Tanzania Mobilizes $1.3 Billion Gold Reserves for Infrastructure Amid Global Aid Withdrawal and Political Isolation

Tanzania has initiated plans to sell portions of its $1.3 billion gold reserves to finance critical infrastructure projects, marking a strategic pivot toward domestic resource mobilization as international development assistance evaporates and political tensions with Western donors intensify. The decision, announced by Planning and Investment Minister Kitila Mkumbo during a briefing in London on Monday, January 27, 2026, reflects both opportunity and necessity for the East African nation.

President Samia Suluhu Hassan directly authorized the Bank of Tanzania to proceed with a partial sale of its bullion holdings, though the government has not disclosed the specific quantity of gold to be liquidated or the timeline for execution. The Bank of Tanzania held gold reserves valued at 3.3 trillion shillings ($1.3 billion) at the end of December 2025, according to data published by the central bank last week.

“Governments are no longer interested in providing aid to Africa, so we are reorganizing ourselves,” Mkumbo stated bluntly, capturing the stark reality facing African nations as traditional donor relationships fundamentally reshape. His comments underscore Tanzania’s determination to finance its development trajectory through internal resources rather than remain dependent on increasingly unpredictable external support.

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Strategic Timing Amid Record Gold Prices

The decision to monetize gold reserves comes at an exceptionally opportune moment for Tanzania, with gold prices surging to record highs above $5,100 per troy ounce in late January 2026. The precious metal has experienced a historic rally, climbing 15% in just the first three weeks of 2026 following a 64% gain throughout 2025, driven by geopolitical tensions, fiscal uncertainty, and robust central bank demand worldwide.

Spot gold crossed $5,110.50 on January 26, 2026, as investors sought refuge amid international political tensions including U.S.-China trade friction, disputes over Greenland’s strategic importance, and concerns about Federal Reserve independence. This represents gold’s steepest annual increase since 1979 and positions Tanzania to maximize returns from its reserve sales.

“We need cash. We have a lot of infrastructure projects that are going on and they need funding, so they have been instructed to sell part of it so that we get money for the infrastructure,” Minister Mkumbo explained in remarks reported by MarketScreener. The timing allows Tanzania to convert its reserves at peak valuations, potentially generating significantly more infrastructure financing than would have been possible even six months earlier.

The Collapse of Development Assistance

Tanzania’s move to sell gold reserves reflects a broader global crisis in development finance that has accelerated dramatically since 2025. The dismantling of the U.S. Agency for International Development (USAID) under the second Trump administration has eliminated the world’s largest bilateral development agency, which provided 28% ($64 billion) of the $223 billion in official development assistance (ODA) delivered by governments worldwide in 2023.

The Trump administration eliminated 5,800 of 6,200 multiyear USAID contracts, amounting to $54 billion, and slashed nearly 30% of State Department foreign aid grants, representing a further $4.4 billion reduction. According to OECD estimates, these cuts contributed to a 17% decline in global foreign aid in 2025, with particularly severe impacts across sub-Saharan Africa where aid funding could drop 16-28%.

The crisis extends beyond the United States. Eight of the top ten donors within the OECD’s Development Assistance Committee reduced their foreign aid budgets in 2024, with Germany announcing a $5.3 billion reduction, the United Kingdom cutting 40% of its aid budget to prioritize defense spending, and the Netherlands slashing 37% of bilateral aid over five years. This represents a fundamental restructuring of the post-World War II development assistance paradigm.

For Tanzania specifically, the aid environment has become particularly precarious. Minister Mkumbo’s remarks come amid what he described as “a number of bilateral partners reviewing their financial support” following the country’s disputed October 2025 election, which international observers characterized as the worst political crisis in Tanzania’s modern history.

The October 2025 Election Crisis

Tanzania’s infrastructure financing challenges are inseparable from the severe political crisis that erupted following the October 29, 2025, general election. President Samia Suluhu Hassan was declared the winner with 97.66% of the vote after the Independent National Electoral Commission disqualified Tanzania’s two main opposition parties from participating. The election sparked unprecedented protests that were met with lethal force by security services.

UN human rights experts condemned what they described as “widespread and systematic human rights violations,” including allegations of hundreds of extrajudicial killings, enforced disappearances, and mass arbitrary detentions. The government imposed a complete internet shutdown from October 29 to November 3, 2025, alongside a nationwide curfew and military deployment, severely curtailing the ability of human rights defenders and journalists to document violations.

