The development of Islamic banking in Tanzania
The Tanzania Foreign Exchange Regulations 2022
Market Insight 26 May 2022 26 May 2022
This article provides a synopsis of the Foreign Exchange Regulations, G.N. No. 294 of 2022 (the Regulations) which are made under section 6 (1) of the Foreign Exchange Act, Cap 217 R.E. 2002, as amended (the Act).
Application of the Regulations
The Regulations govern, among other things, all matters relating to dealing in foreign currency and gold; current account transactions; and capital and financial account transactions.
Some important definitions to take note of under the Regulations include:
- Capital account transaction - defined as capital or financial flow which alters the assets or liabilities, including contingent liabilities, outside the United Republic of Tanzania (the URT), of a person resident in the URT, or assets or liabilities in the URT of a person resident outside the URT.
- Current account transaction - defined as including payment for goods and services imported or exported and short-term credit facilities in the ordinary course of business; payments for or receipts of coupon, dividends, interest on loans and net income from investments; or remittances to or from abroad for living expenses, travel, education, medical care, insurance, retirement benefits, consultancy fees and other expenses of similar nature.
- Resident - defined as a person who resides consecutively or whose centre of predominant economic interest is in the URT for twelve months or more.
- Prescribed territory - defined as a member country of the East African Community (EAC) or the Southern African Development Community (SADC).
Dealing in foreign currency and gold
The Regulations permit any person whether a resident or non-resident to hold, sell and purchase foreign currency from a bank, financial institution or bureau de change, or to open and maintain a foreign currency account with a bank or financial institution within the URT. Nevertheless, the Regulations pose a restriction when trading foreign currency outside the interbank foreign exchange market. This means that banks operating within the URT are allowed to exchange foreign currencies whether directly or through electronic platforms, however, when such exchange is done with a bank operating outside Tanzania, it will be carried out as prescribed by the Bank of Tanzania (the BoT).
It is important to note that the Regulations prohibit a resident from opening and maintaining an account outside the URT except for settlement of securities in the prescribed territory or where holding such account is permitted by the Governor of the BoT(the Governor).
With regards to travelling outside the URT, the Regulations restrict travelling with an amount equivalent to more than USD 10,000 (approximately TZS 23,200,000) and further pose a declaratory obligation to anyone entering or leaving the URT with foreign currency exceeding USD 10,000 (approximately TZS 23,200,000) or its equivalent.
Current account transactions
To facilitate cross border trade, the Regulations permit the expatriation and receipt of foreign currencies in the URT from neighbouring countries provided such is done as per the directives of the BoT. The Regulations provide a requirement of the existence of an account relationship between an exporter and a bank or financial institution for there to be a sale of foreign currency from the exporter to the bank or financial institution. With respect to payments for imports, an importer is required to have an account relationship with a bank or financial institution before direct advance payments for imports are made.
While undertaking export transactions, an exporter is required to receive all proceeds from the export in an account held in a bank or financial institution in the URT and furnish all relevant exportation documents within seven days after the completion of customs export procedures. The Regulations require exporters to ensure that all proceeds from export transactions are paid within the agreed period and not later than 90 days unless reasons for delayed payment are given and the expected timeframe for such payment is stipulated.
All forms of export of foreign currency undertaken by banks or financial institutions are solely dependent on the consent of the Governor. Such consent is also required where any person in the URT wishes to deal in gold or export notes or coins which have at any time been legal tender in the URT.
When dealing with imports, the Regulations require all payments for imports to be made through banks or financial institutions unless the value of an import consignment does not exceed USD 10,000 (approximately TZS 23,200,000). When making direct payments, the bank or financial institution must ensure that the relevant supporting documents are obtained from the importer. In an instance where a bank or financial institution makes direct advance payments for imports, it shall be essential to ensure that the importer has an account relationship with a bank or financial institution just as it is the case for exporters.
The Regulations permit outward remittances by any person in the URT provided it is done through a bank, financial institution or a mobile money operator. Outward remittances can be undertaken upon fulfilling certain supporting documents depending on the purpose for which such remittance is made. For example, when it comes to remittances by expatriates, banks and financial institutions are required to obtain from the applicant relevant employment contracts and work permits. A mobile money operator on the other hand can make outward remittances within the prescribed territory without supporting documents, provided reasons for remittance are provided and such remittance does not exceed the limit amount per transaction per day as prescribed by the relevant authorities.
Capital account and financial account transactions
When dealing in financial securities, coupon or participatory rights in a collective investment scheme, the Regulations allow a resident to purchase, issue, sell or transfer the same to a resident of a prescribed territory. As it currently stands, a resident may remit funds for the purposes of purchasing securities or participatory rights in a collective investment scheme or of an issuer who is making a public issue in a prescribed territory, however, they shall not remit funds for purchase of participatory rights in the collective investment scheme issued by a person who is not authorized by the relevant authority in the prescribed territory. A non-resident, on the other hand, may remit funds for purposes of purchasing traded securities of a listed company, or of an issuer in respect of which the issuer is making a public issue.
Pursuant to the Regulations, a non-resident shall not purchase, sell or transfer government securities unless he is a resident of a prescribed territory or a citizen of the URT in the diaspora.
Furthermore, it is important to note that a non-resident is required to maintain a securities settlement account with a bank or financial institution or appoint a custodian in the URT through which all payments and proceeds obtained from securities transactions can be made and received respectively.
Pursuant to the Regulations, all securities transactions in Tanzania are carried out through a licenced dealing member of an approved stock exchange in the URT and the BoT in case of Government securities.
Additionally, the Regulations afford a resident access to credit accommodation from a non-resident provided it is done through a bank or financial institution. Where Foreign Credit Accommodation (FCA) to a resident exceeds 365 days, the underlying FCA agreement must be registered with the BoT within 14 days of execution and assigned a Debt Registration Number (DRN). The DRN will be the reference for any disbursement, debt service and any other transaction related to the FCA. It is important to note as well that, where proceeds of the FCA are paid by the lender directly to the supplier of machinery, equipment or any other goods and services without the involvement of a bank or financial institution registered in the URT and the FCA remains unregistered for more than 14 days, a penalty of Tanzania Shillings one million (approximately USD 430) will be imposed on the borrower for each day the FCA remains unregistered.
It is provided under the Regulations that the BoT will not register a FCA agreement if it includes:
- interest rates and other charges that do not reflect the prevailing market conditions for the relevant currency of borrowing; and
- conditions precedent requiring the borrower to open a foreign currency account outside the URT.
In relation to outward direct investment and acquisition of real estate, a resident may remit funds for the purpose of engaging in the same if the investment is undertaken in the prescribed territory, the remittance is effected through a bank or financial institution and relevant supporting documents are submitted to the bank or financial approval. Should the resident wish to engage in outward direct investment and acquisition of real estate outside the prescribed territory prior approval must be sought by the BoT.
In a nutshell, the monitoring and enforcement of the Regulations is done by the BoT in collaboration with law enforcement agencies which may, from time-to-time request to be furnished with necessary documentation and information relating to compliance with the Regulations. Enforcement mechanisms include fines and penalties which are in accordance with the Act.
Please note that the Regulations revoke the Foreign Exchange Regulations of 1998 and the Foreign Exchange (Listed Securities) Regulations of 2003.
 The Anti-Money Laundering (Cross Border Declaration of Currency and Bearer Negotiable Instruments) Regulations, G.N. No. 268 of 2016