Mtei’s role in establishing BoT and ensuring monetary control

As recounted in the autobiography of the bank’s founding governor, Mr Edwin Mtei, From Goatherd to Governor, the establishment of the BoT was neither accidental nor routine.

It was the product of political resolve, careful planning and intense institution-building undertaken under tight timelines by a small group of policymakers and technocrats.

Mr Mtei’s role in the birth of the central bank began unexpectedly in late 1965. At the time, he was Permanent Secretary to the Treasury and had just returned from official visits to London and Washington, where Tanzania was negotiating development financing and technical assistance.

Shortly after his return, he was summoned to State House by President Julius Nyerere. During the meeting, Mr Mtei briefed the President on discussions held with the International Monetary Fund (IMF), currency printers and potential foreign experts who would assist Tanzania in setting up a central bank.

After listening carefully, President Nyerere informed him that he had decided to appoint him Governor-Designate of the proposed Bank of Tanzania. Until the institution was formally established, Mr Mtei would remain Permanent Secretary on special duty, dedicating his time entirely to preparing the central bank.

The announcement was made public through radio and newspaper reports, signalling that the government had moved from planning to execution in its bid to establish a national monetary authority.

Laying the legal foundation

One of the first and most urgent tasks was drafting the legal framework. Through IMF technical assistance, a senior Swedish central banker, Mr Gunnar Akermalm, arrived in Dar es Salaam in October 1965 to serve as Director General of the future bank.

Soon after, an IMF mission led by Mr Jan Mladek worked with Tanzanian officials to prepare the Bank of Tanzania Bill. Drawing on central banking laws from other jurisdictions, the team completed the draft within weeks.

The Cabinet approved the Bill before the end of November 1965, and Parliament passed it during its December session. On January 6, 1966, President Nyerere gave his assent, formally establishing the Bank of Tanzania and confirming Mr Mtei as its first Governor.

With that assent, Tanzania joined a broader continental and global shift away from colonial-era currency boards towards independent central banking institutions.

Building an institution from scratch

Legal existence did not immediately translate into operational readiness. The new bank had no offices, no vaults, no currency and only a handful of staff. Temporary premises had to be rented and converted, furniture procured and basic infrastructure, including telephone lines, installed.

In its early months, the bank relied entirely on government funding, as it had no independent income. Expenditure was met through Treasury arrangements, and even routine operational needs required close co-ordination with the Ministry of Finance.

In January 1966, Mr Mtei travelled to Washington to attend an IMF seminar for senior central bankers. While there, he received confirmation by cable that the Bank of Tanzania Act had received presidential assent, formally ending his designation as “Governor-Designate”.

The seminar provided early exposure to global monetary practices at a time when the international system was still governed by fixed exchange rates and gold-backed settlements between central banks.

Winding up the East African Currency Board

Alongside domestic preparations were complex negotiations to dissolve the East African Currency Board (EACB), which had issued the East African shilling used in Tanganyika, Kenya and Uganda.

The three countries agreed that their new national currencies would initially be issued at par with the East African shilling to ensure a smooth transition. Assets of the EACB, including sterling reserves held at the Bank of England and investments in government securities, were to be shared among the three states based on the volume of currency converted in each territory.

The process required close co-operation between the newly appointed central bank governors and finance officials, reflecting a shared determination to minimise disruption to trade and payments during the transition.

Staffing and skills transfer

A defining feature of the BoT’s early years was its approach to staffing. Recognising the shortage of local central banking expertise, Tanzania recruited a small group of expatriate managers from established institutions, including the Bank of England, Sveriges Riksbank, Norges Bank, the Danish National Bank, the Reserve Bank of India and the US Federal Reserve.

Their role extended beyond day-to-day operations. They were tasked with training Tanzanian staff recruited from commercial banks, universities and government departments, with the clear objective of localisation.

The strategy proved effective. Within a few years, Tanzanians formed the core of the bank’s professional and managerial staff. By the time Mr Mtei left office in 1974, only one expatriate adviser remained in a senior role.

Launching the national currency

Issuing a national currency was among the most visible and logistically demanding tasks.

The first shipment of coins arrived in Dar es Salaam in March 1966. With no secure vaults ready, they were stored under armed guard at Tanzania People’s Defence Forces facilities.

Banknotes followed in April and were distributed to commercial banks nationwide in preparation for launch day. June 14, 1966, was deliberately chosen, falling one day before the opening of Parliament’s Budget Session.

President Nyerere officiated at the ceremony, symbolically receiving the first Bank of Tanzania note across the counter. In his address, he cautioned against the illusion that a central bank was a shortcut to development.

Having a national currency, he said, did not mean the country could simply print money to meet its needs. Economic progress would still depend on productivity in farms, factories, mines and offices.

Public response was enthusiastic. Across the country, citizens queued to exchange East African shillings for the new Tanzanian currency, sometimes travelling long distances. Authorities reassured the public that the old notes would remain legal tender for a transition period to prevent panic or hoarding.

Consolidation and early operations

With the currency in circulation, attention turned to consolidation. The Exchange Control Division of the Treasury became the bank’s first fully operational department, managing transactions with non-sterling area countries.

Correspondent banking relationships were established in major financial centres, including London and New York, to facilitate international payments and reserve management. These links were critical in positioning the BoT within the global financial system.

Plans also advanced for a permanent headquarters. The contract was awarded to Mwananchi Engineering and Contracting Company, reflecting the government’s commitment to building local capacity. Opened in 1969, the headquarters symbolised the bank’s growing institutional maturity and housed offices, vaults and public spaces adorned with artwork depicting Tanzania’s economic life.

An enduring institution

Although the original headquarters was later damaged by fire in 1984, the foundations laid during the bank’s formative years proved resilient.

Over time, the Bank of Tanzania evolved into a central pillar of macroeconomic management, financial stability and monetary policy, adapting to shifts from a state-led economy to liberalisation and market-based reforms.

Mr Mtei’s account underscores that the establishment of the BoT was not merely a technical exercise. It was a political and institutional project shaped by debates about sovereignty, development and regional co-operation.

Nearly six decades later, the story of the Bank of Tanzania’s early days remains a powerful reminder that durable institutions are built through foresight, discipline and a commitment to the public interest—principles that continue to underpin central banking in Tanzania.