Shilling holds firm as interbank trading cools

 

Bank of Tanzania office in Dar es Salaam

By Guardian Reporter , The Guardian

The Tanzanian shilling remained stable against major currencies during the week ending August 28, 2026, despite a sharp decline in foreign exchange trading activity, the Bank of Tanzania (BoT) has reported.

According to the central bank’s weekly financial report, the shilling appreciated marginally against the US dollar, closing the week at 2,643.26/- per dollar, compared with 2,644.21/- recorded a week earlier.

The currency also strengthened against the British pound, which fell to 3,591.66/- from 3,606.18/-, while the euro declined to 3,078.87/- from 3,088.18/-.

The stability came as trading at the Interbank Foreign Exchange Market (IFEM) slowed significantly, with turnover almost halving to $24.90 million from $52.30 million recorded in the previous week.

According to the report, daily trading remained uneven, reaching $10.30 million on August 26 before declining during the remainder of the week.

The latest weekly turnover was also considerably below the levels recorded earlier in the year. Monthly data showed that IFEM turnover exceeded $227 million in July before declining to $178.5 million in August.

Foreign exchange transactions between banks and their customers also declined slightly during the week, with retail turnover falling to $544.24 million from $549.46 million.

Trade-related transactions remained the largest contributor to retail foreign exchange activity, generating $160.07 million, followed by individual customers at $109.42 million and the oil and energy sector at $67.10 million.

Meanwhile, conditions in the money market continued to ease as the cost of short-term borrowing between banks declined.

The seven-day weighted average rate in the Interbank Cash Market fell to 6.72 percent from 6.77 percent in the previous week.

The weekly average rate stood at 6.37 percent, remaining within the BoT's policy corridor of 4.75 to 7.75 percent and slightly above the Central Bank Rate of 6.25 percent.

Despite the lower borrowing rates, activity in the seven-day interbank cash market increased. Total trading volume rose to 652.25bn/- from 487.95bn/- recorded in the preceding week.

The central bank also continued to inject liquidity into the financial system through reverse repo operations.

During the week, the BoT injected 893.00bn/- through seven-day reverse repos at the policy rate, compared with 890.00bn/- a week earlier.

The liquidity operations are part of the central bank's efforts to manage money-market conditions and keep short-term interest rates aligned with its monetary policy stance.

In the government securities market, demand for Treasury bills remained strong, with investors submitting bids significantly above the amount offered by the government.

At the Treasury bills auction held on August 26, the government offered securities worth 288.70bn/- but received bids totalling 442.57bn/-, representing an oversubscription of 153.87bn/-.

The auction, which was the 1,205th Treasury bills sale, attracted 104 bids, of which 60 were successful. A total of 248.90bn/- was eventually allotted.

Yields ranged from 2.09 percent on the 35-day Treasury bill to 6.65 percent on the 364-day bill.

Banks continued to dominate demand for government securities, accounting for 99.98 percent of subscriptions, while individuals and companies accounted for only a negligible portion.

The total stock of outstanding government securities stood at 32,934.08bn/-, with Treasury bonds accounting for more than 90 percent of the total.

Banks were the largest holders of government securities, accounting for 33.31 percent, followed by pension funds with 30.39 percent and retail investors with 17.81 percent.

The BoT also reported continued growth in the number of retail investors participating in the government securities market, although the pace of new registrations has slowed.

A total of 1,899 new retail investors had registered during the current financial year, bringing the total number of clients to 33,401.

This compares with nearly 9,900 new registrations recorded during the previous financial year.

The government is scheduled to conduct its next government securities auction on September 2, featuring a reopening of the 10-year Treasury bond.

The developments point to a relatively stable shilling and easing short-term money-market conditions, even as activity in the interbank foreign exchange market remains subdued.