RISING prices of essential commodities used to be the norm in Tanzania forcing the shilling to rail under intense pressure from market players.
Prices for food items, fuel and clothes kept on rising so were fares for public transport vehicles including commonly known daladala in urban areas. But that was no more the case after president John Magufuli came to power in 2015 and tightened control in the financial services sector and as well encouraged best practices among banks, financial institutions and bureaux de change.
It was during his leadership the Central Bank mounted a crackdown on bureaux de change in 2018 and 2019 to plug loopholes for illegal foreign currency trading and money laundering. The Central Bank had initiated the crackdown on illegally operating foreign exchange bureaux following suspicions on money laundering and associated illegal transactions.
The Central Bank Governor, Prof Florens Luoga said the clampdown on illegal operating foreign exchange shops were part of a countrywide crackdown against “masterminds of syndicates behind money laundering and those operating without licences.” The crackdown helped also to ease the pressure on the shilling and helped it to stabilize against major global currencies, he said.
“The crackdown on illegal foreign exchange bureaus in 2018/19, among others, uprooted a syndicate that was behind the pressure in country’s foreign exchange that caused Tanzanian shilling to weaken against the US Dollar,” Prof Luoga told `the Daily News’ in an email.
“Since the operation was completed, the exchange rate between the two currencies has remained stable, which is beneficial to Tanzania, whose economy continues to be import dependent to some extent.”
“And indeed the shilling maintained stability against the US dollar and other major currencies and prices for essential commodities stabilized. “The operation also helped to clean foreign exchange market of money laundering activities as some of the bureaux were used as a gateway for money laundering,” he said noting that Tanzania’s rating in terms of combating money laundering and terrorism financing has improved partly on account of measures that were implemented in 2018/19.
After the crackdown on foreign exchange bureaux, the Central Bank reviewed some regulations to enhance operational efficiency and plug loopholes for illegal foreign currency trading and money laundering.
In August 2020 it issued a circular to all foreign exchange authorised dealers operating in Tanzania, providing directives on foreign exchange operations to foster macroeconomic stability and safeguard the stability of the financial system in Tanzania. President John Magufuli had said in 2019 that the Central Bank had previously licensed too many bureaus and some of them had breached laws.
The shilling remained broadly stable since the beginning of 2019 and the International Monetary Fund had said in a report that came out in April of the same year that the real value of the currency was “broadly in line with fundamentals.”
Former Deputy Minister for Finance and Planning Ashatu Kijaji is quoted as saying the local had remained stable against the U.S. dollar because of effective supervision and implementation of monetary policies, which included effective control over foreign exchange bureaux.
“Controlling the foreign exchange shops business is also a key initiative taken by the government to ensure that our shilling remains stable,” said Kijaji in an interview with an international news agency.