THE Central bank of Tanzania has issued a new circular with directives on foreign exchange operations in the country to foster macroeconomic stability and safeguard stability of the financial system.
“Pursuant to Section 7 of the Foreign Exchange Act, 1992, the Bank of Tanzania issues this circular with directives on foreign exchange operations in the country to foster macroeconomic stability and safeguard stability of the financial system,” a statement issued and signed by BoT governor Prof Florens Luoga read in part.
According to the circular which became operational yesterday, all foreign exchange transactions from USD 250,000 per transaction in the retail market shall at all times be traded within the interbank foreign exchange marker prevailing quoted prices.
That being the case, the statement said, all transactions of a single customer in a day shall be summed up for purposes of determining that amount (USD 250,000).
However, the BoT said the amount of foreign exchange tradable for a given quoted price in the interbank foreign exchange has been revised from the minimum of USD 250,000 to USD 50,000.
But the Bank of Tanzania insisted that the revised amount was applicable for the period of six months effective August 6, 2020.
It was further directed in the statement that sale of foreign currency by any exporter shall be made through a bank where he maintains account relationship, a directive that prohibits banks from buying foreign currency from exporters with whom they have no account relationship.
The Bot further insisted that trading of foreign exchange in retail market shall be restricted to prices quoted by banks and bureaux de change as displayed on boards.
The central bank prohibited trading of foreign exchange with international foreign currency brokers who are not licensed in the United Republic of Tanzania.
The country’s financial regulator reminded all foreign exchange dealers to observe Know Your Customer (KYC) procedures in undertaking foreign exchange transactions.
The measure, according to economic experts, helps to stabilize currency mostly by reducing speculative demand, especially when approaching elections and increasing Interbank Foreign Exchange Market (IFEM) to smaller dealers.
The measure also helps to curb illicit transactions as banks are encouraged to deal with customers with established relationships and reminded on KYC processes.