Dar es Salaam. The decision to open government securities' market to all non-resident investors could strengthen the shilling, improve foreign-exchange liquidity and deepen the country’s capital markets, financial analysts say.
The reform, which allows foreign investors to buy Treasury bills and bonds, is expected to broaden the investor base for government debt while creating another channel for foreign currency to enter the economy, they say.
Before the amendments contained in the Foreign Exchange (Amendment) Regulations, 2026, issued recently, participation by non-residents in the government securities was limited to residents of the East African Community (EAC), the Southern African Development Community (SADC) and members of the Tanzanian diaspora. Bank of Tanzania (BoT) governor, Mr Emmanuel Tutuba said the changes were intended to make the country’s financial markets more accessible to international investors.
“The reform aims to broaden access to government securities market and is part of the bank's ongoing efforts to deepen the domestic financial markets and promote Tanzania as an attractive investment destination,” he said in a statement.
The opening of the market comes at a time when Tanzania is seeking to deepen its capital markets and increase foreign-exchange liquidity amid pressure on the local shilling. Independent economic analyst Oscar Mkude said the reform could support the local currency because foreign investors buying government securities would have to convert foreign currency into shillings to make their investments.
“This is a good step because, in the broader picture, it is taking Tanzania’s capital market onto the international stage. It internationalises our market and, importantly, creates another channel through which foreign currency can enter the country,” he said.
Mr Mkude said the impact could be significant if foreign portfolio inflows were sustained. The increased inflows could also improve liquidity in the foreign-exchange market by adding to other sources of foreign currency, including export earnings, tourism receipts and foreign direct investment.
“The more foreign currency that comes into the country through different channels, the better the liquidity in the foreign-exchange market. That can help reduce pressure on the shilling and contribute to greater stability,” Mr Mkude said.
However, he cautioned that the benefits could quickly reverse if foreign portfolio investors withdrew their funds in response to changing market conditions.
“Foreign portfolio investment is more mobile than foreign direct investment. Someone who invests in a factory cannot easily take that investment out overnight, but someone holding government securities can sell them in the secondary market and repatriate the money much more quickly if they perceive increased risk,” he said.
He said Tanzania would therefore need to maintain sound economic fundamentals, policy predictability and an investor-friendly environment to retain foreign capital. The reform could also benefit the government by widening the pool of investors competing for government securities, potentially improving its ability to raise funds at competitive rates.
He said foreign portfolio investment was distinct from foreign direct investment, with the former involving investors purchasing financial assets such as government securities without taking control of a business.
“International investors are mobile. They compare different markets before deciding where to put their money. They will look at returns, liquidity, economic stability, policy predictability and the ease of entering and exiting the market,” he said.
Beyond government borrowing, Mr Mkude said a deeper and more internationalised capital market could eventually create opportunities for Tanzanian companies and banks to attract foreign capital through corporate bonds.
“This is also an opportunity for the corporate sector. As the market develops, banks and companies can use the same broader investor base to issue bonds and attract foreign capital. So, the benefit goes beyond government borrowing; it can contribute to the development of the entire financial market,” he said.
He, however, warned against excessive reliance on short-term foreign capital, saying sudden withdrawals could expose the economy to financial volatility. “The opportunity is significant, but it comes with responsibility. Tanzania has to ensure that the economic environment remains attractive enough for investors to stay, because the same capital that can come in quickly can also leave quickly when investors perceive risks,” he said.
Another independent financial analyst, Christopher Makombe, said the move could increase foreign investor participation and strengthen the domestic financial market.
“This is a big step forward in the development of our financial market. The expected inflows from foreign investors could help strengthen the shilling, while increased market participation could also contribute to lower interest rates,” he said.
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