Five banks just learned the hard way that Tanzania's central bank isn't messing around when it comes to new forex rules. The Bank of Tanzania kicked them out of the interbank forex market in 2025 for breaking foreign exchange regulations. Oops.
Tanzania's central bank suspended five banks from the interbank forex market in 2025 for violating new foreign exchange regulations.
The drama started when new rules under GN 198/2025 took effect on March 28, 2025. These regulations basically banned foreign currency transactions for anything domestic. No more paying for local stuff in dollars unless you fit into some very specific exemptions. The central bank meant business.
So what did these banks do wrong? They kept participating in prohibited forex transactions. Offering contracts in foreign currencies for domestic deals. Accepting payments in dollars when they shouldn't have. Some reportedly failed to convert existing foreign currency contracts to shillings by the deadline. The central bank was watching, and audits in early Q2 caught them red-handed.
Here's the thing. The new law says all local transactions must be priced and paid in Tanzanian shillings. Period. There are exemptions for embassies, international organizations, loans by local banks, and duty-free shops. That's about it. Contracts denominated in foreign currencies had to be amended within 12 months from March 28, 2025. Miss that deadline? Face the consequences.
The suspension immediately hit the market. Dollar liquidity took a hit. Volatility spiked. The Bank of Tanzania stepped in and sold USD 20 million through an auction to calm things down. Banks were scrambling. More bids came in than dollars available, showing just how desperate the demand was. The weighted average exchange rate during the auction sat at TZS 2,465.13 per USD.
Tanzania's reserves stayed strong through all this mess, still covering four to four-and-a-half months of imports. The shilling had appreciated by 9.51% between July and December 2024 before weakening in early 2025. The central bank issued directives and public notices warning everyone else not to try the same stunts. They're conducting ongoing surveillance and audits. The Financial Intelligence Unit and police are involved now too. Tourists and other foreigners must exchange foreign currency at commercial banks or exchange bureaus in Tanzania. Licensed brokers operating in Tanzania must also comply with the strict regulatory framework governing foreign exchange activities.
The goal behind all this? Stop dollarization. Stabilize the shilling. Protect reserves. And make sure everyone knows the rules aren't suggestions. Like other African central banks, Tanzania's approach mirrors how monetary policy decisions can directly influence currency stability and market behavior in emerging economies.
