Tanzania: Parliament Outlines Plan to Contain Dollar Shortage

THE National Assembly has outlined various measures to be taken by the government to mitigate dollar shortage in the country, including making all payments being made within the country in Tanzanian shillings.

The payments include international school fees, house rent, private sector employees' payments, hotels and payments for services provided by local companies. Tabling a report on activities undertaken by the Parliamentary Budget Committee in 2023, Chairman Daniel Sillo said that the government should also conduct an analysis and identify non-essential goods that are imported in large quantities from abroad and increase taxes on them in order to reduce their importation.

He said the government should also review taxation in tourism in order to attract more visitors.

"The Bank of Tanzania should expedite the process of purchasing gold for the institution to have sufficient gold reserve," he said.

Other measures proposed by the MPs include adding value on exports of natural products and raw materials for projects being implemented by the government should be purchased from within the country.

He commended the government for working on the advice given by committee for BoT to start purchasing gold to serve as foreign reserve.

"The government should also continue to improve investment climate in order to attract more investors especially in industries for adding value to agricultural produce," he said. The committee also commended the government for having foreign currency reserve which has surpassed the target.

He said that until June 2023 the country's foreign currency reserve was 5,282.6 million US dollars compared to 5,110.3 million US dollars reserved by June 2022 which is equivalent to an increase of 3.37 per cent.

"This amount was enough for importing goods and services for a period of 4.8 months... this amount is more than the country's target of having a reserve to meet the needs for 4.0 months and more that the East African Community target of 4.5 months," he said.

The committee further advised the government to continue stimulating the production of commodities within the country in order to reduce imports and protect its foreign reserve. The government had already stepped up measures to mitigate effects of the dollar shortage on the country's economy, key being supporting local business to boost exports and providing export credit guarantee schemes.

Director of Information Services and Chief Government Spokesperson Mr Gerson Msigwa said at the end of last year that the government was dishing out export credit guarantee schemes for products being sold outside the country. Such a mechanism involves banks dishing out loans to traders by contributing 50 per cent.

"The government also supports local traders to produce more quality products in the course of promoting trade and exports," said Mr Msigwa.

He, however, noted that since May last year they have started purchasing gold and by July last year about 400 Kg had already been procured, a measure that is aimed at strengthening its national reserve.

On the other hand, the central bank has been selling hefty amount of dollars to the banks at a reduced price for them to lower the exchange rates in the market. Similarly, the process of issuing licences to people who want to start engaging in forex business is continuing.

At least 80 licences have been presented to traders since the process resumed, inviting more others to apply in accordance with the new licensing conditions.

Mr Msigwa also said a swap mechanism is being conducted, whereby the government provides traders with shillings in exchange of the dollar, adding that in the long run when there are more dollars in the market the reverse will be done.

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