5 June 2014

Tanzania: Legislators Decry Increasing Dollarisation of the Economy

Dodoma — INCREASING dollarisation of the economy was strongly criticized, with Members of Parliament asking the government to revoke the 2008 approval of indiscriminate use of foreign currencies and strictly enforce the Foreign Exchange Act, 1992.

Chairman of the Parliamentary Standing Committee on Economy, Industry and Trade Luhaga Mpina, presenting the committee report on the Ministry of Finance budget speech, condemned the unchecked dollarisation which he described as highly detrimental to the national economy.

"The use of Tanzanian shilling parallel to foreign currencies in pricing and settling financial liabilities robs the country of her international market competitiveness; denies business to local bureau de change and ultimately leads to revenue loss to the government," said Mr Mpina.

The committee directed the Central Bank to strictly stand by the foreign exchange act that recognises the shilling as the only legal tender for all transactions in the country and also proposed special tax on all foreign currency based transactions.

Mr Mpina decried weak supervision of bureau de changes in the country, saying despite their increase to 233 bureaus, the committee has discovered lack of control that has led to random exchange of currencies.

"The law demands that to buy foreign currency, one has to have identity card, ticket and evidence for demand of the money, but we are witnesses today as people buy dollars without IDs and even receipts are not issued," said Mr Mpina, warning against the practice as highly risky to national security.

The committee proposed strict control in the foreign currency business and stern disciplinary measures against those going against the Act.

The shadow Minister for Finance, Mr James Mbatia, presenting the opposition speech on the Ministry decried an alarming rate of dollarization of the economy, a trend that he said has damaged the public trust in the shilling, opting to keep their savings in US dollars.

"The use of foreign currencies for local payments has made foreign currencies to become part of money supply in the country and denied the government its due revenues from the use of the shilling," said Mr Mbatia, charging that the indiscriminate dollar use was easing smuggling and capital flight outside the country.

Mr Mbatia accused the Ministry of weakness in collecting revenues, saying according to Bank of Tanzania (BoT) reports, the ministry failed to collect 977bn/- between September 2013 and March 2014.


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