Foreign investor access to deepen capital markets

DAR ES SALAAM: TANZANIA could attract more foreign capital, deepen its financial markets and strengthen funding for development by opening its government securities market to all non-resident investors, economists said.

The reform, introduced through the 2026 Foreign Exchange (Amendment) Regulations, allows all nonresident investors to buy short- and long-term government securities.

The regulations were published in the Government Gazette on July 17 under Government Notice No. 206, according to the Bank of Tanzania.

Economists said the wider access could increase foreign-exchange inflows, improve market liquidity and broaden the investor base, although the impact would depend on foreign investor appetite, currency risks and the relative attractiveness of Tanzanian assets.

Previously, participation by non-residents was limited to investors from the East African Community and Southern African Development Community, as well as Tanzanians living abroad.

An economics lecturer at Marian University College in Bagamoyo, Mr Gilbert Mwabeza, said the reform could increase foreign-exchange inflows as overseas investors convert foreign currency into Tanzanian shillings to purchase government bonds and Treasury bills.

“Expanding access gives Tanzania a wider opportunity to obtain foreign currency through capital inflows,” said Mr Mwabeza, who is also a PhD student at the University of Dar es Salaam.

He said the move could be important for the country because of its reliance on imports and the resulting demand for foreign currency, particularly US dollars.

Greater foreign participation could also support liquidity in the financial system and deepen capital markets by expanding the pool of investors and tradable assets, Mr Mwabeza said.

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However, the impact on the shilling and government borrowing costs would depend on the scale and persistence of foreign inflows, alongside broader domestic and global market conditions.

Tanzania Accountant Association President Mr Godvictor Lyimo said the move would help the government mobilise capital more easily and potentially support financing for large development projects.

“It opens the door for foreign capital to move into Tanzania,” Mr Lyimo said.

“The increased availability of capital could strengthen the country’s ability to finance development.”

Mr Lyimo said attracting foreign capital could reduce Tanzania’s dependence on external borrowing while giving the government greater flexibility in financing development.

The Bank of Tanzania said the reform was intended to broaden participation in the government securities market, develop Tanzania’s financial markets and promote the country as an investment destination.