Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

TANZANIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of April 30, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: July 15, 1996.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Tanzania is the Tanzania shilling.
Exchange rate structureUnitary.
Classification
Managed floating with no predetermined path for the exchange rateThe Bank of Tanzania (BOT) has to deal with substantial official inflows in a shallow foreign exchange market, frequently making the BOT a very large intervener. Given that interventions under an independent float are limited to avoid disruptive exchange rate fluctuations, the exchange rate arrangement has been reclassified, effective April 30, 2007, to managed floating with no predetermined path for the exchange rate from independently floating.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketADs 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 arising from forward operations.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; directives issued by the BOT.
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 paymentsGeneral permission is granted only with respect to trade transactions with neighboring countries.
For capital transactionsGeneral permission does not apply for capital transactions.
Transactions in capital and money market instrumentsYes.
Transactions in derivatives and other instrumentsYes.
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 of 1992 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.
Payments arrears
OfficialYes.
Privaten.r.
Controls on trade in gold (coins and/or bullion)Only authorized persons may buy, borrow, sell, lend, hold, or otherwise deal in gold coins and gold bullion.
On external tradeYes.
Controls on exports and imports of banknotes
On exports
Domestic currencyNonresidents are allowed to export domestic currency for numismatic purposes only. 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 currencyForeign currency exports are allowed only for bona fide purposes.
On imports
Domestic currencyPermission from the BOT is required.
Foreign currencyImports of foreign currency by banks require authorization from the BOT.
References to legal instruments and hyperlinksForeign Exchange Act, 1992; Foreign Exchange Regulations, 1998; directives issued by the BOT.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyResidents may open and maintain a foreign currency account with an AD.
Held abroadThe holding 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 AD 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 currencyThe UN and related organizations and foreign investors intending to acquire securities listed on the Dar es Salaam Stock Exchange are permitted to open these accounts.
References to legal instruments and hyperlinksForeign Exchange Act, 1992; Foreign Exchange Regulations, 1998; directives issued by the BOT.
Nonresident Accounts
Foreign exchange accounts permittedNonresidents may open and maintain a foreign currency account with an AD.
Domestic currency accountsNonresident accounts are maintained by foreign nationals temporarily residing in Tanzania; such accounts are to be closed on leaving the country.
Convertible into foreign currencyForeign investors may use balances in these accounts to acquire securities listed 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.
References to legal instruments and hyperlinksForeign Exchange Act, 1992; Foreign Exchange Regulations, 1998; Foreign Exchange (Listed Securities) Regulations, 2003.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for imports
Advance payment requirementsOnly ADs 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 requirementYes.
Preshipment inspectionPreshipment inspection is not required. Instead, imports of goods valued at more than the equivalent of $5,000 require a provisional classification valuation report.
Letters of creditYes.
Import licenses used as exchange licensesImport licenses apply for the negative list only.
Othern.r.
Import licenses and other nontariff measures
Negative listCertain imports to the mainland from any source may be prohibited for health or security reasons. Only import items on the negative list require licenses.
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 tariffsA three-band East African Customs Union CET structure of zero, 10%, and 25% applies to goods imported to East Africa. A selected list of sensitive items is subject to rates above 25% as an additional protection measure for similar locally produced products. A rate of zero applies to most of the goods originating and traded within East Africa. A reduction to zero duty rates by 2010 is planned on remaining goods originating from Kenya and imported to Tanzania and Uganda. Statutory exemptions are granted to the diplomatic corps as well as to religious, education, and welfare institutions.
State import monopolyNo.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; Import Licensing Ordinance; directives issued by the Tanzania Revenue Authority.
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 requirementsDocuments are required monthly for tax purposes.
Letters of creditYes.
Guaranteesn.r.
DomiciliationYes.
Preshipment inspectionn.r.
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 taxes
Other export taxesn.r.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; directives issued by the BOT.
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 AD. 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 dividends and income from portfolio investments require audited reports and authenticated documents confirming payment of all taxes.
Indicative limits/bona fide testDocuments are required with respect to payments related to dividends and income from portfolio investments.