The death toll remains deeply contested. While the government has acknowledged that people died but provided no official count, the opposition party Chadema claimed over 2,000 deaths from the post-election crackdown, with party officials alleging that police disposed of hundreds of bodies at undisclosed locations. The UN confirmed at least 10 deaths, while opposition sources initially reported around 700 killed nationwide. Amnesty International documented that security forces used live ammunition and tear gas directly at protesters and bystanders who posed no imminent threat.

Human Rights Watch described the violence as demonstrating a “shocking disregard for the right to life and for freedom of peaceful assembly.” Chatham House analysts characterized the crisis as marking a turning point for Tanzania, noting that “for decades mainland Tanzania has prided itself on relative stability in a turbulent region” – a reputation now shattered by the scale of violence.

European Union Response and Aid Suspension

The political crisis triggered immediate diplomatic consequences. The European Union issued a statement expressing deep concern about election-day violence, the internet shutdown, and reports of irregularities, noting that “reliable reports of large number of fatalities and significant injuries are of extreme concern.” The EU called for the release of detained politicians and swift investigations into all reported incidents.

In November 2025, the European Parliament adopted a non-binding resolution calling for the suspension of implementation of a €156 million ($185 million) support program to Tanzania. The resolution denounced what parliamentarians described as “thousands dead and injured, with reports of mass graves” and called for the “immediate and unconditional release” of opposition leader Tundu Lissu, who was excluded from the electoral process and charged with treason.

The European Parliament resolution, though technically non-binding, carries significant weight in shaping EU policy. The European Commission had already suspended the funds following adoption of an earlier resolution by the Parliament’s Foreign Affairs Committee. While the Commission stated it would continue dialogue with Tanzanian authorities without announcing a final decision, the suspension represents a substantial blow to Tanzania’s external financing.

Tanzania’s embassy in Brussels accused the European Parliament of undue interference, stressing that there was no opportunity to “present its side of the story and clarify the situation.” This diplomatic tension further complicates Tanzania’s relationship with its traditional Western donors at precisely the moment when development assistance is already contracting globally.

Tanzania’s Gold Accumulation Strategy

The decision to sell gold reserves represents a reversal of Tanzania’s recent policy trajectory. Since launching a Domestic Gold Purchase Programme in the 2022/23 financial year, the Bank of Tanzania has been actively accumulating gold from local miners to strengthen foreign exchange reserves and reduce reliance on external borrowing.

Under President Hassan’s leadership, the central bank introduced regulations requiring mining companies to sell 20% of their gold production to the Bank of Tanzania. In June 2025, the central bank signed agreements with four major mining firms – Barrick Gold Corporation’s Twiga Minerals, which operates the North Mara and Bulyanhulu mines, along with other local producers – to implement this domestic purchase requirement.

Finance Minister Dr. Mwigulu Nchemba emphasized at the signing ceremony that “this gold purchase programme reflects the government’s commitment, under the leadership of President Samia Suluhu Hassan, to build sufficient foreign exchange reserves, increase the contribution of minerals to the national economy, and enhance value addition in the mining sector.”

By mid-June 2025, the Bank of Tanzania had acquired 5,022.85 kg of pure gold worth approximately $554.28 million, surpassing its 2024/25 target of increasing reserves by $350 million. The programme represented a strategic effort to convert Tanzania’s mineral wealth into monetary reserves while supporting the domestic refining industry’s efforts to achieve London Bullion Market Association accreditation.

The current decision to sell portions of these accumulated reserves thus marks a significant policy shift, driven by the acute need for infrastructure financing amid collapsing donor support. It illustrates the difficult trade-offs facing developing nations: maintaining foreign exchange reserves for monetary stability versus deploying those same reserves to fund critical development projects when external financing evaporates.

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Gold’s Central Role in Tanzania’s Economy

The gold sector has become increasingly vital to Tanzania’s economic performance and export earnings. Tanzania produced an estimated 52 tonnes of gold in 2023, positioning it among Africa’s leading producers of the precious metal. Bank of Tanzania data show that gold accounted for 22.5% of national exports in 2023, valued at approximately $3.05 billion – a critical source of foreign exchange for the country.

