Central bank hesitates to use gold as foreign reserve

Bank of Tanzania (BoT) says it remains hesitant to include gold in its foreign reserve due to the metal’s price instability.

BoT Director of Financial Markets Judith Ndissi, addressing reporters in the historical town of Bagamoyo over the weekend, said: “The central bank has developed cold feet on buying gold for national reserves.

"We’re a bit nervous as (gold) prices have declined substantially and have not yet recovered.” 

Gold accounts for the largest share of non-traditional exports in Tanzania, the central bank’s monthly economic review for last July showing that the precious metal’s both export volume and average unit price dropped during the year ending June 2013.

The volume of gold exported in the year dwindled to 36 tonnes from 40 tonnes recorded in the year ending June 2012 while the average unit price fell by 3.6 per cent to 1,610.7 US dollars per troy ounce.

Gold prices plummeted to record low levels of about 1,200 US dollars per troy ounce in June this year before gaining slightly to the current price of 1,388.80 US dollars per troy ounce.

Tanzania comes fourth in the largest gold producers’ ranking in Africa after South Africa, Ghana and Mali. 

Ms Ndissi said many central banks invest in gold because they have enough reserves but Tanzania can hardly afford investing her hard earned reserve of foreign exchange in gold, at least for the time being.

She said the latest current figures of foreign reserve stands at 4.5 billion US dollars, which are sufficient to run the country for four months and a half.

The defunct Parliamentary Public Organisations Accounts Committee (POAC) did advice BoT in 2011 to re-introduce a national gold reserve, with POAC Chairman Zitto Kabwe arguing that the re-introduction of the gold reserve would help to boost the value of the shilling.

He also said the reserve would help the government to get foreign exchange in times of need. According to the World Gold Council, the United States is leading the top ten countries with largest gold reserves.

The world’s largest economy holds 8,133.5 tonnes, followed by Germany with of 3,391.3 tonnes and the International Monetary Fund with 2,814 tonnes.

South Africa and Libya at the 28th and 31st positions, respectively, are the only African countries in the top 50 countries with largest gold reserves in the world. They hold 125.1 tonnes and 116.6 tonnes, respectively.
Source: Daily News, reported by Henry Lyimo, from Dar es Salaam, Tanzania
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