Chapter

TANZANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2000
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Status Under IMF Articles of Agreement
Article VIIIDate of acceptance: July 15, 1996.
Exchange Arrangement
CurrencyThe currency of Tanzania is the Tanzania shilling.
Exchange rate structureUnitary.
Classification
Independently floatingThe external value of the Tanzania shilling is determined in the interbank market. The Bank of Tanzania (BOT) intervenes in the interbank market only to smooth movements that are caused by transitory factors.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketAuthorized dealers may enter into forward contracts for purchases and sales of foreign currencies with their customers in export and import transactions.
Official cover of forward operationsThe BOT does not offer forward cover against exchange rate risk.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payment arrangements
Bilateral payment arrangements
InoperativeThere is an agreement with Mozambique.
Regional arrangementsTanzania participates in the COMESA, the SADC, and the EAC.
Clearing agreementsThere are agreements with Kenya and Uganda.
Administration of controlThe MOF has delegated authority to the customs and the BOT to administer and manage exchange transactions both on the mainland and in Zanzibar. The BOT delegates authority to make payments abroad to all licensed banks.
International security restrictionsn.a.
Payment arrearsYes.
Controls on trade in gold (coins and/or bullion)Only authorized persons may buy, borrow, sell, lend, and hold or otherwise deal in gold coins and gold bullion outside Tanzania.
Controls on external tradeYes.
Controls on exports and imports of banknotes
On exports
Domestic currencyPayment in domestic currency to a nonresident requires BOT approval. However, following a currency convertibility agreement reached with Uganda and Kenya, residents may carry and cross any of the three borders with any amount of currency from the three countries.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedThere are no limitations as to the amounts.
Held domesticallyYes.
Held abroadHolding of foreign accounts is allowed for money acquired outside Tanzania; otherwise, operations of offshore foreign currency accounts by individual residents are still subject to restrictions. However, in the case of resident banks and financial institutions, there are no restrictions on the operation of accounts with overseas financial institutions (foreign correspondent banks). Any authorized dealer bank may operate foreign currency accounts abroad in its name on behalf of its customers. Accounts of residents have to be reported to the BOT.
Accounts in domestic currency convertible into foreign currencyThese accounts are exceptionally reserved for UN-related organizations.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsNonresident accounts are maintained by foreign nationals temporarily residing in Tanzania; such accounts are to be closed upon leaving the country.
Convertible into foreign currencyNo.
Blocked accountsAn authorized bank’s approval is required when making any payment or placing any sum to the credit of nonresidents. The bank may direct the sum payable or to be paid or credited to a non-interest bearing blocked account.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsAuthorized dealers are permitted to handle cases of advance payments.
Documentation requirements for release of foreign exchange for importsThe release of foreign exchange in excess of $5,000 requires invoices, shipping documents, a single bill of entry form, and a clean report of findings.
Domiciliation requirementsYes.
Preshipment inspectionA clean report of findings is necessary for import payments subject to preshipment inspection. Imports of goods exceeding $5,000 require a preshipment inspection document.
Letters of creditYes.
Import licenses and other nontariff measures
Negative listCertain imports to the mainland from any source may be prohibited for reasons of health or security.
Import taxes and/or tariffsCustoms tariffs are levied on the c.i.f. value of imports. Effective July 1, 1999, the four rates are 5%, 10%, 20%, and 25% (previously 30%). Low tariffs are also charged on imports of machinery. Specific duties are levied on alcoholic beverages, tobacco, and petroleum products. Statutory exemptions are granted to the diplomatic corps, as well as to religious, educational, and welfare institutions. Zero rates are applicable to strategic and lead investment sectors.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsRequirements are still in place in the repatriation of export proceeds in foreign currency by exporters and reporting by banking institutions to the BOT of delinquent exporters beyond time allowed.
Financing requirementsn.a.
Documentation requirements
Letters of creditYes.
DomiciliationYes.
Export licensesLicenses from the respective ministries are required for the exportation from the mainland for a few items for health, sanitary, or national heritage reasons.
Without quotasYes.
Export taxesn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersPresentation of relevant documentary evidence at the time of buying the foreign exchange is required. The BOT examines these documents.
Trade-related paymentsThe release of foreign exchange for import payments requires invoices, shipping documents, a clean report of findings from an authorized inspection firm, and a single bill of entry form.
Quantitative limitsFor trade-related payments exceeding $5,000, proper documentation, such as invoices, shipping documents, and a clean report of findings, is required.
Investment-related paymentsThe transfer of income from investments by nonresidents is not restricted, provided all tax obligations have been met. Remittances of portfolio and dividends require audited reports and authenticated documents confirming payment of all taxes.
