Dar es Salaam. The Bank of Tanzania (BoT) has introduced new rules and procedures for conducting foreign exchange (FX) auction operations on the Interbank Foreign Exchange Market (IFEM).
IFEM is a wholesale market where banks and financial institutions trade currencies against the local currency.
It is a significant sector of the foreign exchange market.
According to the central bank’s financial markets directorate these introduced regulations are designed to provide a transparent, systematic and efficient framework that ensures fairness, competition, and stability in the foreign exchange market.
“The document provides rules and procedures for market participants engaging in foreign exchange auction operations in accordance with the foreign exchange intervention policy,” the BoT stated.
The introduction of these rules comes at a time when Tanzania’s interbank foreign exchange market has seen a surge in activity.
According to BoT’s recent monthly economic review issued in January 2025, IFEM transactions reached $95.7 million in December 2024, a significant increase from the $17.1 million recorded in December 2023.
In addition, the Tanzanian Shilling has shown strong performance, reversing its previous depreciation trend.
In December 2024, the shilling appreciated by approximately 8.96 percent month-on-month, trading at an average of Sh2,420.84 per dollar, compared to Sh2,659.03 per dollar in November 2024.
On an annual basis, the shilling appreciated by 3.8 percent in contrast to the 6.3 percent depreciation recorded in the previous month.
As of March 6, 2025, the exchange rate remained stable, with the dollar trading at an average of Sh2,611.79 per central bank’s data.
This sustained stability highlights the positive impact of the BoT’s intervention measures.
The newly issued guidelines outline critical aspects of FX auction operations, including eligibility criteria, auction currency, quotation conventions, bidding rules, allocation methodology, and penalties for non-compliance.
According to the BoT, the document aims to streamline FX auction procedures to align with the foreign exchange intervention policy.
A key feature of the new procedures is that participation in FX auctions is strictly limited to Tanzania’s Authorized Foreign Exchange Dealing banks.
Furthermore, transactions will be conducted exclusively in United States Dollars against Tanzanian Shillings.
The exchange rate quotation for bids will indicate the shilling equivalent per dollar, rounded to two decimal places.
Bidding rules and compliance measures
To enhance efficiency and minimise risks, the FX auctions will be conducted via the Refinitiv FX Auction platform.
The minimum bid size is set at $250,000, with bids being submitted in multiples of this amount.
Additionally, the total volume of all bids from a single bank must not exceed 20 percent of the announced auction size.
Once submitted, bids are final and binding, with no option for withdrawal.
BoT has issued a stern warning against non-compliance.
“Banks that fail to comply with these rules and procedures shall be subject to appropriate supervisory and regulatory sanctions including but not limited to suspension from participating in future auctions,” BoT said in a statement.
The newly introduced FX auction rules are expected to bolster confidence in Tanzania’s foreign exchange market by ensuring greater transparency and predictability.
