Is Tanzania getting maximum economic value from its gold?

DAR ES SALAAM: THE head of the Bank of Tanzania’s (BoT) gold purchasing section announced a significant milestone: gold acquisitions rose from six tonnes to 35 tonnes over two years, as reported in various media outlets and on social media, a development Minister for Minerals Antony Mavunde, also reposted.

Although the achievement is promising, a thorough analysis and critical review of potential improvements are necessary, without overly emphasising her presentation and salutation style.

BoT has accumulated around 35 tonnes of gold over 18 months.

The next step is to verify that further gold acquisitions strengthen reserves without causing excessive concentration, liquidity issues, market risks or inflation.

Unquestionably, Tanzania’s initiative to restore its domestic goldpurchasing programme through BoT is quickly attracting notice as a major reserve-management strategy in recent years.

Launched in October 2024, this programme aims to convert part of the country’s large gold output into a strategic reserve, diversify foreign-exchange holdings, and enhance overall financial and monetary stability. In two years of purchasing, the results are significant.

By July 2026, the BoT Governor announced that the bank had gathered around 28 tonnes of gold over 18 months, worth roughly 3.68 billion US dollars ( about 9.76tri/-) at the then-current gold prices.

But the more important question is not simply how much gold Tanzania has bought.

It is whether the programme delivers maximum economic benefit competitively and whether the country manages the risks of accumulating such a large share of its reserves in one commodity.

A detailed look at BoT’s figures shows remarkable growth.

The 2024/25 Annual Report states that by June 2025, 6,190.4 kilogrammes (roughly 6.19 tonnes) of gold had been purchased.

The bank indicated that this gold was intended for refining to London bullion standards and for addition to monetary reserves.

If this gold had been refined locally to international bullion standards, it could have yielded greater economic benefits for Tanzania.

In the 2025/26 financial year, the programme rose sharply.

According to the Ministry of Minerals, the BoT bought 21,710 kilogrammes, or 21.71 tonnes, via domestic refineries.

This results in approximately 6.19 tonnes for 2024/25 and 6.19 tonnes for 2025/26, with a cumulative total of about 27.90 tonnes.

This reflects the governor’s later statement that over 28 tonnes had gathered in 18 months.

Consequently, the programme rapidly transitioned from an experimental phase to a significant reserve-management operation.

Across all these developments, the most significant economic milestone is reserve diversification.

Typically, foreign-exchange reserves mainly consist of currencies and foreign securities.

Gold also serves as a reserve asset, as its value isn’t directly linked to the creditworthiness or monetary policy of any single foreign government.

The BoT’s Monetary Policy Statement indicated that by December 2025, monetary gold made up roughly 13 per cent of foreign exchange reserves.

Total reserves were around US$6.33 billion, enough to cover approximately 4.9 months of expected imports. Gold’s importance rises, especially during times of geopolitical and financial uncertainty.

Although it doesn’t earn interest like Treasury securities, gold offers a safeguard against currency fluctuations, geopolitical conflicts, and systemic financial risks.

Recent actions by global central banks show that gold is becoming increasingly vital for diversifying reserves.

For Tanzania, a major gold producer, keeping some of its mineral wealth as monetary reserves is a strategic choice, converting mineral resources into a sovereign financial asset and giving the programme stronger economic logic.

Previously, Tanzania’s gold was mainly seen as an export commodity.

With the new strategy, some of that gold now serves as a national financial asset.

This establishes a connection: from gold production to domestic purchase, refining, monetary gold, international reserves, and ultimately, increased external resilience.

This policy represents a significant innovation. Instead of just exporting gold and earning foreign currency, Tanzania has the option to keep some of its mineral wealth in the form of physical reserves.

This doesn’t mean Tanzania should cease gold exports; instead, it aims to achieve a more balanced approach between viewing gold as an export commodity and as a strategic reserve asset.

Although the programme has cracks and loopholes, it has improved formalisation, especially for small-scale miners. A notable achievement is formalising the gold trade in most gold hot spots.

The Governor once said the programme has helped over 4,000 gold traders and small-scale miners open bank accounts with different financial institutions, improving liquidity in circulation.

This matters because formalisation creates a wider economic footprint.

Once miners and traders become part of the formal financial system, they may gain access to bank accounts, credit, insurance, digital payments, financial records, formal business financing, and other financial services.

Consequently, the programme serves not only as a reserve-accumulation tool but also as a means of promoting financial inclusion within the mining economy.

Over the past two years, the programme has improved incentives for domestic gold trading, largely due to the BoT’s operating model.

The bank offers gold sellers competitive international prices and ensures payment within 24 hours of fire-assay confirmation.

It also covers refining costs. Moreover, the government reduced the royalty rate under this scheme, eliminated inspection fees, and applied zerorated VAT to gold sold to the BoT.

These measures collectively make the official market more attractive.

This is crucial because formalisation is most effective when the formal market competes well with informal channels.

Merely imposing regulations on miners isn’t sufficient; the legal market must also offer speed, transparency, and competitive pricing.

Plus Gold has strengthened its external reserves, with the Governor’s report in early 2026 showing foreign reserves surpassing US$6 billion. This amount covers approximately 4.5 months of imports.

The total gross international reserves, including non-monetised gold, increased to about US$8.7 billion.

BoT data indicate that gold has emerged as a significant export, with gold exports totaling approximately 4.97 billion US dollars (about 13.14tri/-) in the year ending February 2026, representing around 45.7 per cent of goods exports.

Therefore, the gold programme should be regarded as one factor among many in enhancing Tanzania’s external position, rather than the only cause.