Payments for travel
Quantitative limitsFor travel allowances exceeding $10,000, the traveler has to produce documents certifying that the trip will last more than 40 days.
Personal paymentsProper documentation from the relevant educational or medical institution is required.
Indicative limits/bona fide testThere are bona fide tests for payment of medical costs.
Foreign workers’ wagesForeign workers are obliged to document the transfer with contracts and permits and state the reason of remittance.
Indicative limits/bona fide testYes.
Other paymentsApplicants for payment of fees related to consultancy, management, and royalty agreements need to furnish contractual documents duly executed by parties thereto, relevant invoice/fees notes, and tax clearances from the Tanzania Revenue Authority certifying that tax obligations have been settled.
Indicative limits/bona fide testYes.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital and money market instrumentsCapital transfers to all countries are subject to approval by commercial banks. All transfers of foreign currency funds from residents to nonresidents or to foreign-controlled resident bodies require specific approval from the BOT. Residents may acquire from abroad and sell or issue abroad any security or coupon on which capital, dividends, or interest are payable in foreign currency, provided that the security has been funded exclusively by externally acquired funds. The acquisition must be notified to the BOT for statistical purposes.
On capital market securities
Shares or other securities of a participating nature
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsParticipation of nonresidents in the domestic money and capital markets is restricted.
Purchase abroad by residentsShares issued abroad may be freely held and transferred by residents provided that such securities were acquired with externally generated funds. These purchases have to be reported to the BOT.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Purchase locally by nonresidentsThe purchase and redemption must be done in local currency.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
On money market instruments
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
On collective investment securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsYes.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instrumentsThere are controls on all transactions in derivatives and other instruments.
Controls on credit operationsNo BOT approval is required with respect to applications for foreign loans, overdrafts, structured external financing facilities, and deferred payment arrangements exceeding 365 days.
Commercial credits
By residents to nonresidentsYes.
To residents from nonresidentsBOT approval is required with respect to the receipt of foreign currency by residents and/or receipt of payment in the currency of Tanzania from nonresidents. Any person resident in Tanzania who has a right to receive foreign currency from a nonresident has to comply with directives given by the BOT to ensure the receipt of such foreign currency or such payment.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsYes.
Guarantees, sureties, and financial backup facilitiesThere are no restrictions on assurances obtained outside Tanzania, except that the transfer should be externally funded.
By residents to nonresidentsThere are restrictions in place for the provision of sureties, guarantees, or financial back-up facilities to nonresident entities, or transfer of funds to service these facilities.
Controls on direct investment
Outward direct investmentInvestments require BOT approval, except that banks are permitted to authorize access to foreign currency facilities to residents with respect to outward capital account payments under direct investment as repatriation of capital and income to foreign shareholders.
Inward direct investmentAll foreign direct investment must be approved by the Investment Promotion Center; some areas are reserved for investment by the public sector, and certain other areas are reserved exclusively for Tanzania citizens.
Controls on liquidation of direct investmentRepatriation of capital and associated income is done through commercial banks upon presentation of audited accounts indicating declared dividends, profits, or capital to be repatriated, plus authenticated documents from the Tanzania Revenue Authority confirming payment of all relevant taxes.
Controls on real estate transactionsAny person who owns immovable property in Tanzania may assign or transfer such property to beneficiaries abroad provided that the property was acquired through external resources subject to any laws in force in Tanzania.
Purchase abroad by residentsPurchases require BOT approval.
Purchase locally by nonresidentsYes.
Sale locally by nonresidentsYes.
Controls on personal capital movements
Loans
By residents to nonresidentsDebt servicing-related remittances by residents require the submission of the relevant contract as approved by a commercial bank together with creditors’ demand notes to that effect. Commercial banks have to furnish the BOT with monthly reports on loans serviced.
To residents from nonresidentsBOT approval is required for maturities longer than one year.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsYes.
Settlement of debts abroad by immigrantsYes.
Transfer of assets
Transfer abroad by emigrantsYes.
Transfer into the country by immigrantsYes.
Transfer of gambling and prize earningsYes.
Provisions specific to commercial banks and other credit institutions
Borrowing abroadBorrowing is subject to external debt management regulations. Otherwise, banks and financial institutions are allowed to operate credit lines with correspondents.
Lending to nonresidents (financial or commercial credits)Yes.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsThe BOT requires that all statutory reserves be held in local currency and allows banks’ averaging of daily positions and the counting of half their vault cash toward meeting the requirement.
Open foreign exchange position limitsThe limit is 20% of core capital.
Provisions specific to institutional investorsNo.
Other controls imposed by securities lawsn.a.
Changes During 1999
Imports and import paymentsJuly 1. The customs tariff bands were reduced.

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