Tanzania’s efforts to bolster the Shilling
Following the decline of the Tanzanian shilling, the country has been making efforts to turn the situation around and strengthen the currency. This has been seen through the gazetting of the Foreign Exchange Use Regulations, 2025, and the Bank of Tanzania’s (BoT) intervention in boosting the foreign exchange supply in the system.
Tanzania’s Minister of Finance, Dr. Mwigulu Nchemba, officially gazetted the Foreign Exchange Use Regulations, 2025, under Government Notice No. 198 of 2025. The regulations came into effect on March 28, 2025. They follow amendments introduced in the Finance Act of 2024, which introduced an amendment to the Bank of Tanzania Act that sought to mandate the exclusive use of the Tanzanian shilling for all domestic transactions throughout mainland Tanzania and Zanzibar.
Under the new regulations, businesses and individuals are prohibited from publishing prices, issuing invoices, or demanding payments in any foreign currency. Additionally, refusing to accept the Tanzanian shilling as payment is considered an offense.
Contracts for goods and services within Tanzania must also be denominated in Tanzanian shillings, unless they have been authorised by the Minister of Finance and the Governor of the BoT. Any existing contracts in foreign currency must be amended within 12 months to comply with the new requirements. If this is not done, such contracts will be rendered void unless the Minister of Finance grants an extension. Additionally, any granted extension cannot exceed the original duration of the contract.
However, the regulations provide for specific exemptions that allow foreign currency transactions to remain permissible. These include payments related to government contributions to regional and international institutions, transactions involving embassies and international organisations operating in Tanzania, foreign currency loans issued by licensed commercial banks and financial institutions, and purchases made in duty-free shops.
BoT’s foreign exchange supply boost
The Bank of Tanzania has made efforts to boost the country’s foreign exchange supply in the system. This has resulted in the Bank injecting $25 million into the interbank foreign exchange market, bringing the total supply of US dollars to $78 million over the past four months. In this latest intervention, the BoT said it sold the $25 million to banks at a weighted average price of TSh 2,663.16 per US dollar. A total of 25 banks participated in the auction. However, only eight banks submitted successful bids.
BoT Governor Emmanuel Tutuba has insisted that the medium- to long-term outlook suggests the shilling will remain stable, despite the near-term weakening of the local currency. According to Governor Tutuba, the depreciation of the shilling against the US dollar since the start of the year is just a seasonal currency fluctuation.
What this means for the country
The government is taking decisive steps to stabilise the shilling in response to its recent decline, which includes the gazetting of the regulations and the BoT’s intervention in boosting the foreign exchange supply. These actions reflect broader efforts to strengthen the country’s monetary policy framework by reducing reliance on foreign currencies for domestic transactions.
In the short term, Tanzanians may face challenges in adapting to the new regulatory framework. However, in the long run, these efforts are working towards creating a stable financial environment and fiscal framework. A stronger and more stable shilling could lead to reduced inflation, improved economic planning, and enhanced investor confidence.