Tanzania banks oversubscribe yet again in BoT’s $25m forex auction

The auction drew $28.5 million in bids, but the bank adhered to its previously announced offer, accepting only the $25 million it had committed to sell.

Of the 21 banks that participated, 18 secured allocations.

BoT said the operation was aimed at “providing liquidity in the foreign exchange market,” where demand has remained elevated for months due to sustained import requirements and tightening global dollar conditions.

The latest sale extends a liquidity-provision campaign the central bank launched on October 24, when it injected $15 million at a weighted average rate of Sh2, 471.73.

That first auction attracted aggressive demand, with 26 banks bidding for $34.75 million, more than double what was on offer.

Three days later, on October 27, the BoT increased the amount to $20 million, triggering an immediate—though modest—appreciation of the shilling as the weighted average rate strengthened to Sh2,465.13.

Bids totalled $29.5 million, again outstripping supply, with 23 banks seeking dollars and 14 receiving allocations.

In an earlier interview with The Citizen, BoT Governor Emmanuel Tutuba said the interventions are part of the bank’s routine liquidity operations designed to maintain equilibrium in the financial system.

“As the Bank of Tanzania, our core mandate is to regulate the economy, which includes ensuring that there is adequate liquidity within the financial system,” he said.

He added: “We constantly assess market conditions to determine whether to inject or withdraw liquidity, depending on what is needed to maintain balance.”

Tutuba said the BoT continuously monitors the balance positions of all commercial banks to ensure smooth market functioning.

Independent forex analyst Mr Bernard Mumwi said the Bank of Tanzania’s latest intervention is helping calm the market and maintain orderly trading conditions.

“The market is stabilising—right now it is simply trying to find its balance,” he said. “We’re in a peaceful environment, and we do not expect any major movements in the exchange rate in the short term.”

Mr Mumwi noted that year-end dynamics are also shaping trading behaviour as investors reassess their positions. “Toward the end of the year, many investors begin pulling out funds or taking profits. Others are reallocating their portfolios, reinvesting, or meeting end-of-year obligations,” he explained.

He said that while demand for dollars remains present, there is no indication of an actual shortage.

“There is appetite for foreign currency, but not a supply crisis,” he said. “Banks and investors are simply responding to global market signals. External movements—what’s happening in major markets—often influence local positioning.”

He added that the central bank’s actions appear aimed at ensuring the market remains stable as the country heads into the final weeks of the year.

“They want to make sure there is enough liquidity and that the market stays orderly as we close the year,” he said.

The shilling has remained broadly stable through 2025, supported by rising export earnings from gold, gas, and tourism. Inflation has stayed within the BoT’s 3–5 percent target range, while reserves continue to cover over four months of imports, according to recent official data.

With global dollar strength and high import bills continuing to challenge frontier markets, the BoT’s dual interventions reinforce its commitment to maintaining market confidence through transparent and timely action.