Tanzania’s forex reserves down to $4.9 billion, sufficient to cover 4.4 months of imports

Tanzania’s foreign exchange reserves closed at $4.9 billion at the end of April 2023, down from $5.5 billion at the end of April 2022, the Central Bank said in the latest Monetary Policy Committee (MPC) statement.

The level of reserves was however sufficient to cover 4.4 months of imports, which was within the country benchmarks of at least 4 months, according to the statement.

The Bank of Tanzania Governor Emmanuel Tutuba attributed the fall in foreign exchange reserves to external shocks including spillover effects of the war in Ukraine and lagged impact of the COVID-19 pandemic, through elevated commodity prices, disrupted supply chains, rising current account deficit and pressure on foreign exchange, as well as high cost of borrowing in international markets.

Given the domestic and global economic conditions, the MPC approved the Bank to sustain the implementation of less accommodative monetary policy in May and June 2023.

“This policy stance will ensure that inflation remains within the target of 5.4 percent in the remainder of 2022/23, while supporting attainment of quantitative performance criteria under the IMF ECF arrangement for the quarter ending June 2023,” the BoT Governor Emannuel Tutuba said in a statement.

He added that the Central Bank will continue to closely monitor the developments in the economy and take additional actions, as deemed necessary, to address any unwarranted shocks.

On the domestic economy, the MPC noted that growth is broadly on track supported by improving business conditions, sustained public and private investment, recovery in tourism, and strong growth of credit to the private sector.

“In Mainland Tanzania, growth in the first three quarters of 2022 was 5.2 percent, and high frequency economic indicators support for strong growth of around 5 percent for the entire year 2022 and about 5.2 percent for 2023,” the statement says.

Zanzibar economy is estimated to have grown by 6.8 percent in 2022, much faster than 5.1 percent in 2021.

“In 2023, Zanzibar economy is projected to grow at 7.1 percent,” it added.