THE Bank of Tanzania (BoT) has strengthened measures of controlling forex exchange in the country, with experts considering it as a part of efforts to curb the deficit of US dollars in the market.
The measures that according to the BoT Governor Emmanuel Tutuba came to effect from yesterday, include 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,” he said.
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.
Earlier on Wednesday, the Minister for Finance and Planning, Dr Mwigulu Nchemba instructed experts in the ministry to partner with a delegation of the International Monetary Fund (IMF) in discussing better ways of addressing the shortage of US dollars in Tanzania for the sake of rescuing the economic slump.
Dr Nchemba made the instruction when gracing a meeting that brought together IMF experts who came for evaluation of Extended Credit Facility (ECF).
“We have been referring to the eruption of Covid-19 pandemic and the war between Russia and Ukraine as reasons for economic depression to most developing countries, including Tanzania,” he said.
According to him, lack of US dollar liquidity in the domestic market could affect the price of imported raw materials and production costs.
Commenting on the move, an Economist Cum Banker, Dr Hildebrand Shayo was optimistic that the new directives will yield positive results as per the expectations.
“With high rates and an uncertainty about accessing forex as one may wish to execute plans in place can re-holding back the expected investment endeavours. Implication can be fatal for the entire economy. So, this directive, although a bit late, will put things in perspective,” he said.
For his part, Alpha Capital Head of Research and Financial Analytics, Imani Muhingo said the initiative aims at controlling foreign exchange outflow, especially now with global uncertainties and scarcity of the US dollars.
The World Bank’s Tanzania Economic Update of 2022 forecasted a country GDP growth of 5.3 per cent in 2023, up from 4.6 per cent of the year 2022, a single digit inflation rate, and a relatively stable shilling – US dollar exchange rate.