Why the dollar crunch has eased in Tanzania

“Currently, no one is talking about the dollar scarcity anymore because dollars are now readily available,” he said.

Bank of Tanzania (BoT) governor Emmanuel Tutuba confirmed to The Citizen on Monday that there has been a significant improvement in the availability of foreign exchange in the country in recent weeks.

“The availability of dollars has improved due to an increase  in exports, particularly of agricultural produce, among other reasons,” he said.

Mr Tutuba added that an increase  in volumes and prices of gold traded globally has boosted Tanzania’s economic outlook, further easing the dollar crunch.

He noted that the high tourist season has seen a sharp rise in tourist arrivals in Zanzibar, while the launch of standard gauge railway (SGR) services has made it easier for tourists to visit attractions such as Mikumi Mikumi National Park in Morogoro Region.

According to the BoT’s Monthly Economic Review (MER) for October 2024, Tanzania’s foreign exchange reserves stood at $5.414 billion at the end of September.

The reserves were sufficient to cover 4.4 months of projected imports of goods and services against the national benchmark of four months.

This means that foreign exchange reserves increased by about 11 percent during the past year, up from $4.88 billion in September 2023.

Available data shows that traditional exports rose to $1.073 billion during the year ended September 2024 from $853.8 million in the previous year. This has been particularly attributed to a rise in tobacco and cashew-nut exports.

With the 2024/25 cashew-nut trading season having opened seven weeks ago, analysts are optimistic that export earnings will continue to rise steadily, at least in the short term.

According to Cashewnut Board of Tanzania (CBT) director general Francis Alfred, the cashew trading season was off to a successful start.

He said last weekend that cashew-nut farmers have earned a total of Sh879.7 billion in the past seven weeks, courtesy of an improved trading environment, which includes the designation of Mtwara Port as the export gateway for the crop as well as trading on the Tanzania Mercantile Exchange (TMX) platform, which  has cut out middlemen who were fleecing farmers.

Production and sales of cashew nuts totalled 261,797 tonnes valued at Sh999 billion in the first seven weeks of the new season.

CBT expects last season’s total production figure of 310,000 tonnes to be surpassed this season.

During the year ended September 2024, Tanzania’s non-traditional exports rose to &6,834.9 million from $6,371.3 million, new BoT figures show.

The rise was driven by gold exports, with the precious metal bringing in about $3.26 billion, up from $2.98 billion during the previous year. Exports of horticultural products rose to $484 million from $378 million.

Service receipts rose by over 18 percent to reach $6.981 billion in the year ended September 2024 from $5.894 billion in 2023.

Receipts from tourism increased to $3.826 billion during the year ended September 2024 from $3.156 billion in 2023.

“The performance was backed by growth in the number of tourists, which increased by 21.2 percent to 2,068,856, reflecting the effectiveness of government and private sector initiatives in promoting Tanzania as a tourist destination,” BoT says in its latest MER.

Analysts are of the view that with the high tourism season having taken off, the future looks bright.

Dr Abel Kinyondo of the University of Dar es Salaam said the high tourist season has contributed significantly to improved availability of dollars in the country.

However, he added that efforts should be made to ensure that more tourist attraction sites are created to ensure that tourists come to visit throughout the year.

Transport earnings, mainly from freight charges, rose to $2,579.1 million in the year ending September 2024, from $2,277.1 million in the same period in 2023.

This is largely associated with the continued improvement of port operations and transport infrastructure.

With the ongoing improvement of Tanzania’s major seaports, analysts believe that things will continue to improve.

Tanzania Freight Forwarders Association (Taffa) president Edward Urio said the availability of dollars has expedited cargo clearance process at Dar es Salaam Port.

“In the past, agents had to search for dollars to make payments before goods could be released. Now, certain charges such as demurrage fees and freight charges, which are paid in dollars, can be transferred to the foreign principal promptly,” he said.

The dollar situation in the country began to worsen in early 2023. In May 2023, the government officially acknowledged the issue, attributing the shortage primarily to a current account deficit that had reached $5.4 billion in 2022.

Several factors contributed to the deficit, including the lingering effects of the Covid-19 pandemic, rising import costs exacerbated by the Russia-Ukraine conflict, and substantial demand for dollars for major national projects such as the SGR and the Julius Nyerere Hydropower Project.