(Dar es Salaam) – Tanzania’s central bank has prohibited the use of foreign currencies like the US dollar for domestic transactions in a bid to protect the value of the Tanzanian Shilling and strengthen the national economy.
The recent move by Tanzania’s Central Bank to ban the use of foreign currencies, such as the US dollar, for pricing and payments within the country has sparked significant discussions. This policy aims to protect and stabilize the value of the Tanzanian Shilling, which could be vulnerable if foreign currencies were used in local transactions.
In many countries, local currencies like the Tanzanian Shilling (TZS) are used to measure the value of goods and services. However, international trade often involves foreign currencies, which can sometimes find their way into domestic pricing. By prohibiting this practice, Tanzania seeks to ensure that the value of its currency remains strong. When businesses price goods and services in foreign currencies, it can lead to increased demand for those foreign currencies, causing the Shilling’s value to decline. As a result, the cost of living could rise due to inflated prices driven by foreign exchange fluctuations.
For ordinary Tanzanians, such as farmers and workers who earn in Shillings, the ban on using foreign currencies could offer several benefits. For instance, if goods and services were priced in foreign currencies, those paid in Shillings might find it more expensive to make purchases as they would need to exchange their Shillings for dollars. However, by pricing goods in Tanzanian Shillings, it becomes easier for individuals to budget and manage their finances. Furthermore, this measure helps curb unnecessary price hikes by traders who might otherwise use fluctuating foreign exchange rates to set high prices, which could reduce inflationary pressures.
Another advantage of this policy is the potential reduction in tax evasion and the smuggling of foreign currencies. When foreign currencies are used for domestic transactions, some economic activities may bypass the formal economic system. This can result in lost tax revenues, which would otherwise contribute to funding essential public services such as healthcare, education, and infrastructure.
By ensuring that all payments are made in Tanzanian Shillings, the government can better track tax payments and increase revenue collection. Additionally, it helps reduce the illegal movement of foreign currency, thereby giving the Central Bank greater control over the supply of foreign currency, which is crucial for paying for imported goods.
Many countries worldwide have adopted similar policies, limiting the use of foreign currencies for domestic payments to protect the value of their local currencies. For Tanzania, this move could contribute to a more stable economy, as a strong local currency gives investors and businesses more confidence in the financial system. As more economic activities are carried out using the Tanzanian Shilling, it could also increase the global recognition and credibility of the currency.