Tanzania central bank to sell dollars to commercial bank amid liquidity crisis

Tanzania’s central bank will begin selling US dollars to commercial banks to boost liquidity amid high demand for foreign currencies.

“The initiative aims to ensure adequate foreign currency liquidity in the market. In addition, it intends to ensure customers’ demands for foreign currency are met through licensed financial institutions at the prevailing market prices,” the Bank said in a statement.

The move is also aimed at undermining the black market, which has worsened the dollar crisis in the country.

The foreign exchange crisis started to bite in 2022. By the end of 2023, Tanzania had only 5 billion dollars, a fact authorities blamed on global inflation, the war in Ukraine and the federal reserves rate hikes as well as drought.

The depletion of foreign exchange reserves was a result of a growing current account deficit in 2022 due in part to higher commodity prices.

The Tanzanian economy, however, is expected to start reaping benefits of reforms with growth improving to 5.1% in 2023 from 4.6% a year earlier, according to the World Bank.

Growth is projected to reach the long-run potential of about 6 percent in 2025, it said.