Tanzania’s central bank changed rules on how much foreign currency lenders in the East African nation can hold in a bid to end trading in the shilling it called “speculative.”
Commercial banks’ net open position was cut to 5.5 percent from 7.5 percent of liabilities to reduce the amount of foreign currency banks can hold and “limit their activities in the interbank market,It’s the speculative tendencies that are needed to eradicate this and take other measures if necessary depending on the source of pressure.
The currency of East Africa’s second-biggest economy fell 16 percent against the dollar this year, the worst among 24 of the continent’s currencies tracked by Bloomberg after Ghana’s cedi. Tanzania’s central bank sold $339 million to lenders from January to April to support the shilling, as per May 4. Shipments of gold, a key source of foreign exchange, dropped 13 percent to $1.4 billion in the year through March, according to the regulator.
Foreign-currency reserves fell to $4 billion in March from $4.2 billion the previous partly due to sale of foreign exchange in the domestic market to manage liquidity, the central bank said on May 19. The shilling traded unchanged at 2,045 per dollar by 3:17 p.m. in Dar es Salaam after gaining 0.3 percent recently hence the trigger for change.
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