Dar es Salaam - The Bank of Tanzania (BoT) has acknowledged that the country is currently experiencing shortages of US dollars, the dominant currency in international transactions. However, the central bank maintains that there is no cause for alarm as the level of reserves is adequate to cover four months of imports.
Dr. Suleiman Missango, the Director of Economic Research and Policy at BoT, addressed editors in Dar es Salaam yesterday, stating that the stock of foreign exchange reserves declined to $4,881.2 million at the end of April 2023, compared to $5,461.4 million in the same period the previous year.
Despite the decline, Dr. Missango emphasized that the reserves remained sufficient, covering 4.4 months of projected imports of goods and services, which aligns with the country's benchmark of at least four months.
"While there has been a decline in foreign exchange reserves, it is not a crisis as the level of reserves remains sufficient to cover four months of imports," asserted Dr. Missango.
He explained that Tanzania's external sector continues to be impacted by global shocks such as the conflict between Ukraine and Russia, the COVID-19 pandemic, and climate change, which have significantly affected global commodity prices. However, the country is implementing various measures to mitigate the situation.
To address the scarcity of US dollars in the market, the BoT is prudently utilizing the available stock of foreign exchange, which currently stands at $4.9 billion. Additionally, the central bank is selling $2 million to local banks daily. From January 2022 to May 2023, BoT traded a total of $376 million through the Inter-Bank Foreign Exchange Market (IFEM).
In an effort to boost foreign exchange reserve capacity, the BoT has also initiated the purchase of gold from the government. So far, the central bank has acquired 418 kilograms of the precious metal. Gold reserves have always played a crucial role in diversifying global reserves for countries.
Dr. Missango further noted that the BoT has granted licenses to 88 Bureau de Change outlets across the country to enhance domestic forex levels.
Furthermore, the central bank has implemented measures to reduce the use of dollars in transactions, including the declining prices of petroleum products.
Dr. Missango remained optimistic that the situation would recover soon, particularly during the peak tourism season from July to September, as well as the market season for traditional cash crops, which will bring in more dollars to the country.
He emphasized that the BoT would continue to manage foreign exchange reserves diligently to meet the objectives of the financial markets, which include preserving capital, meeting liquidity needs, and enhancing income within the viable market environment.
Recently, the BoT announced strengthened measures to control foreign exchange transactions in the country. This includes the mandatory use of interbank foreign exchange for transactions exceeding $1 million, as well as restrictions on trading with international foreign currency brokers who are not licensed in Tanzania.
By implementing these measures, the Tanzanian government and the BoT aim to address the shortage of US dollars in the market and ensure a stable and regulated foreign exchange environment.