Payments for travel
Indicative limits/bona fide testTravel allowances exceeding the equivalent of $10,000 require the presentation, under current regulations, of valid travel 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 or 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.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; directives issued by the BOT.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsYes.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; directives issued by the BOT.
Capital Transactions
Controls on capital transactionsAll transfers of foreign exchange by residents with respect to portfolio investments, loans to nonresidents, acquisition of real property abroad, outward direct investments, and operation of offshore foreign currency accounts abroad require specific approval from the BOT.
Repatriation requirementsNo.
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 is payable in foreign currency, provided 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 natureForeign investors may purchase, sell, or transfer equities listed on the Dar es Salaam Stock Exchange, subject to limits and conditions.
Purchase locally by nonresidentsPurchase of securities by a foreign investor is subject to a limit of 60% of total securities issued by an issuer.
Sale or issue locally by nonresidentsForeign companies from prescribed territories (i.e., Kenya and Uganda) may issue securities to the public and be cross-listed at an approved stock exchange in Tanzania, subject to approval by the Capital Markets and Securities Authority.
Purchase abroad by residentsShares issued abroad may be freely held and transferred by residents, provided 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 nonresidentsThe purchase and redemption must be done in local currency.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThese purchases are allowed only if funded fully by external sources and must be reported to the BOT for statistical purposes.
Sale or issue abroad by residentsYes.
On money market instrumentsThe participation of nonresidents in the domestic money market is restricted.
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThe regulations governing bonds or other debt securities apply.
Sale or issue abroad by residentsYes.
On collective investment securities
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThe regulations governing bonds or other debt securities apply.
Sale or issue abroad by residentsYes.
Controls on derivatives and other instruments
Purchase locally by nonresidentsYes.
Sale or issue locally by nonresidentsYes.
Purchase abroad by residentsThe regulations governing bonds or other debt securities apply.
Sale or issue abroad by residentsYes.
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 nonresidentsRealization of export proceeds beyond 180 days requires approval by a commercial bank.
To residents from nonresidentsADs may approve these credits, but must report them to the BOT.
Financial credits
By residents to nonresidentsYes.
To residents from nonresidentsADs 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 ADs 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 for transfer of funds to service these facilities.
Controls on direct investment
Outward direct investmentThese investments require BOT approval.
Inward direct investmentForeign direct investments exceeding $300,000 or its equivalent that are registered with the Tanzania Investment Center are eligible for incentives. Commercial banks are permitted to authorize access to foreign currency facilities for repatriation of capital and transfer of income to foreign shareholders.
Controls on liquidation of direct investmentRepatriation of capital and associated income is done through commercial banks on presentation of audited accounts indicating declared dividends, profits, or capital to be repatriated, plus authenticated documents from the Tanzania Revenue Authority confirming payment of relevant taxes on the transactions.
Controls on real estate transactionsAny person who owns immovable property in Tanzania may assign or transfer such property to beneficiaries abroad, provided 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-service 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.
Settlements of debts abroad by immigrantsYes.
Transfer of assetsControls apply to all these transactions.
Transfer of gambling and prize earningsYes.
References to legal instruments and hyperlinksForeign Exchange Act, 1992; Foreign Exchange Regulations, 1998; Foreign Exchange (Listed Securities) Regulations, 2003; directives issued by the BOT.
Provisions Specific to the Financial Sector
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 to average their daily positions and count half their vault cash toward meeting the requirement.
Differential treatment of deposit accounts held by nonresidentsn.r.
Open foreign exchange position limitsThe limit is 20% of core capital.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on investment portfolio held abroadThe regulations governing the purchase abroad by residents of shares or other securities of a participating nature apply.
Pension funds
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
Investment firms and collective investment funds
Limits (max.) on securities issued by nonresidentsn.a.
Limits (max.) on investment portfolio held abroadn.a.
Limits (min.) on investment portfolio held locallyn.a.
Currency-matching regulations on assets/liabilities compositionn.a.
References to legal instruments and hyperlinksForeign Exchange Regulations, 1998; directives issued by the BOT.
Changes during 2006
No significant changes occurred in the exchange and trade system.
Changes during 2007
Exchange arrangementApril 30. The exchange rate arrangement was reclassified to the category managed floating with no predetermined path for the exchange rate from the category independently floating.

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