Prime
BoT pumps $100 million into circulation to tame dollar shortages
BoT Governor Emmanuel Tutuba.
What you need to know:
- This is one of the steps being taken to make the Tanzanian shilling stronger and undermine the underground market for foreign currency.
Zanzibar. The Bank of Tanzania (BoT) sold $100 million last week as part of measures to alleviate foreign currency supply constraints, which have led to the formation of a black market for the dollar in recent months.
Mr Emmanuel Tutuba, the central bank governor, stated that the government was implementing a slew of measures to expand the dollar supply, warning dealers suspected of keeping the currency.
"I believe that those who hold currency in the black market will suffer future losses because the economy is opening up and the risks and vulnerabilities in the global economy are diminishing," said Mr Tutuba.
He remarked during a meeting with tourist hotel owners and operators in Zanzibar to inform them about the opportunity to operate foreign exchange bureaus.
The governor mentioned that foreign currency from hotels is still ending up in the black market, and he urged the hotels to obtain licences for currency exchange.
He also stated that the central bank will continue to ensure the availability of foreign currency and promote legitimate business in the forex market while taking action against illegal trading.
According to him, Tanzania's economy has continued to grow despite challenges, adding that the improvement in the economy significantly contributes to the strengthening of the shilling.
The shilling weakened by eight percent against the dollar last year due to the scarcity, said Mr Tutuba.
According to him, the gap between imports and exports has reduced from $5.3 billion in 2022 to $2.7 billion in December 2023, signalling increased exports that will improve the supply of foreign currency in Tanzania.
In October last year, the government amended the foreign exchange regulations and allowed all tourist hotels from three to five stars to operate foreign exchange bureaus.
"We have seen many tourists coming into the country and bringing in foreign currency. We are looking for ways to simplify forex trading so that tourists do not take the money to the black market but rather exchange it through the formal system," he said.
He said after conducting research, they found that some of the hotels were accepting dollars, while the law clearly states that the Tanzanian shilling is the only currency used in all transactions within the country.
Mr Tutuba said after July 1 this year, they will want to see all hotels registered with internal bureaus where they can exchange foreign currency and help hotel owners provide accurate information and statistics on foreign currency transactions.
Some stakeholders complained of some confusing laws, citing an example of guidelines from the Zanzibar Revenue Authority (ZRA), which require them to pay in dollars.
Ali Haji, a representative from one of the hotels on the island, said “the laws are confusing,” highlighting the need to look into the matter.
ZRA commissioner for finance and tax policies, Mr Hajali Ali, acknowledged that some hotels make payments in dollars, saying it is a matter of sitting down and figuring out how to address the issue.
Mr Tutuba also accepted the challenge, promising to look into how to resolve the matter.
