BoT: Forex reserve climbs up

THE country’s stock of foreign reserve has increased to 5.55 billion US dollars as of Friday last week, compared to 4.69 billion reported at the end of May this this year.

The amount is sufficient to cover five months of projected imports of goods and services, above the country’s benchmark of at least four months.

“There is no reason for fear of foreign exchange shortage, especially US dollar in the country because it has not reached an alarming situation,” Bank of Tanzania (BoT) Governor, Emmanuel Tutuba said in Dar es Salaam on Monday in a meeting with foreign exchange traders.

The meeting with foreign exchange dealers that aimed at enhancing efficiency in their business is part of the government’s efforts to listen and suggest ways to address various challenges the business community face in the country.

Although foreign exchange shortage is hitting countries worldwide, Governor Tutuba insisted that there is no reason for fear as BoT continues to take appropriate measures to ensure that the situation is not affecting the economy.

Some of the reasons leading to foreign exchange shortage particularly US dollar that holds 83 per cent market share included Covid-19, Russia and Ukraine war, climate change and US policy on foreign exchange.

As a result, prices for global commodities and various services including transport have increased thus pushing up demand for US dollars and disruption of supply chain.

Governor Tutuba said BoT is closely monitoring the availability of US dollar and other foreign exchange currencies and take appropriate measures to ensure the country economy remains stable.

Despite the global challenge of foreign exchange shortage, Tanzania has continued to have sufficient foreign exchange above the country’s benchmark of four months of projected import of goods and services.

However, the BoT Governor told over 70 forex dealers at the meeting that to remain self-sufficiency, is one of the reasons for holding a meeting with forex traders to device better ways of offering foreign exchange services to the people.

He reminded the foreign exchange traders to observe laws, regulations and guidelines in their business while giving priority to national interests.

“By doing this we are supporting President Samia Suluhu Hassan’s efforts to boost economic growth for the benefit of the whole population,” he noted.

The government had already adopted a set of measures as part of the solutions to address foreign exchange shortage including the mandatory use of interbank foreign exchange for transaction that exceeds 1 million US dollars

The government has also restricted trading of foreign exchange with international foreign currency brokers, who are not licensed in Tanzania.

“All foreign exchange transactions exceeding 1 million US dollars per transaction in the retail market shall at all-time be traded within the interbank foreign exchange market prevailing quoted prices,” Governor Tutuba said recently while announcing the measures.

The governor also instructed that transactions of a single customer in a day shall be summed up for the purpose of determining the amount.

According to him, at all times, foreign exchange dealers are required to strictly observe the procedures for Know Your Customer (KYC), in their undertakings, while the limit for the foreign exchange Net Open Position (NOP) shall be ten per cent of Core Capital and has to be observed at all times.

All Letters of Credit (LCs) for transit cargoes shall be funded by foreign exchange mobilised from respective destination countries.

He said the Central Bank of Tanzania is selling 2 million US dollars to local banks every day, in efforts to curb the deficit of US dollars in the market.

He said from January 2022 to May this year, BoT has traded a total of 376 million US dollars through Inter-Bank Foreign Exchange Market (IFEM).

Another measure initiated by the BoT is that of purchasing gold from the government for its reserve and has so far acquired 418 kilogrammes of the precious metal.

Gold reserves have always been an important part of the diversification of global reserves for countries.

He said since the move was introduced, BoT has been purchasing gold worth 280 million US dollars annually, equivalent to six (6) tonnes as part of the measures to swell the foreign exchange reserve capacity.

He added that BoT is selling 2 million US dollars to local banks every day, in efforts to curb the deficit of US dollars in the market. He said from January 2022 to May 2023, the BoT has traded a total of 376 million US dollars through Inter-Bank Foreign Exchange Market (IFEM).

“The government has also increased the amount acceptable to be sold through single retail transaction between banks from 250,000 US dollars to 500,000 US dollars and maintain acceptable liquidity in the economy through various means identified in the monetary policy,” he said.

He further said that, commercial banks in the country have continued to maintain enough deposits in foreign banks in order to facilitate transactions for payment of various commodities and services, which are being ordered and sold outside the country.

Related Articles

Back to top button