Tanzania committed on full capital account liberalisation

The Bank of Tanzania (BoT) remains committed to extend capital account liberalisation to investors from the rest of the world by the end of the year.

Mid last year, the central bank opened the account that enabled investors to participate in the equity market thus increase trade activities on Dar es Salaam Stock Exchange which ballooned by almost hundred-fold.

However, on debt market the capital account was still restricted mostly to local investors while a number of prudential measures were still maintained.

The government said in a letter of intent to the International Monetary Fund (IMF) released yesterday that the next step would be to extend the current capital account liberalisation with the rest of the world later this year in line with Tanzania’s commitments under the EAC Common Market Protocol.

The government said in this initial stage of liberalisation, BoT has maintained a number of prudential measures in the debt market, such as overall limits on foreign participation and minimum holding periods for investors.

“These measures are not aimed at deterring inflows but are designed to act as ‘speed bumps’ to attract longer-term investors and ensure that risks are maintained at manageable levels”.

The BoT is constantly reviewing the experience with the controls and stands ready to modify them as regulators and the financial markets become more familiar in dealing with capital flows.

Since freer capital flows between EAC members were allowed in 2014, EAC investors have indicated interest in participating in Tanzania’s capital markets, entering the market gradually, with increasing participation in the equity market.

Capital Markets and Securities Authority (CMSA), Public Relations Manager Charles Shirima said there was no restriction for foreigner investors on equity but there is for debt market.

“This is good news as we anticipate trade activities on debt market to increase as well as we experienced in stock market,” he told Daily News.

The account liberalisation was behind the decent performing of the bourse as the DSE Index—measuring total market capitalisation– recorded a growth of 5.0 per cent, from 22.7tri/- at the close first quarter to 23.9trio/- at the end of second quarter.

Though the foreign investors’ participation decreased from 91 per cent to 86 per cent on the buy-side and from 77 per cent to 41 per cent on the sell-side, they activities boosted the bourse’s performance.
Source: Daily news, reported from Dar es Salaam, Tanzania
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