Bank of Tanzania (BoT) has said the country is experiencing shortages of US dollars, the dominant currency in international transactions but insisted that there was no cause for alarm, as the level of reserves was sufficient to cover four months of imports.
BoT Director of Economic Research and Policy, Dr Suleiman Missango told editors in Dar es Salaam yesterday that the stock of foreign exchange reserves declined to 4,881.2 million US dollars at the end of April 2023, from 5,461.4 million US dollars in the similar period in 2022.
Despite the decline, reserves remained adequate, covering 4.4 months of projected imports of goods and services, in line with the country benchmark of at least four months.
“There is a decline in foreign exchanges reserves in the country, however, that is not a crisis, as the level of reserves remains sufficient to cover four months of imports,” insisted Dr Missango.
Dr Missango said much as Tanzania’s external sector continued to be affected by cumulative effects of global shocks, particularly the war between Ukraine and Russia, Covid-19 and climate change, which largely impacted the global commodity prices, the country is grappling with the situation by instituting various measures.
He said that the available stock of foreign exchange which 4.9 billion US dollars is being used prudently to cope with the global dollar scarcity.
He added that BoT is selling 2 million US dollars to local banks every day, in efforts to curb the deficit of US dollars in the market. He said from January 2022 to May 2023, the BoT has traded a total of 376 million US dollars through Inter-Bank Foreign Exchange Market (IFEM).
Another measure initiated by the BoT is that of purchasing gold from the government for its reserve and has so far acquired 418 kilogrammes of the precious metal. Gold reserves have always been an important part of the diversification of global reserves for countries.
He said since the move was introduced, BoT has been purchased gold worth 280 million US dollars annually, equivalent to six (6) tonnes as part of the measures to swell the foreign exchange reserve capacity.
He further said that BoT has moved to issue licence to at least 88 Bureau de change in various part of the country to increase the level of forex domestically.
Dr Missango further said that the prices of petroleum products is declining, which is one of the supporting measures being taken by the BoT to reduce use of dollars in transactions.
However, Dr Missango maintained that the situation will recover soon, especially during the tourism peak season — July to September, as well as market season for traditional cash crops, which will pump into the country more dollars.
He also said that BoT will continue to strictly manage foreign exchange reserves, to meet the objectives of the financial markets.
“The objectives of the financial markets are to ensure that the Bank preserves capital, meet liquidity needs and enhances income given the viability of the market environment,” he said.
Recently, the BoT announced strengthened measures of controlling forex exchange in the country, with experts considering it as a part of efforts to curb the deficit of US dollars in the market.
The measures that according to the BoT Governor Emmanuel Tutuba came to effect from May 1st this year, include the mandatory use of interbank foreign exchange for transaction that exceeds 1 million US dollars.
The government has also restricted trading of foreign exchange with international foreign currency brokers, who are not licensed in Tanzania.
“All foreign exchange transactions exceeding 1 million US dollars per transaction in the retail market shall at all-time be traded within the interbank foreign exchange market prevailing quoted prices,” he said.
The governor also instructed that transactions of a single customer in a day shall be summed up for the purpose of determining the amount.
According to him, at all times, foreign exchange dealers are required to strictly observe the procedures for Know Your Customer (KYC) in their undertakings, while the limit for the foreign exchange Net Open Position (NOP) shall be ten per cent of Core Capital and has to be observed at all times.
All Letters of Credit (LCs) for transit cargoes shall be funded by foreign exchange mobilised from respective destination countries.
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