The mining sector’s contribution to GDP has risen substantially, climbing from 9.0% in 2015 to 10.1% in the 2024/25 fiscal year according to Minister of Minerals Antony Mavunde. Annual mining sector contributions to the Government Consolidated Fund have surged from TZS 162 billion to TZS 753 billion since legal amendments strengthened government revenue collection, with officials targeting TZS 1 trillion in contributions.

Recent data from the Ministry of Mining show extraordinary revenue performance, with the ministry collecting Sh653.20 billion (approximately $260 million) from July through December 2025 – representing 54.4% of the ambitious Sh1.2 trillion annual target for the 2025/2026 fiscal year. In a more recent period from November 2025 to January 25, 2026, the ministry collected Sh311.80 billion, exceeding its target for that timeframe by 11%.

This revenue surge reflects both increased production volumes and the favorable global price environment. During the same period through early 2026, the Bank of Tanzania continued purchasing gold, acquiring 17.03 tonnes of the precious metal valued at Sh4.97 trillion, aligning with the broader trend that saw Tanzania’s gold exports generate a record $4.4 billion in 2025.

Infrastructure Financing Requirements

Tanzania faces massive infrastructure financing needs as it pursues ambitious development targets outlined in President Hassan’s Vision 2050 strategy, which aims to transform Tanzania into a $1 trillion economy by mid-century. The government has prioritized completion of transformative infrastructure projects including the Standard Gauge Railway (SGR) linking Dar es Salaam port to landlocked neighbors, the Julius Nyerere Hydropower Plant designed to double power generation to 8,000 MW, and expansion of port capacity.

President Hassan outlined in her November 2025 parliamentary address plans to lift GDP growth from 5.6% to above 7% by 2030, with major investments required in SGR completion, ports, airports, water infrastructure, and energy systems. The Kwala Dry Port and SGR electric freight services launched in July 2025 represent critical components of this infrastructure push, with the project including a 1,000-hectare industrial park expected to create over 200,000 jobs.

Tanzania is also pursuing a mega $42 billion liquefied natural gas project that Minister Mkumbo indicated the government expects to sign before June 2026. This project alone would represent one of Africa’s largest energy infrastructure investments, requiring substantial supporting infrastructure and long-term financing commitments.

President Hassan emphasized in her end-of-year national address that Tanzania’s economy grew by 5.8% in 2025, up from 5.2% in 2024, while inflation remained contained at an average of 3.4%. Foreign exchange reserves had risen to $6.6 billion by year-end 2025, sufficient to cover more than five months of imports. The government attributed this performance to sustained infrastructure investment and strong contributions from agriculture, mining, construction, financial services, and tourism sectors.

However, maintaining this growth trajectory and advancing ambitious infrastructure targets requires substantial capital investment precisely as external financing becomes scarce. The gold reserve sales provide a mechanism to bridge this financing gap without incurring new debt or compromising fiscal sustainability.

Currency Stabilization Considerations

The decision to sell gold reserves carries implications for Tanzania’s currency management and foreign exchange position. Throughout 2025, the Bank of Tanzania engaged in significant central bank intervention, exceeding $260 million by the end of November to support the Tanzanian shilling’s stability amid dollar hoarding ahead of the October election.

Analysis of Bank of Tanzania data shows the shilling appreciated by 6.5% against the US dollar in the second half of 2025, attributed to central bank intervention, stricter regulations on domestic US dollar usage, and positive developments in the external sector. The central bank implemented stringent regulations in March 2025 requiring that all pricing and payment for goods and services within Tanzania be conducted in Tanzanian shillings rather than foreign currencies.

Gold reserve accumulation has been central to the central bank’s ability to intervene in currency markets and maintain shilling stability. Bank of Tanzania Governor Emmanuel Tutuba emphasized that the gold purchase programme aims to strengthen the resilience of foreign exchange reserves and reduce dependence on external borrowing for monetary policy operations.

The planned partial sale of gold reserves could potentially reduce the central bank’s capacity for currency intervention, though the conversion of gold into cash would simultaneously provide immediate liquidity for infrastructure spending. The government appears to be calculating that the infrastructure investments enabled by gold sales will generate sufficient economic returns and foreign exchange earnings to offset any reduction in reserve cushion.

Regional Context and Donor Dependency

Tanzania’s strategic pivot reflects challenges facing African nations broadly as they navigate declining and increasingly conditional donor support. Across the continent, governments are reassessing development financing models that have relied heavily on bilateral and multilateral assistance for decades.

