Bank of Tanzania sets new rules on foreign exchange trade

Dar es Salaam. The Bank of Tanzania (BoT) has announced new measures to stabilise the foreign currency market in the country. BoT issued a circular directing financial institutions and forex traders to adhere to the revised rules signed by governor Florens Luoga.

The new rules revised the mi nimum tradable currency on a given price from $250,000 to 50,000 over the next six months.

It also restricted interbank trading to a maximum of $250,000 per transacted unit.

The rules which took effect from yesterday also banned banks from accepting currency from exporters who did not have accounts with them. The circular dated August 6th 2020 was welcomed by the Tanzania Bankers Association. The association’s chairman told The Citizen yesterday that they were aware with the move and that it was meant to stabilise the foreign currency market.

TBA Chairman Abdulmajid Nsekela said they have been working in close partnership with BoT to ensure smooth operations and stability in the foreign exchange market. According to him, the circular is in line with the discussions that were held between BoT and TBA. “We thank BoT for the close working partnership,” he told The Citizen which sought to establish the reasons behind the move. The government has in recent years acted to rein on illegal currency trade and at one point carried an extensive crackdown on private bureaus, with most of them closing shop following the crackdown. BoT said it was issuing the new rules under the law that allows the regulator to intervene to foster macroeconomic stability and safeguard stability of the financial system. According to the rules, all foreign exchange transactions from $250,000 per transaction in the retail market shall at all times be traded within the interbank foreign exchange market prevailing quoted prices. A customer will not be allowed to exceed this amount in one day’s trading. The amount of foreign exchange tradable for a given quoted price in the interbank foreign exchange market was revised from a minimum of $250,000 to $50,000. “The revised amount is applicable for the period of six months effective from the date of this Circular,” read the statement.

According to BoT, the sale of foreign currency by exporters shall be made through a bank where they maintain accounts. The banks were prohibited from buying foreign currency from exporters with whom they did not have an account relationship.

Parties will be restricted to only quoting retail prices quoted by banks and bureaux de change as displayed on boards while Trading of foreign exchange with international foreign currency brokers who are not licensed in Tanzania remained prohibited.

All foreign exchange dealers were warned to only deal with customers that they knew.