Tanzania Mandates 20% Gold Allocation to Central Bank Amid Reserve Diversification Efforts

In a significant policy shift, Tanzania’s mining regulator has ordered all mining firms and traders exporting gold to allocate at least 20% of their gold production for sale to the Central Bank of Tanzania (BoT). This directive, effective October 1, is part of the government’s strategy to bolster its foreign reserves and stabilize the local currency, the shilling.
The Central Bank began purchasing gold from local traders and miners in the last financial year to enhance its foreign reserves. With the Tanzanian shilling under depreciation pressure, increasing gold reserves is seen as a critical move to support the currency.
In the year ending June, the BoT acquired 418 kg of gold, and it plans to purchase an ambitious 6 metric tons in the current financial year. This push aligns with broader efforts to diversify reserves and reduce reliance on foreign currencies.
The directive falls under a newly enacted mining law aimed at regulating the sector more effectively and ensuring that Tanzania benefits more from its natural resources.
Under the new rules, miners and traders will be required to submit the reserved gold to two major mineral refineries: Eye of Africa Ltd in Dodoma and Mwanza Precious Metals Refinery in Mwanza.
The statement indicated that all transactions would be conducted according to arrangements made by the Bank of Tanzania, although specific payment rates were not disclosed.
Economic Context
Tanzania’s foreign exchange reserves were reported at $5.29 billion at the end of July, sufficient to cover approximately 4.3 months of projected imports. This level of reserves is crucial for maintaining economic stability and confidence in the national currency.
Implications for the Mining Sector

Market Stability: The allocation of 20% of gold for the central bank may lead to more stable pricing in the local gold market and ensure a steady supply of gold for the country’s reserves.
Impact on Miners and Traders: While the new requirement may present challenges for some miners and traders by limiting their market options, it could also provide a reliable buyer in the form of the central bank, potentially enhancing financial security for those involved in the gold trade.
Incentives for Increased Production: As the central bank’s demand for gold rises, local miners might be incentivized to increase production to meet both local and international market needs.

Conclusion
Tanzania’s directive to require a 20% allocation of gold for the Central Bank represents a strategic effort to strengthen its financial position and stabilize the economy amid currency pressures. By enhancing its gold reserves, Tanzania aims to create a more resilient economic environment while ensuring that the benefits of its mineral wealth are realized domestically. As this policy unfolds, its impact on the mining sector and the broader economy will be closely observed by stakeholders within and outside the country.