Advertisement
Tanzania says to fully embrace foreign capital this year
Tanzanian President Jakaya Kikwete is seen during a meeting with the Swedish king at the Stockholm Palace, during his visit in Sweden, June 4, 2015. PHOTO BY REUTERS/Bertil Ericson
15/07/2015
DAR ES SALAAM (Reuters) - Tanzania is pushing ahead with plans to accept more foreign portfolio investments by the end of 2015 and is taking steps to start setting interest rates, it said in a letter to the International Monetary Fund (IMF) released on Tuesday.
The easing of restrictions on foreign participation in the stock and debt markets is part of Tanzania's commitment under the East African Community (EAC) common market to open up its capital markets and free up movement of capital.
"The government remains committed to extending this liberalization to investors from the rest of the world by the end of 2015," it said in the letter.
Tanzania last year set aside a rule that barred foreign investors from buying more than 60 percent of shares in a listed company on the Dar es Salaam Stock Exchange.
Officials also want to fully open up the debt market to foreigners, dispensing with a long held policy of discouraging short-term money, that was aimed at minimising the risks associated with any sudden capital flight.
The government said it was also taking steps to shift to a price-based monetary policy, including setting of lending rates, but did not give a time frame for the change.
Central bank governor Benno Ndulu said last year that the bank would gradually move towards using interest rates as its main monetary policy tool rather than the present combination of instruments such as foreign exchange interventions.
The shift, which he said would take four years, would bring Tanzania into line with neighbours Kenya and Uganda.
Tanzania said it would allow a unification of the statutory minimum reserve (SMR) and clearing accounts of banks maintained at the central bank by the year end.
As part of the monetary policy shift, Tanzania will also introduce partial reserve averaging by December to allow banks to directly access a portion of their respective statutory reserve balances maintained at the central bank. This will give them greater flexibility in liquidity management.
The government said it was also drawing up a strategy to clear arrears of state-run power utility, TANESCO, to its suppliers, which stood at 586.5 billion shillings ($289.63 million) at the end of May. It said the debts were threatening to stifle future investments in gas production.
"Unless these arrears are cleared, TANESCO’s credibility ... will be further weakened with negative implications on investment decisions by the private sector to expand near-shore gas production," it said.
Add new comment