The broader trend toward declining development assistance has forced African nations to explore alternative financing mechanisms including domestic resource mobilization, regional development banks, sovereign bonds, and partnerships with emerging economies such as China, which has expanded its infrastructure financing role across Africa through Belt and Road Initiative projects.

However, Tanzania’s particular political circumstances following the October 2025 election crisis have left it more isolated than many regional peers. While countries like Kenya and Ethiopia continue to receive substantial international support despite their own governance challenges, Tanzania’s violent suppression of election protests has triggered a degree of Western donor backlash that complicates access to remaining pools of development finance.

The European Parliament resolution calling for suspension of EU aid to Tanzania cited not just the post-election violence but also the broader deterioration of democratic space, including “arbitrary and politically motivated detention” of opposition figures and systematic restrictions on civil liberties. This positions Tanzania as a test case for how Western donors will respond to democratic backsliding in Africa amid their own pivot toward prioritizing strategic interests over governance concerns.

Looking Ahead: Sustainable Development Financing

The sustainability of Tanzania’s gold-funded infrastructure strategy depends on several critical factors. First, global gold prices remain highly volatile, influenced by macroeconomic conditions, geopolitical tensions, and investor sentiment that could shift rapidly. Analysts at Societe Generale project gold could reach $6,000 per ounce by year-end 2026, suggesting continued favorable conditions, though such forecasts carry substantial uncertainty.

Second, Tanzania’s gold production levels and reserve accumulation capacity will determine whether the country can continue this financing strategy beyond the current reserves. The domestic purchase programme requiring 20% of mining output provides a steady source of gold acquisitions, but expanded implementation requires cooperation from mining companies and sustained production volumes.

Third, the effectiveness of infrastructure investments in generating economic returns and tax revenues will ultimately determine whether this approach proves financially sustainable. If infrastructure projects succeed in catalyzing private sector growth, expanding the tax base, and attracting foreign investment, they could justify the drawdown of reserves. If projects deliver below expectations or face implementation challenges, the strategy risks depleting reserves without achieving transformative economic impact.

Tanzania Investment Centre data suggest that foreign direct investment prospects remain strong despite recent political tensions, with the country positioned to benefit from global demand for critical minerals including graphite, nickel, and cobalt essential for electric vehicle production. The regulatory environment under President Hassan’s “4Rs” framework (Reconciliation, Resilience, Reforms, and Rebuilding) has streamlined investment processes, potentially supporting economic growth independent of donor support.

The Broader Implications

Tanzania’s decision to monetize gold reserves for infrastructure financing represents more than a tactical response to immediate fiscal pressures. It signals a potential paradigm shift in how resource-rich African nations approach development finance amid the collapse of traditional donor relationships and the restructuring of the global aid architecture.

Minister Mkumbo’s stark assessment that “governments are no longer interested in providing aid to Africa” reflects a recognition that the post-colonial development assistance model may be ending permanently rather than experiencing a temporary contraction. African nations are increasingly forced to finance their own development through domestic resource mobilization, including strategic deployment of natural resource wealth.

This approach carries both opportunities and risks. On one hand, it could catalyze more sustainable, domestically-driven development that reduces dependency on external actors and aligns infrastructure investments with national priorities rather than donor preferences. Tanzania’s ability to fund critical projects like the Standard Gauge Railway and hydropower expansion without incurring additional debt represents genuine economic sovereignty.

On the other hand, the strategy requires exceptional implementation capacity, transparent governance, and strategic resource management that many developing nations struggle to maintain. The political crisis surrounding Tanzania’s October 2025 election raises questions about whether current governance structures can effectively deploy infrastructure investments for broad-based economic development or whether resources will be captured by elite networks.

The international community’s response to Tanzania’s gold sales strategy and infrastructure financing will likely influence how other African nations approach similar challenges. If Tanzania succeeds in maintaining macroeconomic stability while advancing transformative infrastructure without donor support, it could inspire regional emulation. If the approach falters, it may reinforce arguments for continued donor engagement, albeit under reformed modalities.

For now, Tanzania proceeds with a clear-eyed assessment that external support cannot be relied upon and that the country must chart its own development path using the resources at its disposal – including the gold lying beneath its soil and the reserves accumulated in its central bank vaults. Whether this bet on self-reliance succeeds will shape African development finance for years to come.

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By: Montel Kamau

Serrari Financial Analyst

29th January, 2026