Tanzania has a foreign currency problem — and it's not small. As of December 2024, the country's external debt stock hit USD 32.93 billion. That's TZS 79.72 trillion. Let that number sink in. And roughly 67.8% of that debt is denominated in US dollars. So when the dollar gets stronger and the shilling gets weaker, Tanzania feels it hard. A 10% depreciation of the TZS adds TZS 5.41 trillion to debt servicing costs. Just like that.
Skeptics love to argue that curbing foreign currency dependence is too ambitious, too fast, too risky. But here's the thing — Tanzania didn't get here by accident, and it won't escape by waiting around either. The dollarisation problem has clear, identifiable roots. Firms and households leaned into foreign currency because of inflation fears, shaky exchange rates, and frankly, a shallow local financial market with too few attractive TZS instruments. The shilling's largest note was worth about USD 7.5. Try buying commercial real estate with that.
The government moved. In March 2025, the Foreign Currency (Use) Regulations, GN 198/2025, took effect. All domestic prices must now be quoted and paid in Tanzanian shillings. Refusing TZS is an offence. Existing foreign currency contracts have until 27 March 2026 to be converted into TZS or they become void. Bold? Yes. Necessary? Absolutely.
Critics will call this heavy-handed. Fine. But what's the alternative — just keep watching foreign currency loans flow into non-tradable sectors with zero hedging and massive balance-sheet risk? That's the status quo the skeptics are defending. Smart policy actually does exist here. Restricting foreign currency lending to tradable sectors, where exporters earn foreign exchange to repay it, makes obvious sense. Requiring hedging for non-tradable borrowers also reduces currency mismatch. None of this is radical. In forex markets, even routine currency exchanges follow a standard T+2 settlement period, meaning actual delivery of currencies occurs two business days after the trade date — a structural feature that underscores just how institutionalised and deliberate foreign currency flows already are. Central banks can also deploy open market operations to influence domestic liquidity conditions and support exchange rate stability, a tool that has proven effective in economies navigating similar currency pressures. Beyond these tools, central banks exercise regulatory oversight of forex bureaus and commercial banks to ensure compliance with exchange control regulations, adding a critical layer of discipline to how foreign currency is accessed and used in the broader economy.
Tanzania's GDP stood at USD 174.7 billion in 2022. That's a real economy with real stakes. The legal framework is in place. The rationale is clear. The skeptics are simply wrong.
