Forex regulations reviewed to expand business in Tanzania- Central Bank

ZANZIBAR: IN an effort to curb the US dollar deficit in the market, the Bank of Tanzania (BoT) has reviewed Foreign Exchange (Bureau de Change) Regulations to open doors for more players in the business.

“Soon, we will see more bureaus resume operations. This will help to track US dollars from ordinary people into the official market, boosting foreign currency,” said Mr John Mero, Deputy Manager and Financial Analyst at the BoT.

He made this statement in Zanzibar during a media engagement forum on ‘economy and business,’ where some journalists raised concerns over the current outcry from travellers and members of the business community about the US dollar shortage. These travellers include Muslims preparing for pilgrimage to Mecca, Saudi Arabia.

“It is true that there is a global shortage of US dollars caused by the US government’s decision to control their currency in the market. The past Covid-19 pandemic followed by the Russia-Ukraine war are also contributing to the shortage of money,” he explained.

He further mentioned that BoT believes there is a considerable amount of US dollars in people’s hands, so by allowing more ‘Bureau de Change’ to operate in various parts of the country, the level of forex domestically will increase.

Mr Mero observed that the situation will stabilise soon after the forex shops open, in addition to the increasing number of tourists bringing more US dollars into the country.

“Despite the shortage, as a country, we are better off compared to other countries. There is no reason to panic because our reserves are sufficient to cover more than four months of imports and enable citizens, including Muslims, to travel for pilgrimage,” he clarified.

He also mentioned that although there has been a decline in foreign exchange reserves in the country, it is not a crisis, saying those in need of US dollars should visit banks as the BoT finalises new regulations to govern the forex shop business.

Some local investors have complained that they cannot resume business due to tough regulations regarding Bureau de Change, such as the requirement to have a minimum capital of 1bn/- for all forex businesses. This has prompted the BoT to review the procedures so that more investors can return to the business.

In 2019, over 100 Foreign Exchange (Bureau de Change) were closed down across the country during a crackdown on illegal activities, including money laundering.

Recently, the National Assembly outlined various measures to be taken by the government to mitigate dollar shortage in the country, including making all payments being made within the country in Tanzanian shillings.

The payments include international school fees, house rent, private sector employees’ payments, hotels and payments for services provided by local companies.

Tabling a report on activities undertaken by the Parliamentary Budget Committee in 2023, Chairman Daniel Sillo said that the government should also conduct an analysis and identify non-essential goods that are imported in large quantities from abroad and increase taxes on them in order to reduce their importation.

He said the government should also review taxation in tourism in order to attract more visitors.

“The Bank of Tanzania should expedite the process of purchasing gold for the institution to have sufficient gold reserve,” he said.

Other measures proposed by the MPs include adding value on exports of natural products and raw materials for projects being implemented by the government to be purchased from within the country.

He commended the government for working on the advice given by committee for BoT to start purchasing gold to serve as foreign reserve.

“The government should also continue to improve investment climate in order to attract more investors especially in industries for adding value to agricultural produce,” he said. The committee also commended the government for having foreign currency reserve which has surpassed the target.

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