Tanzania is set to implement a new regulation that will prohibit the use of foreign currencies for domestic transactions, mandating the exclusive use of the Tanzanian Shilling (TSh) for all local financial activities. The policy, spearheaded by the Bank of Tanzania (BoT) in collaboration with the Ministry of Finance, is scheduled to take effect from July 1, 2025.
The new measure is part of the government’s broader strategy to safeguard the country’s monetary policy, strengthen the Tanzanian Shilling, and reduce reliance on foreign currencies in everyday business transactions.
Protecting monetary stability
Villela Waane, Manager of International Economics and Real Sector at the Bank of Tanzania, explained that the regulation aims to limit domestic use of foreign currencies, which has been undermining the country’s financial stability.
‘Using foreign currencies domestically limits the supply of foreign reserves needed for essential imports,’ Waane stated. ‘This practice weakens the value of the Tanzanian Shilling and adds pressure to inflation. Our goal is to strengthen the local currency and reserve foreign currencies strictly for critical imports.’
By curbing the widespread use of foreign currencies, particularly in sectors like real estate, hospitality, and luxury goods, Tanzania aims to maintain better control over its monetary policy. The government believes that exclusive reliance on the Tanzanian Shilling will boost confidence in the local currency, reduce inflationary pressures, and improve the country’s economic resilience.
Regulations to be enforced by July 1
The Bank of Tanzania has already issued directives to commercial banks, instructing them to cease processing payments in foreign currencies for domestic transactions. This includes payments for goods, services, taxes, and fees.
Emmanuel Akaro, Director of Financial Markets at the central bank, noted that individuals and businesses who previously conducted local transactions in foreign currencies will now be required to switch to the Tanzanian Shilling.
‘Payments for goods and services within Tanzania using foreign currencies will no longer be legal,’ Akaro confirmed. ‘This change is part of a comprehensive effort to stabilise our financial system and uphold the integrity of our monetary policy.’
Impact on businesses and the economy
While the regulation is designed to protect Tanzania’s financial system, it will have far-reaching implications for businesses that have become accustomed to transacting in foreign currencies, particularly the US dollar. Sectors such as tourism, real estate, and luxury imports, where foreign currency payments are common, will need to adjust their pricing structures to comply with the new rules.
Analysts suggest that this shift could lead to an initial period of adjustment as businesses and consumers adapt. However, in the long run, it is expected to reduce the volatility of the Tanzanian Shilling and encourage greater trust in the local financial system.
Additionally, the move aligns with broader regional trends, as several African nations seek to strengthen their local currencies and reduce dependence on foreign reserves.
Addressing inflation and economic resilience
Tanzania has faced inflationary pressures in recent years, partly driven by fluctuations in foreign currency reserves and external economic shocks. The government believes that reducing the domestic use of foreign currencies will help contain inflation and support long-term economic stability.
‘This policy will create a more predictable economic environment,’ said Waane. ‘By limiting the influence of foreign currencies on our domestic market, we can better control inflation and create conditions for sustainable growth.’
The Bank of Tanzania will continue to monitor the implementation of the regulation and make adjustments if necessary. Businesses are encouraged to prepare for the transition by reviewing their payment systems, updating contracts, and ensuring compliance with the new rules before the July 1 deadline.
Looking ahead
As Tanzania moves towards a more robust monetary framework, the government remains confident that the exclusive use of the Tanzanian Shilling will strengthen the country’s economic sovereignty. The initiative reflects a growing trend among African nations to assert greater control over their financial systems, reduce exposure to external economic risks, and promote sustainable growth.
The success of this policy will depend on effective implementation, public awareness, and the ability of businesses to adapt. However, with strong regulatory support and clear communication, Tanzania is poised to reinforce the stability of its financial system and enhance the value of its national currency in the years ahead.
Story Credit: Africabriefing
