By Hassan Osman Kargbo
In a significant move aimed at strengthening its economy, Tanzania has officially banned the use of US dollars for domestic transactions. Starting July 1, 2025, all goods and services within the country must be priced and paid for exclusively in Tanzanian shillings as mandated by the Ministry of Finance and the Bank of Tanzania.
This directive, issued by Finance Minister Dr. Mwigulu Nchemba, seeks to curb the widespread use of foreign currencies in local transactions, a practice that has been contributing to inflationary pressures and undermining the value of the Tanzanian Shilling. The government has emphasized that the Tanzanian Shilling is the sole legal tender for domestic payments as stipulated in Section 26 of the Bank of Tanzania Act of 2006.
Economists have largely welcomed the ban, viewing it as a necessary step to bolster the local economy. Professor Kitojo Wetengere from the University of Arusha noted that using foreign currencies domestically increases demand for dollars, leading to a depreciation of the local currency. “When Tanzanians or stakeholders use dollars to buy domestic goods or services, they increase the demand for dollars, so when you increase the demand, automatically the price for dollars goes up and the Tanzanian currency is going down,” he explained.
The new regulations also require businesses and institutions to amend any existing contracts denominated in foreign currencies within 12 months. Failure to comply will render such contracts void unless an extension is granted by the Minister of Finance. Exceptions to the ban include payments by the government to regional organizations, transactions involving diplomatic missions and international organizations, foreign currency loans issued by local banks, and purchases at duty-free shops.
While the policy aims to promote financial stability and economic sovereignty, it has raised concerns among some businesses and foreign nationals. The directive mandates that even visitors to Tanzania exchange their foreign currency for Tanzanian shillings to facilitate transactions. The Bank of Tanzania has urged the public to report any instances where prices are set or payments are made in foreign currency to the authorities for appropriate action.
Despite the challenges, the government remains steadfast in its commitment to enforcing the ban. The Bank of Tanzania has instructed commercial banks to cease facilitating transactions involving foreign currencies, including payments for taxes, fees, goods, and services. Authorities are actively educating the public, businesses, banks, and schools about the new regulations and encourage compliance to ensure the effectiveness of the policy.
As Tanzania takes this bold step towards economic self-reliance, the success of the policy will depend on widespread adherence and the government’s ability to manage potential challenges arising from the transition.
The move positions Tanzania among a growing number of African nations seeking to reduce their dependence on the US dollar and strengthen their local currencies.
