Can Gold Reserves Stabilise the Tanzania Shilling Amid EU Funding Threats?

• As EU aid hangs in the balance post the October 2025 elections, Tanzania’s gold reserves, which now stands at $6.2Bn, could redefine the country’s monetary resilience.
• From $260M interventions to booming horticulture exports, the Bank of Tanzania (BoT) is arming its currency against global shocks.
• Globally, gold prices are set to hit $3,700/oz in 2026. Can Tanzania’s reserves turn October 2025 election jitters into a trade windfall for East African markets.

In an era of roiling geopolitical tensions and economic volatility, Tanzania’s central bank is wielding gold reserves as a strategic asset to fortify its currency against volatility. The Bank of Tanzania (BoT) has ramped up gold purchases, amassing reserves that now stand at $6.2 billion, amid concerns over potential retraction of critical financing from the European Union (EU) following worldwide scrutiny of the 2025 General Election.

This move not only aims to insulate the Tanzanian Shilling from external shocks, but could also open up lucrative opportunities for investors in commodities, finance, and trade. As global gold prices climb, projected to average $3,700 per ounce in this year, professionals eyeing East African markets should assess how these dynamics could reshape investments.

The Bank of Tanzania‘s Gold Reserves Strategy

Tanzania’s approach to Tanzania shilling stability hinges on proactive strategy of building gold reserves. In the latest BoT monthly economic review, the governor noted that: “We are continuing with our earlier strategy of increasing gold purchases to bolster financial stability in the country.” This initiative has propelled reserves to $6.2 billion by December 2025, providing a strong cushion against the country’s currency fluctuations.

For policymakers in Tanzania, gold’s allure lies in its role as a hedge. With international prices of the metal surging from $3,400 per ounce as per last year, Tanzania’s exports—where gold comprises an estimated 39.4 per cent of goods in value, have surged, further narrowing the trade deficit.

For investors, this underscores gold’s dual function: as a safe-haven asset and a driver of forex inflows. Policymakers, meanwhile, view it as a tool to mitigate import pressures, particularly in energy, which accounts for 19.9 per cent of imports but has eased due to softer global oil prices.

Analytically, this strategy aligns with broader African trends, where nations such as Ghana and Zimbabwe leverage mineral wealth for monetary resilience. Yet, Tanzania’s execution stands out for its scale, offering trade professionals a model for commodity-linked currency management.

Enhancing Dollar Liquidity Through Interventions

BoT’s interventions have been aggressive, injecting over $260 million in November 2025, up from under $170 million the previous year, to counter dollar hoarding pre-elections. This has yielded a 6.5 per cent Tanzania shilling appreciation against the US dollar by early 2026, stabilising at around 2,550/- per greenback.

Such measures reflect authoritative monetary policy, but they also highlight vulnerabilities. For corporate leaders, the implications are clear: a stronger shilling could reduce import costs for multinationals, fostering investment in manufacturing and agribusiness. However, sustained interventions risk depleting reserves if external pressures mount.

Gold and Exports Drive Progress

Tanzania’s current account deficit is forecast to shrink from 3.2 per cent of GDP in 2025 to 2.5 per cent in 2026, buoyed by gold, horticulture, and import substitution. The BoT governor noted: “Rising gold prices, strong horticultural exports and sustained government backing for import substitution have collectively boosted export levels and moderated import demand.”

Self-sufficiency in construction materials such as cement and steel, achieved by December 2025, exemplifies this shift. For investors in markets and finance, this signals reduced forex outflows and enhanced domestic supply chains, ripe for partnerships in value-added processing.

Horticulture’s resilience amid climate challenges further bolsters the narrative. Trade experts should note the projected completion of the East African Crude Oil Pipeline by late 2026, which could amplify services exports through improved regional connectivity and competitive port costs.

Navigating Primary Income Outflows

Debt servicing remains a drag, with outflows offsetting gains. Yet, the BoT anticipates balance through export surges. For policymakers, this underscores the need for diversified financing; for investors, it highlights bonds and green finance as avenues to support infrastructure without exacerbating deficits.

EU Funding Risks: Geopolitical Clouds on the Horizon

Post-2025 General Election, the European Parliament urged retraction of €156 million ($181 million) in aid to Tanzania, citing governance concerns. The BoT review counters: “In light of possible lender withdrawals that could reduce financial inflows, the Bank of Tanzania has both the readiness and capacity to intervene, thereby ensuring the stability of the shilling.”

This show of confidence stems from gold-backed reserves and a weaker dollar’s revaluation effects, a move that widens interest rate differentials with the US. For international investors, such scrutiny could deter short-term flows but create openings in alternative financing, for instance, in Islamic bonds or Chinese partnerships, given Tanzania’s strategic Belt and Road ties.

Analysts question sustainability: if EU funds retract, could it trigger depreciation of the Tanzania Shilling? The BoT’s narrative reassures, but vigilant monitoring is advised for corporate strategies in East Africa.

Investor Implications Amid Uncertainty

For finance professionals, Tanzania’s gold strategy offers hedging plays; rising prices could yield 8-10 per cent returns on commodity-linked investments. Trade opportunities abound in port efficiencies, potentially cutting logistics costs by 15-20 per cent regionally.

Policymakers might emulate this model, blending reserves with regulatory tightening, like mandating Tanzania shilling transactions strategy that has been in force since March 2025 to curb dollarisation.

Outlook: A Stable Shilling as Tanzania’s Economic Anchor

Tanzania’s multifaceted approach, comprising gold hoarding, export diversification, and fiscal prudence, looks set to position the shilling for stability amid global headwinds. As the BoT review states: “Notwithstanding donors’ apprehensions and heightened domestic demand for US dollars, the central bank has shown commendable readiness to intervene to stabilise the currency.”

For business leaders and investors, this spells opportunity: a resilient currency fosters predictable markets, ideal for long-term commitments in agribusiness, mining, and infrastructure. With reserves robust and policies adaptive, Tanzania could emerge as East Africa’s stability hub—provided geopolitical risks are navigated astutely. The shilling’s fortitude may well define the nation’s investment appeal in 2026 and beyond.

Read also: Port Pay Off: DP World’s Cash Injection Delivers Wins for Tanzania’s Shipping Industry