Tanzania on track to liberalise capital account

Full capital account liberalisation has been delayed until Foreign Exchange Regulations of 2015 are endorsed by the Bank of Tanzania (BoT). 

The regulations, which are in the final stages of approval, would determine the date of full liberalisation of the account that was earlier slated for end of last month.

Liberalisation of the capital account will enable the country to attract more investment initially from other members of the East African Community and then from the rest of the world.

Analysts say Tanzania will need to liberalise its capital account to get sovereign, if it wants to boost investor interest in its financial markets. 

BoT Director of Economic Research and Policy, Mr Johnson Nyella (pictured), told ‘Daily News’ that the plan was to fully liberalize the capital account by end of last year.

“However,” Mr Nyella said, “the implementation was somehow delayed, apparently due to other equally pressing official engagements.” The pressing matter, according to the Director, fell on the side of the relevant authorities within BoT.

Mr Nyella said, “as we communicate the draft regulations on full capital account liberalisation, the Foreign Exchange Regulations, 2015, are at advanced stages of the approval process in the Bank”.

Dar es Salaam Stock Exchange (DSE) Chief Executive Officer, Mr Moremi Marwa, said he understood that BoT was working on the process for possible fully liberalisation of the capital account.

“The larger objective of this exercise is to allow for possible free movement of investment capital in and out of the economy and therefore bring about efficiency on how capital is allocated in various asset classes across the region and the globe.

“We, at the DSE envisage seeing increased flow of investment portfolio capital in financial instruments that are listed in our market, especially in the bonds space,” Mr Marwa told ‘Daily News’.

He said opening up of the account will benefit positively both treasury and corporates which for sometimes have not matched up with what “we have witnessed in the equity space since the uplifting of foreign investors’ limits”.

Bank M Deputy CEO (Commercial) Ms Jacqueline Woiso said the liberalisation apart from increasing activities at the bourse would also raise revenue for financial institutions.

“This is also a good opportunity in the banking sector as it will improve capital flows,” while injecting more liquidity into the market, Ms Woiso said.

BoT Governor Prof Benno Ndulu said in the latest Financial Stability Report that opening up of the capital account to the rest of the world was expected to enhance mobilisation of both domestic and external financial resources.

“However,” Prof Ndulu warned, “this may expose the financial system to new risks particularly, those relating to international capital flows”. The Bank, he promised, would continue to monitor and use targeted macro-prudential policy tools to mitigate risks emanating from capital flows volatility.

Source: Daily News, reported by Abduel Elinaza, from Dar es Salaam, Tanzania
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