Although Tanzania's foreign exchange reserves have decreased by $600 million (about Sh1.4 trillion) during the past year, the administration insists there is no cause for concern and the country's future is still promising.
The Monetary Policy Committee (MPC) reports that as of the end of April 2023, foreign exchange reserves were valued at $4.9 billion (or about Sh11.7 trillion), from the $5.5 billion (about Sh13.1 trillion) that was recorded at the end of April 2022, this represented a decrease of over 11%.
Despite the decline, the MPC, which is led by the governor of the Bank of Tanzania (BoT), notes that the level of reserves was still adequate to fund imports for 4.4 months, which is within the required minimum of at least four months for the nation.
Additionally, Tanzania is in better health than some of its regional counterparts in terms of foreign exchange reserves, according to Mr. Benny Mwaipaja, head of the government media unit and spokesman at the Finance and Planning Ministry.
He explained the trend as being the result of sound monetary and economic policies, a favorable business climate, and economic diplomacy.
“This has prompted more investors and development partners to bring in their money. Capital inflows have resulted in the building up of our foreign exchange reserves,” Mr. Mwaipaja stated.
The country's foreign exchange reserves will drop by 10.9% at the end of April 2023 compared to the same time in 2022, he noted, which is not unexpected given current global events.
Global demand for foreign currency has increased recently as importers seek more dollars to fund imports due to rising import costs, including those for steel, food, cooking oil, and other commodities like fuel. Mr. Mwaipaja claimed that the Russia-Ukraine War and the Covid-19 Pandemic were partially to blame for the country's declining reserves.