The president also instructed the central bank to conduct a staff audit of its 1,391-strong workforce and terminate redundant employees.
Magufuli issued the directives yesterday to central bank governor Prof. Benno Ndulu during an unannounced visit to the BoT headquarters in Dar es Salaam.
"The president ordered BoT to immediately halt payments approved from the exchequer accounts, and instead these claims should be returned to the Ministry of Finance and Planning for verification," the president's office said in a statement.
"As President Magufuli gave the directive, the Bank of Tanzania was in the process of making payments amounting to 925.6 billion shillings that had been approved by the finance ministry," the statement added.
During his visit, Magufuli told the top BoT brass including Governor Ndulu, deputy governors, directors and managers that the payments should remain suspended until the finance ministry completes its verification exercise.
He also ordered that the external debt department should be returned to BoT from the finance ministry in a move to keep proper tabs on the national debt.
Latest BoT figures show that Tanzania's total external debt stock rose to $15.408bn at the end of 2015, up from $14.57bn previously. The domestic debt stock reached 8.59 trillion/- at the end of 2015, from 8.4trn/- a year ago.
It was a BoT expenditure audit conducted in 2008 that first revealed improper payouts of more than $120 million in 2004/05 that led to the infamous external payment arrears (EPA) account scandal.
On the need for a BoT staff audit, the president said: "It is unacceptable to have a large number of employees who are paid (big) salaries, but no one knows what these people are actually doing".
The central bank has long been accused of harbouring nepotism practices by employing the children, spouses and relatives of top political and government officials.
According to the president's office, Magufuli was armed with the CVs of some central bank employees during his visit, which he spent some time inspecting.