In recent years, Tanzania has tightened its currency controls with new regulations on foreign exchange bureaus coming out almost every year. Professor Wiley examines the ongoing fight against money laundering and currency speculation impacting the lives of those in Tanzania.
Professor Wiley details the new rules published by the central bank, after the government revoked the licences of around 100 bureaus and temporarily shut a newspaper for using unofficial data on exchange rates.
The research goes into discussing how the central bank had previously licensed too many bureaus and some of them had breached laws.
The Tanzanian Shilling
Some key takeaways from the research are that the Tanzanian shilling has been broadly stable since the beginning of the year as the International Monetary Fund work on reporting the real value of the currency to be “broadly in line with fundamentals”.
Professor Wiley however states a major hurdle is the serious weaknesses in official data and said that some indicators point to slower pace of economic activity than reported by the government.
Why the need for a stable currency…
Professor Wiley makes some strong arguments on the economy and how it relies on the stability of the currency. Economically, less volatile currency means stable foreign liquidity in the banking sector especially in Tanzania where there is growing foreign capital expenditure to feed numerous infrastructure projects undertaken by the government.
He said stable currency on portfolio investment and stocks reduces the country risk which lower discount rate when foreigners consider Tanzania as an investment destination. “Considering a low and stable inflation [plus stable currency], the real returns should be stable as well.
The beaureas are now shut…
With the bureaus now shut, commercial banks have conducted the bulk of foreign currency trading, so perhaps things are due to change for the better in Tanzania? Not too fast says Professor Wiley as he discusses where to from here.
