Tanzania’s Central Monetary Facility will allow more exchange rate flexibility and limit its foreign exchange interventions as part of a new staff-level agreement between the Bank of Tanzania and the International Monetary Fund.
The International Monetary Fund (IMF) said the Bank of Tanzania (BoT) will also start publishing the results of its foreign exchange auctions to enhance transparency of its interventions in the interbank foreign exchange market (IFEM).
◾Global lender reaches agreement with Tanzania on USD 790 million climate financing
“The BoT reiterated its commitment to allow more exchange rate flexibility to revitalize the Foreign Exchange interbank market and ensure a market determined exchange rate, while limiting FX interventions to avoid disorderly market conditions, in line with its intervention policy,” the IMF stated.
“To enhance the transparency of its interventions, the BoT will publish the results of its Forex Exchange auctions.”
The IMF said a staff-level agreement reached with Tanzania will enable the country to access close to USD 790 million in climate financing under the Resilience and Sustainability Facility (RSF).
The IMF said the agreement will also unlock USD 150 million financing for the country under the Extended Credit Facility (ECF) arrangement.
“Maintaining a moderately tight monetary policy stance will complement efforts to ease pressures in the FX market, while preserving price stability,” the IMF maintained.
According to the IMF, Tanzania’s economy grew by 5.1 percent in the year 2023 and this is bound to accelerate by 5.4 percent in 2024.
The development is underpinned by improvements in the business environment and subsiding global commodity prices.
“Risks to the outlook are tilted to the downside, as intensification of regional conflicts, increased commodity price volatility, abrupt global slowdown, prolonged liquidity issues in the foreign exchange market, and intensification of floods resulting from El Nino, could weigh negatively on economic outlook,” it said.
The agreement was reached following talks between a staff team led by Charalambos Tsangarides, IMF mission chief for Tanzania, and top government officials, including Finance Minister Mwigulu Nchemba and BoT Governor Emmanuel Tutuba.
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