The legal framework for financial transactions in Tanzania has undergone substantial changes as a result of the amendments made by The Finance Act of 2024. The Act has incorporated a new provision, Section 26(2), into the Bank of Tanzania Act. As per the revised legislation, it is now mandatory for all transactions within Tanzania to be conducted in Tanzanian Shillings (TZS). Foreign currencies such as USD for transactions are now prohibited under the said amendments.
The adjustment in regulations can be primarily attributed to the prevailing shortage of USD within Tanzania. The Tanzanian government has implemented these measures to address the scarcity and foster stability in the national currency. At present, comprehensive guidelines to support investors through this transition are yet to be disseminated.
Key Implications for international businesses include:
Legal Compliance: It is now illegal to conduct transactions in USD or any other foreign currency, with non-compliance potentially leading to legal penalties. Therefore, it is crucial for businesses to comply with the new regulations to avoid disruptions.
Currency Conversion Costs: Businesses will face expenses when converting foreign currencies to TZS, such as transaction fees and potential losses from fluctuating exchange rates, which can impact profitability.
Operational Adjustments: Companies need to update their financial systems and processes to handle TZS transactions, which may involve modifying accounting systems, providing staff retraining, and adapting to new financial practices.
Account and Investment Restrictions: Residents are prohibited from maintaining accounts outside of Tanzania without permission from the governor of the Central Bank (Section 3(5)). Additionally, certain activities such as trading in gold, transferring legal tender out of the country without permission (Section 12(3)), and making specific investments outside Tanzania (Section 37) are now restricted.
As we closely observe the impact of these new regulations, it’s important to note that various social groups are expressing concerns about the potential challenges they may encounter. It is crucial to implement effective regulatory pathways to facilitate a smooth and positive transition for all those involved.
DISCLAIMER
This article cannot and does not contain legal advice. The legal information is provided for general information and education purposes only and is not a substitute for legal advice. Accordingly, before taking any actions based on the provided information, we encourage you to consult Lawfic Attorneys for further legal advice.
Author: Adv. Gasper Malongo.
