Tanzania is tightening control over its monetary system by enforcing new regulations that ban the use of foreign currencies in domestic transactions.
The move, announced earlier this year, is beginning to show results, according to the Bank of Tanzania (BoT), which says the policy is helping to protect the value of the Tanzanian shilling, stabilize inflation, and reduce unnecessary demand for foreign currencies.
Speaking in Dar es Salaam today (May 20) during a media seminar, Emmanuel Akaro, Director of Financial Markets at the Bank of Tanzania, outlined six reasons for the regulation and emphasized the importance of using the local currency in all domestic transactions.
“People using foreign currencies for many transactions increase the demand for those currencies in circulation, leading the public to believe that foreign currencies are more needed. This causes their value to rise and weakens the value of the Tanzanian shilling,” said Akaro.
He stressed that the new policy reinforces the strength of the shilling by increasing its use in payments for goods, services, and financial obligations within the country.
“For example, if fines, fees, and government charges, as well as payments in hotels, tourism, and other services are made in Tanzanian shillings, then the value of our local currency will be protected,” he explained.
Akaro also pointed out that excessive reliance on foreign currencies for local transactions undermines Tanzania’s financial sovereignty.
“We don’t have control over foreign currencies because they are governed by policies from their respective countries. So, when we use them frequently in domestic transactions, we effectively become agents of their policies, and any policy shift directly affects us,” he said.
The use of the shilling, he argued, also allows the BoT to manage the economy more effectively.
With the shilling playing a dominant role in the local market, the central bank can more precisely implement policies related to interest rates, inflation control, and overall economic growth.
“If our own currency is strong and widely used, we will be able to control our economic systems more effectively in line with our domestic monetary policies,” said Akaro.
Beyond economics, Akaro emphasized the symbolic importance of the shilling, calling it a key marker of national identity.
“The Tanzanian shilling is our economic symbol. It identifies us globally, showing which country the currency belongs to. But if we use foreign currencies, people will not fully recognize our identity,” he noted.
He also addressed the impact of the new policy on the informal currency exchange market.
Previously, some businesses, particularly in the tourism and hospitality sectors, set their own high exchange rates, putting customers at a disadvantage.
“You can go to a hotel, for instance, and the owner might say pay in dollars or shillings… but if you choose to pay in shillings, you’ll be charged TZS 2,800 for one dollar, even though the official market rate is TZS 2,600 per dollar,” said Akaro.
The new regulations have already begun to show positive results.
Since enforcement started on March 28, 2025, the liquidity of foreign exchange in the retail market has risen, with the average daily supply of U.S. dollars increasing from USD 40 million in January 2025 to USD 69 million.
Akaro attributed this to the shift in behavior, where those who previously transacted in foreign currencies now convert them into shillings before making payments.
“People who used to make direct transactions in foreign currencies are now going to the market to exchange and pay in shillings, and this brings real benefits to the Tanzanian shilling compared to previous periods,” he said.
This year, the total amount of foreign currency circulating in the market has also increased.
“Last year, during this same period, we had about USD 30 million in the market daily. Now we are at approximately USD 70 million,” he said, indicating growing stability.
The BoT has also been proactive in maintaining the market’s balance.
Akaro said the bank has injected USD 130 million into the market this year, compared to a larger amount last year, which reflects improved market performance and stronger resilience of the shilling.
He also affirmed that BoT’s monetary policies are now more effective in managing inflation expectations, with the current inflation rate holding steady at 3.1 percent.
Akaro concluded by emphasizing that all transactions within the country must be conducted in Tanzanian shillings, while foreign currencies should only be used for cross-border transactions.
The rules are enforced under the Foreign Currency Use Regulations, GN No. 198 of 2025, published under the Bank of Tanzania Act, Chapter 197.
The regulations, announced by Finance Minister Dr. Mwigulu Nchemba on March 28, 2025, apply to all individuals and businesses across the country.
By moving away from foreign currencies in local trade, Tanzania is not only protecting its economy but also reinforcing national identity and financial independence. The message is clear: the shilling must come first.