BoT reassures market as appetite for govt securities hits record high

Government securities now account for 86.8 percent of total domestic debt, comprising Sh2.05 trillion in Treasury bills, Sh135.7 billion in government stocks and a dominant Sh30.3 trillion in Treasury bonds.

BoT data indicates that the market remains highly concentrated among institutional investors. Commercial banks hold the largest share at 28.7 percent, equivalent to Sh10.75 trillion, followed by the central bank at 27.4 percent (Sh10.28 trillion).

Pension funds account for a further 18 percent, or Sh6.75 trillion, underscoring the continued dominance of institutional players in the securities market.

Despite the rapid expansion, the central bank insists the system remains stable and well-balanced.

A financial analyst from the BoT’s Directorate of Financial Markets, Mr Francis Samuel, said the rising demand for government securities is neither accidental nor destabilising.

He noted that Treasury instruments sit at the core of the banking system.

“Commercial banks must comply with liquidity requirements to ensure they maintain enough liquid assets to meet short-term obligations,” he said.

“Treasury bills and bonds are the only acceptable collateral for accessing central bank liquidity facilities, so banks accumulate them to strengthen their borrowing capacity.”

He added that in the interbank lending market—where banks lend to each other—Treasury securities provide high-quality collateral.

“Unsecured interbank lending is rare and costlier, making government bonds the preferred instrument for securing cheaper short-term credit,” he said.

This collateral value, he explained, means that even as banks increase their holdings of government paper, liquidity remains sufficient.

“Banks are earning substantial income from their external investments, and their domestic operations are performing strongly,” Mr Samuel said.

“Because of these diversified revenue streams, liquidity stays stable even when banks allocate large sums to government paper.

The banking sector continues extending loans to private-sector players, and the numbers show they are doing well.”

Data from the Monthly Economic Review supports this view, showing private-sector credit expanding by 16.1 percent year-on-year in September—one of the strongest growth phases in recent years.

Agriculture, mining, trade and construction all recorded strong lending activity, with personal loans—frequently used by MSMEs—continuing to command the largest share.

Regarding the rising demand for government securities, Mr Samuel said Tanzania is witnessing a structural shift in how both ordinary citizens and institutional investors manage their money.

“Financial literacy has improved sharply, with more Tanzanians now aware of fixed-income investment options,” he said.

He pointed to the rapid growth of collective investment schemes, particularly those operated by UTT AMIS, which pool resources from thousands of small investors and channel them directly into government securities.

With Treasury bond yields remaining high—often in double digits—many retail savers who previously relied on bank deposits or informal savings groups have shifted towards the bond market.

However, he cautioned that increased preference for low-risk government instruments over investing in or expanding businesses may prompt policymakers to reflect on what this shift means for the broader business environment