Use of dollar in Dar poses no threat

A study commissioned by the Bank of Tanzania has found the dollarisation problem in the country to be minor.

The findings show that about 3.2 per cent of the businesses in mainland Tanzania and 4.5 per cent in Zanzibar quote prices in dollars, but most of these businesses are willing to accept payments in the Tanzanian shilling.

“Only 0.1 per cent of the businesses in the mainland and none in Zanzibar indicated that they would prefer payments exclusively in dollars,” said the BoT report, authored by Pantaleo Kessy,  Johnson Nyella  and  Nicas Yabu.

Some business people in the country recently protested against a plan by the government to price services in dollars, saying it undermines the shilling and makes prices unpredictable.

Tanzania Chamber of Commerce, Industry and Agriculture executive director Daniel Machemba said pricing services in dollars by government departments will raise inflation and the cost of living.

Last year, the government priced a tender for offshore oil and gas prospecting blocks in dollars while the dollar was observed  to be  increasingly accepted for basic transactions, putting Tanzania at risk of facing a situation similar to those in Ghana and Sierra Leone, where pricing in foreign currencies led to the depreciation of local currencies.

The state-owned National Housing Corporation, the Parastatal Pensions Fund, Tanzania Ports Authority, National Insurance Corporation, Tanzania National Parks, Ministry of Finance and the Ministry of Energy and Minerals have  all been quoting for their services in dollars for many years.

Most countries that opt for official dollarisation are either small countries that rely on large -neighbouring economies for much of their income and imports or those that suffer from macroeconomic mismanagement leading to hyperinflation like in Zimbabwe.