Tanzania: central bank to establish extent of dollarization

THE relevant authorities in Tanzania are setting out to establish how deeply the mammon known as `dollarization` has penetrated the country's the markets – and why. The first reason that usually comes to mind is the possibility that this has become the case mainly due to the relentlessly weakening Tanzania currency the shilling, against the US dollar and other hard currencies. Speaking at a breakfast meeting staged in the nations commercial capital Dar es Salaam last Friday, the Governor of the central Bank of Tanzania, Professor Benno Ndulu, said a team of experts was already in the field to establish the intensity of dollarization. According to the Governor, there are roumours that many business people are now demanding payment in the US currency when selling goods and services... But, as things stand now, there are no figures to back up the claims. It is in the light of this that the central bank decided to send teams of researchers throughout the country to establish the intensity of dollarization. ''The team is already in the field. Sometimes, you can think that it is something big – and, yet, there may only be just a few individuals here and there who are demanding payment in dollars instead of the Tanzania shilling,'' said the governor.

Bank of Tanzania Governor Professor Benno Ndulu
However, he was unable, unwilling or not ready to categorically state when the researchers would finish the job. Asking for payment of goods and services rendered in US dollars as a legal tender is not against the extant laws, the good professor said. Apparently, what is against the law is `forcing` a customer or client to pay in foreign currency! ''NO one should refuse to accept Tanzania shillings since that is the country's legal tender. However, the vendors may – if they wish – quote their prices in dollars but receive the equivalent as payment in Tanzania shillings,'' stated the bank chief. In the event, the governor called upon customers to report traders who may attempt to `force` them to pay in dollars. In that regard, he said, the central bank would not hesitate to take strict measures against such culprits. Virtually admitting that the Tanzania shilling is in decline, Ndulu ventured that business persons could mainly be demanding payment in dollars at this time when the shilling has substantially weakened against the latter. That is possibly why they prefer to be paid in dollars rather than in the local currency. ''Once the shilling gains ground against the dollar, very few if not all vendors will demand payment in dollars, that is the way business is,'' said the governor. Prof. Ndulu was addressing over 50 business persons and other invitees who attended the meeting that was organised by the Tanzania Private Sector Foundation at Moevein Peak Hotel in Dar es Salaam. According to available statistics, the Tanzania shilling has been weakening seriously against the US dollar over the past few months – falling from about Tsh1,260 a dollar in February this year to around Tsh1500 today! At the same time, however, the shilling has maintained its ground against the Euro and British Pound during the period in question! Expressing undiminished optimist ism that the days are numbered for the Tanzania shilling to go on losing ground against the US dollar, the bank chief stated that ''the season in which we are now is peak season and, therefore, any time the shilling is going to gain ground against the dollar!'' The tourism season in Tanzania is at its peak from August to somewhere in December, January. This is also harvest time when farmers sell their yields – thereby taking in export earnings in hard currency. As the law of Supply and Demand states, if there are more dollars in the country, strengthening of the local currency is bound to follow! Tourism and agriculture are among the sources of foreign currency to Tanzania. ''If there is anybody buying US dollars with the intention of selling them at a higher rate in a few months to come, I bet that person is acting against the signs of the times,'' said Ndulu, stressing that, by all means the rate of exchange between the two currencies is going to favour the shilling! According to the professor, this has happened in the past... In 2008 when the rate between Tanzania shilling and the US$ went down by around Tsh200 – resulting in losses by business people who had thought they could make considerable profit from hanging onto the US dollar to be sold at a much higher rate in due course of time. In the event, that never happened – and the poor fellows ended up incurring huge losses..