Forex reserves: No need to worry, government reassures investors

Dar es Salaam. The government has assured the private sector that the country has enough foreign exchange reserves despite pressure from some of its neighbours and volatility brought about by the current geopolitical crisis in Europe.

The stock of foreign exchange reserves declined to $5.177 billion at the end of December 2022 from $6.386 billion during a similar period in 2021, the Bank of Tanzania (BoT) says in its January 2023 Monthly Economic Review.

BoT notes, however, that the amount was still enough to cover 4.7 months of imports, against a benchmark of not less than four months.

Against this backdrop, Finance and Planning Minister Mwigulu Nchemba stated yesterday in Dar es Salaam at a breakfast meeting with members of the Confederation of Tanzania Industries (CTI) that everything was fine so far.

However, he admitted that the country’s dollar reserves were facing pressure from some neighbouring countries that are important trading partners.

“The countries around us are experiencing a dollar crisis. So far, we have remained stable,” said Dr Nchemba.

“However, this (the dollar crisis) piles pressure on our reserves for importation.”

Dr Nchemba said the pressure came at a time when the government required more foreign currency for the importation of raw materials required for the construction of mega projects.

To some extent, he explained, the pressure on reserves has been triggered by an unbalanced Balance of Payment (BOP) as the country is importing more than it is exporting due to the implementation of big projects. He cited some of the projects as the standard gauge Railway (SGR), Julius Nyerere Hydropower Station and the Kigongo–Busisi Bridge, which is also referred to as the Mwanza Gulf Bridge.

 “We are doing all in our power to balance the stability of our currency for it to be predictable,” Dr Nchemba said.

 He stated that in order for this to occur, all government institutions must treat investors with discipline so that they can invest and export more.

This, in turn, will boost the country’s foreign exchange earnings. “We are no longer in the era where the government needs to do everything. We need to create a friendly environment that will attract the private sector,” said Dr Nchemba.

 Investment, Industry and Trade minister Ashatu Kijaji urged manufacturers to boost production and exports so that the country could earn more foreign currency and stabilise its currency.

 “And, if you want to make it, you must manufacture products that fit worldwide standards so that they can easily enter global markets,” said Dr Kijaji.

She urged manufacturers to be proactive in taking part in the African Continental Free Trade Area (AfCFTA) so that the country could boost its exports and get more foreign exchange. She reaffirmed that, to begin, Tanzania will allow the trading of ten products beginning in July of this year.

Manufacturers, for their part, urged the government to maintain momentum in building an enabling business environment for them to invest more, export more, and bring in more foreign cash.

Minjingu Mines and Fertiliser Limited executive director Anup Modha said the country needed proper policies to protect local investors.

 He said special incentive packages should be given to local manufacturers instead of favouring importers, who add little or nothing to the stability of the country’s foreign reserves and shilling.

“We who contribute to the stabilisation of our currency and solve the challenge of the dollar crisis require protection in order to continue our work,” said Mr Modha.

 Twiga Cement managing director Alfonso Velez called for the need to boost the country’s exports to create more foreign currency.

 “We import a large amount of items in dollars. We can use our abundant coal and gas resources to increase exports and thereby stabilise the country’s currency,” said the Twiga Cement boss.

He also urged manufacturers to take advantage of the country’s conducive business environment to produce more products and export more.

 Confederation of Tanzania Industries (CTI) executive director Leodegar Tenga said his members were in favour of the government paying a Value Added Tax (VAT) refund to all manufacturers.

 “We are grateful that payments are being made, but we have a number of members who are yet to be paid,” said Mr Tenga.

He also said the question of abrupt power cuts was adversely affecting manufacturers and increasing the costs of doing business.

“Members of CTI request to be informed in advance so that they can get prepared,” said Mr Tenga.

Dr Kijaji promised to work on all raised issues.