Saturday, 13 December 2008

Clandestine "Dollarisation" is a problem!

Dollarisation now a chronic problem
The Governor of the Bank of Tanzania (BoT), Professor Benno Ndulu, has admitted that dollarisation of the domestic economy is a growing problem which requires serious institutional reforms for it to be redressed.
In an exclusive interview in Dar es Salaam on Wednesday, the BoT boss said existing financial laws were not competent enough in dealing with the problem effectively, much as focused inter-institutional cooperation was equally lacking to arrest the currency mess.
Presently, he said, financial laws of the land did not specifically restrict the use of the US dollar as a medium of exchange in conducting domestic transactions.
However, Ndulu was categorical that ``BoT will never encourage use of foreign currency, especially the US dollar, in carrying out home-based transactions``.
``We are so much concerned about the matter. We therefore plead with the public to leak to us any information that will lead to unveiling networks oiling and fueling the dirty game,`` he said.
What is happening in Tanzania, according to analysts, is a process of unofficial or partial dollarisation, whereby individuals substitute domestic money with foreign cash in order to conduct transactions and protect their purchasing power.
While dollarisation is an observable process, it can only be measured accurately if financial transactions using foreign currency are permitted, which is not the case in Tanzania for the time being.
Our survey shows that landlords in Dar es Salaam\'s high-ended Mbezi Beach, notoriously charge rentals in US dollars.
Even rentals for office and school spaces in some parts of Tegeta, Mikocheni and Masaki in the city are charged in hard currencies.
Ndulu confirmed to have heard about rumours related to such rental transactions in US dollars, yet he insisted that tenants should refrain from settling their bills in foreign currencies.
``We will stage serious investigations across suspected areas, as well as raising more public awareness about the economic maladies of dollarisation``, he said.
At a later stage, he hinted, the issuance of national identity cards would make it easier to trace agents running this disgraceful underground financial system.
As for Bureax de Change, he said there were elaborate rules and regulations guiding their businesses, including requirement that every transaction must be furnished with receipt.
Likewise, all tourist hotels are supposed to have an in house bureau de change outfit to facilitate foreign exchange transactions for incoming and outgoing visitors.
``Tanzanians seeking accommodation in tourist hotels are not supposed to pay their bills in US dollars``, he said.
When reached for comments, Finance and Economy Minister Mustapha Mkulo said dollarisation was truly an embarrassing issue, taking into account the endless complaints made by various individuals, including MPs, business people and individuals.
However, he disclosed that plans were underway for a joint meeting with the BoT with the aim of investigating the relevance of the existing financial laws that govern currency, in the upshot, proposing permanent solutions.
``Rampant dollarisation of the economy is dangerous for the wellbeing of the nation.
We will come up with a statement after having discussions with BoT over the matter``, he said.
Michael James, a Mbezi Beach resident, complained to this reporter about the kind of hassles he undergoes when it comes to paying rent in US dollars.
``I am obliged to travel all the way downtown to change local currency in bureau de change for the US dollar, otherwise my landlord will not accept local currency``, he said.
(SOURCE: Guardian, 2008-12-13 11:51:44. By Joyce Kisaka)

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