While we generally hesitate to discuss shortcomings and weaknesses, I will briefly mention some measures that, if adopted, could bring even higher economic gains in the gold sector.

From an economic standpoint, this significant accumulation also presents a new policy challenge.

The current question isn’t about whether Tanzania should purchase gold, considering the impressive two-year milestone, but rather about determining how much gold to hold, at what price, for which purposes, and within what risk boundaries.

The market assessment identifies concentration as a key concern. Gold prices are highly volatile, often experiencing sharp increases or decreases.

As Tanzania accumulates more gold reserves, its vulnerability to international gold price changes also grows.

This presents a paradox: while Tanzania can strengthen its reserves through gold purchases, this action could also increase the volatility of its reserve portfolio.

Therefore, gold should act as a diversification tool for Tanzania’s reserves, not the primary source of risk.

The real question isn’t gold or foreign currency? but rather, what is the optimal reserve portfolio that includes gold, dollars, euros, other currencies, securities, and highly liquid assets?

Gold holds value but isn’t as instantly accessible as cash. Although it’s a highly liquid international asset, gold can’t match the immediacy of having foreign currency on hand.

When Tanzania urgently requires dollars for petroleum, medicines, machinery, debt payments, or other imports, the simplest way to access reserves is through foreign currency.

In such cases, gold might need to be sold or used in transactions to obtain the necessary liquidity.

Therefore, reserve management should keep adequate liquid foreign-currency assets in addition to gold.

The goal should be resilience rather than mere accumulation. Going back to basic economic principles, measure opportunity cost because every reservemanagement decision has one.

If the BoT uses foreign currency to purchase gold, it is choosing gold instead of another reserve asset. If gold subsequently rises faster than the alternative asset, Tanzania benefits.

If gold prices decline, the opposite effect might occur. Consequently, the BoT should regularly share or explain, in a transparent way, the risk-adjusted reasons behind its gold allocation. This does not imply disclosing sensitive trading details.

It means explaining the strategic framework, target gold share, maximum concentration, liquidity requirements, valuation methodology, storage costs, insurance, refining costs, counterparty risk, and, importantly, rebalancing rules.

Years of detailed analysis reveal that Tanzania’s domestic value chain remains underdeveloped, perhaps the country’s greatest missed opportunity.

Purchasing gold alone doesn’t optimise its economic value. Tanzania needs to consider what happens before the BoT buys gold and what happens afterwards.

The country should strategically expand domestic participation in sectors like exploration, mining technology, geological services, refining, bullion production, assaying, responsible sourcing, goldbacked financial products, jewelry manufacturing, mineral trading, mining equipment manufacturing, and financial services for miners.

As a result, the gold strategy should evolve from merely acquiring gold to establishing a complete gold value chain.

As previously mentioned regarding loopholes in gold trading, Tanzania needs to improve its targeting of small-scale miners.

The programme’s progress in financial inclusion is promising, but the next goal should be to link small-scale miners with productive financing.

Instead of merely opening bank accounts, banks and DFIs could provide equipment finance, working capital, geological financing, processing equipment, environmental rehabilitation finance, insurance, digital payment systems, responsible mining technology and structured gold-sale agreements.

This would increase production while improving traceability and formalisation.

The goal is to progress from an informal miner to a productive one, then to a bankable miner, followed by a larger-scale producer, and finally to a formal exporter.

Given the importance of the gold trade and market, Tanzania should strengthen responsible gold standards, which are becoming more critical.

International oversight of gold supply chains is growing, with increasing focus on responsible sourcing and human rights.

The London case involving the LBMA and accusations related to Tanzania’s North Mara mine underscores the reputational and governance risks in gold supply chains.

However, these claims are contested and remain under legal review. Nonetheless, the lesson for Tanzania is clear.

The country’s gold should not merely be plentiful; it should also be demonstrably responsibly sourced.

This requires stronger traceability from mine to refinery and from refinery to bullion.

That would protect Tanzania’s reputation and improve access to premium international markets.

At present, the Mining Act framework designates 20 per cent of exported gold for purchase by the BoT.

This policy is strategically prudent because it guarantees that Tanzania’s mineral wealth directly supports the country’s reserves.

However, the 20 per cent target should not be treated as a fixed goal without considering market conditions.

The country needs regular evaluations of gold production, export demand, domestic liquidity, international prices, reserve levels, foreign-exchange needs, refinery capacity, and the optimal gold share in reserves.

The ideal approach combines rules-based policies with flexibility to support turning gold reserves into economic leverage.

Tanzania has now completed two years of its gold purchasing programme. What measures can the country adopt to improve efficiency or explore alternative approaches?

Key areas for improvement include ensuring transparent, strategic gold allocation; providing more precise data on gold reserves; speeding up local refining to meet international standards; developing a strong gold ecosystem; boosting productivity among small-scale miners; encouraging responsible sourcing; and separating reserve management from fiscal funding.

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Gold reserves should enhance monetary and external stability, not serve as an alternative means of budget funding.

Why? Tanzania has succeeded initially, but the challenge remains. Two years after starting the Domestic Gold Purchase Programme, Tanzania has achieved a notable milestone.

The BoT has gathered about 28 tonnes of gold valued at 3.68 billion US dollars, with 6.19 tonnes acquired in 2024/25 and 21.71 tonnes in 2025/26.

This programme has diversified the reserves, enhanced the connection between mineral wealth and the financial sector, and encouraged formal practices among miners and traders.

Nevertheless, accumulation is just the initial step. The country should therefore move from How much gold can BoT buy?” To what is the optimal amount of gold Tanzania should hold, how can we maximise its economic value, and how can every gramme of gold contribute more to national development?”

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