Firms ‘require $747m to clear outstanding fuel payments’

“As of July 21, 2023, total demand was $747million. This amount is needed by OMCs to clear the backlog of matured letters of credit (LCs), swaps and post-import loans,” Mr Mgaya told The Citizen on Tuesday.

Swaps and post-import loans are financial instruments that have been created by commercial banks to support OMCs to navigate through the ongoing scarcity of US dollars.

These financial instruments come with huge costs to the industry, given the fact that interest is charged.

“It is imperative to note that without clearing the backlog of $747million, most of OMCs have no extra lines of letter of credit to finance future importation of petroleum products,” Mr Mgaya said.

To add insult to injury, he said, experience had shown that right now, it is next to impossible to source $747 million from markets, which include commercial banks and bureaux de change.

Besides, OMCs need around $250million (about Sh625 billion) every month to finance the importation of petroleum products for the domestic market.

He said the required amount was sufficient to import roughly 250,000 tonnes of fuel.

Presently, marketers of petroleum products are continuously detailing how the appreciation of the US dollar was adversely impacting their business, resulting in a pump prices rise.

 With the greenback now fetching Sh2,510/Sh2,610 in bureaux de change – a massive leap from the rate of about Sh2,300 that has been there for almost two years – prices of imports, including petroleum products have also skyrocketed.

For instance, the Energy and Water Utilities Regulatory Authority (Ewura) last week announced an increase of Sh463 and Sh391 for a litre of petrol and diesel, respectively, in Dar es Salaam.

As it happens, a litre of petrol and diesel now fetches Sh3, 199 and Sh2,935, respectively.

Marketers blame the dollar appreciation, with Taomac deputy chairperson Salim Baabde saying dollar shortage compelled importers to cut fuel imports.

As such, small scale traders have found themselves in the woods.

Going by the Taomac figures, imports of petrol and diesel decreased by 24.2 percent between January and August this year compared to a similar period last year.

The imports dwindled to 1.43 million metric tonnes, well below compared to 1.89 million metric tonnes.

In response to the grievances related to dollar shortage, the Bank of Tanzania (BoT) governor, Mr Emmanuel Tutuba, said the bank was intervening in the market whenever necessary by supplying more dollars, as well as establishing the export credit guarantee scheme.

Going by official data, Tanzania’s foreign reserves stand at $5.5 billion, sufficient to cover almost five months of imports, which is within the country’s benchmark of at least four months.

Mr Tutuba told The Citizen over the weekend that on Friday last week the BoT sold $6 million (about Sh15 billion) to oil marketing companies that have opened LCs.

Other measures taken by the Central Bank include, purchasing of gold and exporting the same to get US dollars, as well as banning the use of the American currency in local transactions.