Tuesday, March 19, 2024

On May 31, the Central Bank of Tanzania announced that all foreign currency transactions exceeding $1,000,000 should be conducted within the “interbank foreign exchange market prevailing quoted prices.” This move, according to the Bank of Tanzania, aims to enhance macroeconomic stability and protect the country’s financial system’s stability.

Forex Dealers Advised to Transact Exclusively with Approved International Brokers

Forex dealers in Tanzania are being reminded by the central bank that all transactions surpassing USD 1,000,000.00 must conform to the “interbank foreign exchange market prevailing quoted prices.” Furthermore, these dealers are advised to only transact with licensed international foreign currency brokers.

Emmanuel M. Tutuba, the governor of the Bank of Tanzania, issued a statement explaining that this reminder was prompted by a review of the foreign exchange market’s operations. “In carrying out its statutory mandate, the Bank of Tanzania has examined the operations of the foreign exchange market in light of current market developments,” the Bank of Tanzania elucidated.

Preserving the Financial System’s Stability

According to Bloomberg, Tanzania’s foreign exchange reserves dwindled to $4.9 billion by the end of April, a decline of about $600 million from $5.5 billion the previous year. The central bank’s new directives, effective from June 1, are aimed at fostering macroeconomic stability and protecting the financial system’s stability.

Besides advising dealers to only transact with approved brokers, the Bank of Tanzania also stressed the importance of adhering to ‘Know Your Customer’ (KYC) procedures in their operations. Dealers are also advised to maintain a foreign exchange net open position limit of 10% of their core capital. The bank warned that any violations would result in penalties as outlined in the Foreign Exchange Act, 1992.

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What new regulations has the Tanzanian Central Bank implemented?

The Tanzanian Central Bank has introduced new regulations requiring that all foreign currency transactions exceeding $1,000,000 be conducted within the “interbank foreign exchange market prevailing quoted prices.” Additionally, dealers are advised to only transact with licensed international foreign currency brokers.

Why were these forex regulations introduced in Tanzania?

The regulations were introduced with the intention to enhance macroeconomic stability and protect the financial system’s stability in Tanzania, following a significant drop in the country’s foreign exchange reserves.

What is the role of forex dealers in the new regulations?

Forex dealers are being reminded by the central bank to adhere to these new regulations. They are also advised to maintain a foreign exchange net open position limit of 10% of their core capital and to comply strictly with ‘Know Your Customer’ (KYC) procedures.

What are the penalties for non-compliance with these regulations?

The Bank of Tanzania has warned that any violation of these new regulations will result in penalties as outlined in the Foreign Exchange Act, 1992.

When do these new regulations become effective?

The new forex regulations introduced by the Tanzanian Central Bank became effective from June 1, 2023.

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5 comments

BenjaminK June 3, 2023 - 12:45 am

Oh wow, that’s a huge step for Tanzanian forex markets! Wonder how it will pan out, the economy really needs it…

Reply
ForexMaster23 June 3, 2023 - 12:45 am

Seems like they’re tightening the leash on forex dealers! makes sense given the fx reserves drop…

Reply
GlobalEconGirl June 3, 2023 - 12:45 am

This could be a game changer in Tanzania. Important move to protect financial system but will it work though?

Reply
Juma_K June 3, 2023 - 12:45 am

These are tough times for Tanzania’s economy. Hope this will help stabilize things.

Reply
EastAfricaBiz June 3, 2023 - 12:45 am

Have to see how this pans out. More regulation can be good but also stifles innovation sometimes. Guess we’ll see.

Reply

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