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The Bank of Tanzania plans to buy 12 tons of gold during the fiscal year in an effort to boost its foreign exchange reserves. The East African nation joins a growing number of central banks turning to gold.Tanzania Minister for Minerals Anthony Mavunde said the central bank will purchase gold from domestic miners and refiners in Tanzanian shillings. According to Mavunde, the funds have already been allocated.In a recent video posted in September, Bank of Tanzania Governor Emmanuel Tutuba said the central bank had already bought 418 kg of gold and plans to purchase six tons by the end of 2023.Tanzania ranks 20th in the world in gold production. Last year, the country’s mines produced just over 50 tons of gold. Mineral exports totaled about $3.3 billion in the last fiscal year. According to Mavunde, the mining industry contributed 56% percent of the country’s foreign currency reserves.To incentivize sales to the central bank, government officials and representatives of the mining industry are discussing legislation to lower the royalty charged on gold sales to the bank. Currently, miners sell gold to refineries, the government levies a 7.3% royalty. That compares to a 9.3% royalty when they sell to the Bank of Tanzania. The legislation would lower the tax on sales to the bank to 7.3%.Mavunde also assured miners that the Bank of Tanzania plans to buy gold based on the global spot price on a daily basis. According to the Tanzania Daily News
, this would ensure dealers didn’t have to export gold in order to find the best price in foreign markets.“The main target is to ensure that money obtained from gold remains in the country’s circulation instead of exporting it outside to boost the economies of foreign nations,” Mavunde said.Reading between the lines, it appears the Bank of Tanzania would prefer to hold more gold instead of more US dollars.Mavunde went on to say he hoped the plan would “provide what is expected in the Gross Domestic Product (GDP), as well as uplifting individual economies of miners and business persons in the sector.”Tanzania joins a growing number of central banks turning to gold. At the end of the third quarter, the World Gold Council said it’s “all but certain that central banks are on course for another colossal year of buying,” after a record-setting 2022.Through the first nine months of 2023, central banks bought a net of 800 tons of gold. That was 14% more than through the same period in 2022.Total central bank gold buying in 2022 came in at 1,136 tons. It was the highest level of net purchases on record dating back to 1950, including since the suspension of dollar convertibility into gold in 1971. It was the 13th straight year of net central bank gold purchases.According to the 2023 Central Bank Gold Reserve Survey released by the World Gold Council last spring, 24% of central banks had plans to add more gold to their reserves in the next 12 months. Seventy-one percent of central banks surveyed believe the overall level of global reserves will increase in the next 12 months. That was a 10-point increase over prior year.More By This Author:The World Is Sitting On A Powder Keg Of Debt
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