Experts speak out on BoT forex reminder

 

By 

Rosemary Mirondo

Reporter  Mwananchi Communications Ltd

Summary

·         The experts made their remarks following the reminder issued by the central bank yesterday, saying that despite the notice issued in August 2007 and December 2017, there have been violations

Dar es Salaam. Experts yesterday said the Bank of Tanzania’s notice prohibiting domestic payments for goods and services using foreign currency among residents of Tanzania is aimed at protecting the local currency.

They also said the decision aimed at checking an increase in demand for foreign currency as well as depletion of reserves that are needed for the importation of goods.

The experts made their remarks following the reminder issued by the central bank yesterday, saying that despite the notice issued in August 2007 and December 2017, there have been violations.

Prof Abel Kinyondo of the University of Dar es Salaam said there was increased demand as a result of a scarcity of foreign currency, especially the US dollar, which is mostly used for importation of goods and services.

“This puts pressure on the exchange rate by weakening the local currency. The central bank should be commended for its reminder as it protects the local currency,” he said.

Prof Kinyondo said traders and the businesspeople have been dollarising the economy in order to cushion their turnover against a weakening local currency.

“The government through the central bank is discouraging use of the use of dollars in domestic payment because the move increases demand for foreign currency in the country,” he said.

A financial expert who preferred anonymity said the BoT was trying to reduce unnecessary demand for US dollars which may cause further pressure on the local unit.

“By restricting dollar payments among residents, BoT is focusing at reducing demand for the US currency and therefore supporting the local unit,” he said.

BoT governor Emmanuel Tutuba said in a statement that the Central Bank issued a public notice August 2007 and December 2017, prohibiting domestic payments for goods and services using foreign currencies between Tanzania residents.

“However, the Bank of Tanzania has recently observed violations of directives. Therefore, the Bank of Tanzania would like to remind the general public that the government's directives issued are still valid and should be adhered to at all times,” reads part of the public notice.

Titled “Dealing with the Currency within the United Republic of Tanzania”, the notice insists that all prices of goods and services in the country should be quoted in Tanzanian shillings.

“These pertain to rent for land, housing and office; fees for education; medical services, equipment and reagents; transport, logistic and port services; electronic equipment, telecommunication services etc,” reads another part of the document.

According to the notice, prices to be paid by tourists or non-resident customers may be quoted and paid in foreign currency.

These services include accommodation, travel, airport and visa, transit trade and cargo handling, reads another part of the notice.

Furthermore, the notice says tourists and non-residents who pay in foreign currencies must provide their identification documents such as passport and certificate of incorporation for companies for proper capturing and classification of statistics.

“The exchange rate which will be used for making payments therein above should be displayed and should not exceed the prevailing market exchange rate. It should be noted that institutions registered to determine exchange rates are commercial banks and Bureaux de Change only,” reads the notice.

“Any Tanzania resident should use only Tanzanian shillings and forced or obliged to make payment to another Tanzania resident for any good or service in foreign currency,” insists the public notice.

Furthermore, the notice says the Bank of Tanzania also wishes to remind the public that Section 26 of the Bank of Tanzania Act 2006 stipulates that the Tanzanian Shilling is the only legal tender in the country.

Therefore, any act of refusing payment in Tanzanian Shilling amounts to violation of the Bank of Tanzania Act 2006, according to the document.