Chapter

TANZANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
September 2004
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(Position as of December 31, 2003)
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 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 requirements
Controls on the use of domestic currencyPayment in domestic currency to a nonresident requires BOT approval.
For current transactions and paymentsYes.
For capital transactions
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other (instruments)Yes.
Credit operationsYes.
Payments arrangements
Bilateral payments arrangements
InoperativeThere is an agreement with Mozambique.
Regional arrangementsTanzania participates in the SADC and the EAC.
Clearing agreementsThere are agreements with Kenya and Uganda.
Administration of controlThe Foreign Exchange Act vests power in the BOT to administer and manage exchange transactions both on the mainland and in Zanzibar. The BOT delegates authority to all licensed banks to make payments abroad.
International security restrictionsNo.
Payments arrears
OfficialYes.
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 currencyNonresidents are allowed to export domestic currency for numismatic purposes. Following a currency convertibility agreement reached with Uganda and Kenya, residents may carry any amount of currency across borders to settle cross-border transactions with these countries.
Foreign currencyYes.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadHolding of foreign currency accounts is allowed for funds acquired outside Tanzania; otherwise, the opening and maintaining of offshore foreign currency accounts by residents are subject to restrictions. However, banks and financial institutions registered in Tanzania are permitted to operate foreign currency accounts with foreign correspondent banks. In addition, any authorized dealer bank may operate foreign currency accounts abroad on behalf of its customers. These accounts must be reported regularly to the BOT.
Accounts in domestic currency held abroadn.a.
Accounts in domestic currency convertible into foreign currencyAccess to these accounts is restricted to the UN and 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 currencyEffective May 21, 2003, foreign investors may use balances in these accounts to acquire listed securities on the Dar es Salaam Stock Exchange.
Blocked accountsAuthorized banks may credit funds to or debit funds from blocked (non-interest bearing) accounts of nonresidents with the approval of the BOT.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsOnly authorized dealers may make advance payments.
Documentation requirements for release of foreign exchange for importsThe release of foreign exchange in excess of the equivalent 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 valued at more than the equivalent of $5,000 require a preshipment inspection document.
Letters of creditYes.
Import licenses and other nontariff measures
Negative listCertain imports into the mainland from any source may be prohibited for reasons of health or security.
Open general licensesYes.
Licenses with quotasYes.
Other nontariff measuresTo protect certain industries from unfair competition, permits and licenses are required to import tires and sugar.
Import taxes and/or tariffsCustoms tariffs are levied on the c.i.f. value of imports at the rates of 5%, 10%, 20%, and 25%. Low tariffs are 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. About 17 categories of imports from EAC member countries are subject to a 20% import surcharge (after application of the 80% general tariff preference). About 13 categories of imports from non-EAC countries are subject to import surcharges in the range of 10—40%.
State import monopolyNo.
Exports and Export Proceeds
Repatriation requirementsExporters are required to repatriate their export proceeds in foreign currency to banking institutions; banks are required to report regularly to the BOT exporters failing to meet this requirement.
Financing requirementsn.r.
Documentation requirements
Letters of creditYes.
DomiciliationYes.
Export licensesLicenses from the respective ministries are required for the exportation from the mainland of a few items for health, sanitary, or national heritage reasons.
Without quotasYes.
Export taxesn.r.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersRelevant documentary evidence of the need for foreign exchange must be presented when purchasing foreign exchange from an authorized dealer. These documents are examined by the BOT.
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.
Indicative limits/bona fide testYes.
Investment-related paymentsThe transfer of income from investments by nonresidents is not restricted, provided all tax obligations have been met. Remittances of portfolio investments and dividends require audited reports and authenticated documents confirming payment of all taxes.
Payments for travel
Indicative limits/bona fide testTravel allowances exceeding $10,000 require the presentation of documents certifying that the length of the trip is more than 40 days.
Personal paymentsProper documentation from the relevant educational or medical institution is required.
Indicative limits/bona fide testBona fide tests apply to payment of medical costs.
Foreign workers’ wagesForeign workers must present work permits to receive foreign exchange.
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/fee notes, and tax clearances from the Tanzania Revenue Authority certifying that tax obligations have been settled.
Indicative limits/bona fide testBona fide tests apply to certain other payments.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
Capital Transactions
Controls on capital transactionsAll transfers of foreign currency funds from residents to nonresidents require specific approval from the BOT.
Controls on capital and money market instrumentsResidents may acquire from abroad and sell or transfer 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 reported to the BOT for statistical purposes.
On capital market securities
Shares or other securities of a participating natureEffective May 21, 2003, foreign investors may purchase and sell or transfer securities listed on the Dar es Salaam Stock Exchange.
Purchase locally by nonresidentsPurchase of securities is subject to a limit of 60% of total securities an issuer.
Sale or issue locally by nonresidentsParticipation of nonresidents in the domestic money market is restricted. However, foreign companies from Kenya and Uganda may issue securities and be cross-listed at an approved stock exchange in Tanzania, subject to approval from the Capital Markets and Securities Authority.
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 must be reported to the BOT.
Sale or issue abroad by residentsYes.
Bonds or other debt securities
Purchase locally by nonresidentsControls apply on all these transactions. The purchase and redemption must be done in local currency.
On money market instrumentsThe participation of nonresidents in the domestic money market is restricted.
On collective investment securitiesControls apply on all these transactions.
Controls on derivatives and other instrumentsControls apply on all these transactions.
Controls on credit operationsBOT approval is not 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 nonresidentsAuthorized dealers may approve these credits, but must report them to the BOT.
Financial credits
By residents to nonresidentsRealization of export proceeds beyond 180 days requires approval by a commercial bank.
To residents from nonresidentsAuthorized dealers may approve these credits, but must report them to the BOT.
Guarantees, sureties, and financial backup facilitiesThere are no controls on these instruments if outside Tanzania, but they must be obtained through authorized dealers, and must be reported to the BOT.
By residents to nonresidentsControls are in effect for the provision of sureties, guarantees, or financial backup facilities to nonresident entities, or transfer of funds to service these facilities.
Controls on direct investment
Outward direct investmentThese investments require BOT approval.
Inward direct investmentCommercial banks are permitted to authorize access to foreign currency facilities for repatriation of capital and transfer of income to foreign shareholders. Foreign direct investments exceeding $300,000 that are registered with the Tanzania Investment Center are eligible for incentives.
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 nonresidentsThese transactions are subject to the consent of the Commissioner for Lands.
Sale locally by nonresidentsThese transactions are subject to the consent of the Commissioner for Lands.
Controls on personal capital transactions
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.
Gifts, endowments, inheritances, and legacies
By residents to nonresidentsDocumentary requirements must be met.
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 investors
Limits (max.) on investment portfolio held abroadThe regulations governing the purchase abroad by residents of shares and other securities of a participating nature apply.
Other controls imposed by securities lawsn.r.
Changes During 2003
Nonresident accountsMay 21. Foreign investors intending to acquire the securities listed on the Dar es Salaam Stock Exchange were allowed access to the domestic currency accounts convertible into foreign currency.
Capital transactions
Controls on capital and money market instrumentsMay 21. Foreign investors were allowed to acquire securities listed on the Dar es Salaam Stock Exchange.

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