Tanzania’s central bank should rally to the defense of the shilling by taking steps such as stopping the “dollarization” of the economy, President John Magufuli said.
The currency of the natural gas-producing country has weakened almost 2 percent against the dollar this year, extending depreciation of 19 percent in 2015. Tanzania held $3.9 billion of gross international reserves at end-March, sufficient for 4.1 months of imports.
“The central bank must defend the value of the shilling,” Magufuli said Wednesday at an event marking the Bank of Tanzania’s 50th anniversary. “You have many ways you can use, but one is to stop dollarization.”
Neighboring Kenya and Rwanda have secured stand-by facilities from the International Monetary Fund that they can use to underpin their economies in times of shock.
In April and June 2015, the Tanzanian shilling was undermined by an investor flight to safety, high liquidity in the system, low export earnings and repatriation of corporate dividends, the IMF said in February. The fund urged the country, which has a $48 billion economy, to limit any foreign-exchange market interventions to liquidity management and smoothing volatility.
At least 17 of 23 African currencies tracked by Bloomberg have weakened against the dollar over the past 12 months, with those of Angola, Zambia, Mozambique, Nigeria and Malawi declining more than 25 percent.
Magufuli, in power since November, also asked Tanzania’s central bank to stop supporting under-performing lenders, including state-owned Twiga Bancorp, saying they pose a risk to the economy.
“There are these banks that are violating regulations,” he said. “Don’t hesitate to take action, even those that belong to government. They wait for government bailouts to survive. If they can’t survive, let them die.”
Magufuli urged the Bank of Tanzania to monitor mobile-money transfers closely to ensure the government receives its share of revenue from about 5.5 trillion shillings ($2.5 billion) transacted monthly. The banking regulator should also scrutinize foreign-exchange bureaus to curtail money laundering.
The central bank and Treasury should work together to guarantee the government is receiving its due revenue from mining and telecommunication companies, he said. Tanzania is Africa’s third-biggest gold producer and holds 58 trillion cubic feet of natural gas reserves.
“The miners claim to be making losses, but if you are making losses why stay here for 10 years? You leave,” he said.