Tanzania central bank allays fears after drop in assets

The report also shows that Cash and Cash Equivalents dropped to Sh4.88 trillion in November from Sh6.03 trillion.

This prompted anxiety over possible liquidity outflows and instability of the central bank, which regulates the banking industry.

However, BoT governor Emmanuel Tutuba said the trend is primarily influenced by exchange rate revaluation losses.

“The shilling has currently strengthened. For instance, $1 was equivalent to Sh2,700 before November, but now $1 exchanges at around Sh2,400. If you multiply those figures, you’ll see a decrease in value,” he said.

Mr Tutuba added that the asset reduction was purely a reflection of exchange rate adjustments and not indicative of underlying financial instability.

The shilling has continued its upward trajectory against major global currencies, with the US dollar experiencing a significant depreciation.

Yesterday, BoT quoted the dollar at an average of Sh2,447.82, compared to an average of Sh2,718.475 on September 30, 2024.

In addition to its gains against the dollar, the shilling has also appreciated against the euro and British pound.

Projections indicate that the shilling will likely maintain its strength well into 2025, with expectations for continued stability through at least February 2025.

Despite the decline in total assets, the report indicates an increase in advances to the government from Sh4.92 trillion to Sh5.39 trillion while gold reserve slightly reduced from Sh87.52 billion to Sh82.08 billion.

The value of Foreign Currency Marketable Securities, which remain the largest asset class, also reduced from Sh8.28 trillion to Sh8.12 trillion, underscoring reliance on foreign investments.

Independent analyst Oscar Mkude said a drop in assets is not something to worry about as economic indicators show a positive outlook.

“What matters most is the story behind the drop of the assets. Sometimes the asset holder might have acquired something valuable,” he said.

Mr Mkude added that Tanzania and the world as a whole faced a dollar shortage for a long time but now there is a positive impact of the shilling which also protects the economy.

“BoT uses some of its assets as tool to regulate the economy so there is nothing to worry about.”

According to the BoT report, the total liabilities decreased by 2.2 percent to Sh22.69 trillion, driven by reduced foreign currency obligations.

The report indicates that the currency in circulation increased by 0.4 percent to Sh8.63 trillion, indicating stable or seasonal cash demand.

The Foreign Currency Financial Liabilities dropped by 8.8 percent to Sh4.93 trillion, signaling improved external debt management.

The total equity declined by 5.3 percent to Sh2.70 trillion, primarily due to reduced reserves, suggesting tighter financial conditions.

According to an analytical report by the Tanzania Investment and Consultant Group Ltd (TICGL), the broader economic implications reveals that the liquidity pressures decline in cash reserves indicates liquidity outflows, possibly to stabilise financial markets or fund fiscal operations.