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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