By Arden Kitomari | Business & Finance Insights
Dar es Salaam, Tanzania — In a significant development for Tanzania’s financial markets, the country has witnessed a 72.5% surge in retail foreign exchange liquidity, a clear signal of the impact of recent government measures promoting the Tanzanian shilling (TZS) as the preferred currency for domestic transactions.
According to the Bank of Tanzania (BoT), average daily dollar liquidity has jumped from USD 40 million to USD 69 million over the past month. This increase is a direct outcome of regulatory changes that discourage the use of foreign currencies in local transactions—a bold move intended to strengthen monetary sovereignty and exchange rate stability.
“This shift has helped us maintain the stability of our shilling compared to similar periods in previous years,”
— Emmanuel Akaro, Director of Financial Markets, BoT
Government Interventions Reshaping Market Behaviour
On March 28, 2025, the government implemented regulations prohibiting pricing and payment for goods and services in foreign currencies, with a few exceptions: diplomatic missions, international organizations, duty-free shops, and foreign-currency loan repayments. All new contracts must now be priced in shillings, while existing ones have a one-year window to comply or seek special approval from the Ministry of Finance.
This strategic move aims to reduce dollarization in the economy, enhance control over monetary policy, and boost confidence in the Tanzanian shilling.
Forex Reserves and Gold Reserves Bolster Stability
The BoT also emphasized that it maintains foreign reserves sufficient to cover more than four and a half months of imports. Additionally, since October 2024, the central bank’s gold purchase programme has added over USD 450 million to the reserves—providing a buffer against external shocks and lending further credibility to the shilling.
Structural Growth Drivers: Tourism, Exports, and Agriculture
While the regulatory crackdown has played a role, economists argue that multiple factors are contributing to the enhanced liquidity. Dr. Hilderbrand Shayo, a renowned economist and investment banker, notes that earnings from tourism, agricultural exports, and growing manufactured goods exports are playing a more substantial role than regulation alone.
In a milestone for the agricultural sector, the cashew industry posted record-breaking performance in the 2024/25 season, with production reaching 528,260 metric tonnes, up from 305,000 tonnes in the previous season. Export volumes hit 410,000 metric tonnes, earning Tanzania TZS 1.52 trillion (USD 583.7 million)—surpassing the previous record set in 2017/18.
What’s Next for the Shilling?
Looking ahead, the Tanzanian shilling is expected to gain further resilience as the tourism high season begins in June, bringing fresh foreign currency inflows. Combined with policy-driven liquidity and strong export performance, Tanzania appears poised to strengthen its foreign exchange position amid global volatility.
Conclusion
Tanzania’s evolving currency policies and export performance are redefining the dynamics of its forex market. While structural economic growth is fueling forex liquidity, the government’s commitment to a shilling-first economy could mark a turning point in Tanzania’s financial independence.
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