monetary objectives.
In a recent auction, the Bank sold $25 million at a weighted average exchange rate of Sh2,663.16 per US dollar. The strong participation in the auction reflects the market’s demand for US dollar liquidity, showcasing the bank’s effective management of this need.
With a total tender amount of $75.2 million, the auction aimed to reinforce foreign exchange stability and facilitate the proper enactment of the country’s monetary strategies. The auction registered a highest bid rate of Sh2,670.00 per US dollar and a lowest bid of Sh2,640.00 per US dollar, with the successful bids capturing an acceptable range, improving currency stability.
A total of 25 banks were involved in the auction, indicating an active interest from the banking sector. Economic experts, however, are weighing in on the long-term effects of such interventions. An economist emphasized that a nation’s currency stability should fundamentally correlate with its production capacity.
The economist explained that as local production rises, reliance on imported goods decreases, thereby reducing demand for foreign currencies like the US dollar. Strengthening local production not only diminishes the demand for foreign exchange but can also generate a surplus of goods available for export, further enhancing the local currency’s standing.
By fostering increased local production and reducing dependence on foreign currencies, the nation can position itself for a more robust currency in the global market.
