Tanzania’s central bank authorities are pursuing an ambitious strategy to increase their gold reserves for this fiscal year. To do this, they asked Mining companies to reserve 20% of their metal production for sale to the country.
This strategy of the African country aims to diversify its possessions in international reserves. Likewise, it seeks to stop the accelerated depreciation of the local currency, the Tanzanian shilling. It should be noted that the authorities of Dodoma, (the country’s capital) began purchasing gold from mining companies last fiscal year.
In that sense, in the annual period until June 2024, they purchased 418 kilograms of this raw material, according to Reuters. For the current fiscal year they aim to buy about 6 metric tons of gold and hence the pressure on mining companies. In this way, both miners and traders are obliged to dedicate 20% of their products to the State.
According to the country’s mining regulators, the new law came into effect last Tuesday. In such a way, Tanzania’s gold reserves could strengthen its international reserves strategy and boost its economic capacity. However, at the same time they could discourage mining and other raw materials companies from investing in the country.
The consequences of this Tanzanian strategy to increase its gold reserves
The strategy of increasing its reserves from 20% of the extraction of mining companies seems fair for the country. The latter taking into consideration that this gold is within the sovereign borders of Tanzania. However, there are some elements that could make this law not fair for mining companies.
For example, the payment of that 20% does not offer a clear perspective for producers. Consequently, it is limited to highlighting that the payment methods will be established by the central bank without offering further details. This has two readings. The first is that it will pay with the local currency and that means issuing inorganic money to pay companies.
The second scenario is to pay late, which is also not beneficial for companies, which would be left in a productive deficit. As you can see, Tanzania’s strategy of increasing gold reserves is probably not very popular among mining companies operating in the country.
Gold remains a fundamental part of economic stability strategies around the world. Hence, all countries make considerable efforts to increase their possessions in this raw material.
For African countries, generally with weak economies, this is a historic debt. The continent is one of the world’s great gold reserves and yet its countries are left with little.
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