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Tanzania importers turn to costly euro to beat dollar crunch
What you need to know:
- Importers, especially those of petroleum products, are increasingly adopting the euro as shortage of the dollar persists
Dar es Salaam. Importers, especially those of petroleum products, are increasingly adopting the euro as shortage of the dollar persists.
However, the adoption is not without a cost as the euro remains an expensive option and with the dollar remaining the preferred vehicle currency, the international conversion rate still recognises it (the dollar).
Traders say they started adopting the euro after realising that it has been stable for a long time and that it is widely accepted.
The executive director of the Tanzania Association of Oil Marketing Companies (Taomac), Mr Raphael Mgaya, said forex required for products to be sold in June includes $86.7 million and 43.8 million euros from the official market, excluding dollars from the black market.
He said the dollar crisis facing Tanzania and the globe has worsened to a point where they now have to import using the euro instead of the dollar.
“More than a third of the petroleum products imported in June were imported using the euro. This is also partly affecting the price of fuel in the country,” he said, adding that dollars were now easily accessed in the black market but at rates that are more expensive than the official ones.
The views became more pronounced through the cap prices for petroleum products which were announced by the Energy and Water Utilities Regulatory Authority (Ewura) on Wednesday.
Though motorists got a slight relief in prices, Ewura noted that the continuous use of the euro was making the decrease minimal.
“Moreover, the changes in petroleum prices are attributed to the change in the exchange rate and a continuous use of the euro for the payment of imported petroleum products,” said Ewura director general James Mwainyekule.
The Bank of Tanzania (BoT) says that while the business community is slowly turning to the euro and other currencies, it remains expensive because the dollar is still recognized by the international conversion rate.
In early 2023, the government confirmed that the country was facing a dollar shortage, a crisis that has been affecting several nations in Africa.
Expensive
The president of Tanzania Freight Forwarders Association (Taffa), Mr Edward Urio, said the situation was critical because a majority of their members did not have dollar accounts. However, he said their members have not turned to the euro because it is more expensive.
“Some of the activities that require us to pay in dollars include freight charges, demurrage charges, and deposit charges. The dollar crisis continues to bite, with commercial banks issuing limited amounts per day, which has been increasing operational costs,” he said.
He noted that the time used to find dollars has been increasing operational costs, especially for goods in transit. When a member delivers a quotation and cannot make payment due to a lack of dollars required for such payments, it causes delays.
For his part, Tanzania traders chairman Hamisi Lizembe said currently, commercial banks offer $500 a day, forcing businesspeople requiring about $50,000 to $100,000 to wait for at least three months before they can get enough to import goods.
“A majority of businesses have opened dollar accounts to avoid the crisis, and while there are other options like the euro, the challenge is that one will still be forced to convert to the dollar when they arrive in countries where they want to buy goods,” he said.
He noted that following the dollar crisis, prices of goods have also increased, including food commodities, hardware equipment, and even vehicles. He cited that a Toyota IST, for instance, that was initially sold at Sh13 million is now sold at Sh20 million.
Light at the end of the tunnel
Responding to the dollar crisis, BoT governor Emmanuel Tutuba said that globally, US inflation has not dropped sufficiently, so their interest rates were still high, thereby affecting other countries, including Tanzania.
He noted that while there were several currencies in circulation, including the euro and the pound, among many others, their exchange rates were still high because the international conversion rate still recognizes the dollar.
However, he pointed out that it is difficult to determine which foreign currency is currently being used by the public because all the currencies were in circulation.
He however exuded enthusiasm that the situation will soon get back to normal, banking his hopes on the start of the export season for several traditional export crops, the opening of some mines after the rains and the beginning of the tourism high season.
