Tanzania has banned the use of foreign currencies for domestic transactions, requiring payments to be made in Tanzanian Shillings (TZS).

The policy aims to reinforce the national currency, improve monetary policy, and protect foreign reserves amid TZS depreciation.

Effective March 28, businesses are prohibited from quoting or accepting payments in foreign currencies, though certain exemptions apply.

Tanzania has formally prohibited the use of foreign currencies, including the US dollar, for all domestic transactions, mandating that payments for goods and services within the country must be made exclusively in Tanzanian Shillings (TZS).

The Tanzanian shilling, currently Africa’s worst-performing currency in 2024, has depreciated by over 10% against the U.S. dollar, according to Bloomberg data.

The new rules, which took effect on March 28, prohibit businesses from setting, advertising, or quoting prices in foreign currencies such as the US dollar or euro.

Weakening currency

The Tanzanian shilling has come under pressure due to rising national debt tied to major infrastructure projects, including a deep-water container port operated by India’s Adani Ports and Special Economic Zone Ltd. And a $5 billion oil pipeline transporting crude from neighbouring Uganda.

The currency has also been impacted by increased imports for these large-scale developments and broader global headwinds, including former U.S. President Donald Trump’s tariff policies.

The policy particularly targets sectors like tourism, real estate, and high-value commerce. Authorities say the shift will help reinforce the national currency, improve monetary policy control, and safeguard foreign reserves.

Under the new rules, businesses can no longer quote prices or accept payments in foreign currencies. Existing contracts denominated in foreign currencies must be converted to TZS by March 27, 2026, unless the Minister of Finance grants an extension.

The Bank of Tanzania will be responsible for enforcement. Penalties for non-compliance include fines and suspension of operating licenses.

However, certain exemptions apply: foreign tourists and non-residents can still pay in foreign currency for services like hotels and tours, but only through approved channels at official exchange rates.

Diplomatic missions, international organisations, and some foreign-currency-linked loans related to trade or external financing are also exempt.

Looking ahead, the government plans to support the shilling through continued gold and foreign currency purchases, export promotion, and import substitution policies.

Tanzania’s currency policy shift mirrors recent moves by other African nations like Zimbabwe and Zambia, which have also implemented bold measures to stabilise and strengthen their national currencies. (Business Insider Africa)