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Dollarisation of economy debate continues
2007-06-23 10:36:54
By Mgeta Mganga and Lydia Shekighenda
Economic experts have supported a statement made by four allied opposition parties on the state of the country`s currency in relation to ``the dollarisation of the economy.``
The opposition NCCR- Mageuzi, Chadema, Civic United Front and Tanzania Labour Party want the government to declare that the Tanzania shilling will be the sole currency used in all sectors of the economy.
Speaking to The Guardian yesterday, Hussein Kamote, an economist, said the government should commit itself to making sure that the law governing procurement matters is adhered to before doing any purchase.
He said finance law governed by the Bank of Tanzania states that there will be only one currency which will be used in domestic transactions.
``Giving less consideration to the law governing procurement matters will create low demand of local currency versus high demand of dollars, hence weakening the local currency,`` he said.
He said the giving of first priority to foreign currency in procurement created unnecessary demand of dollars.
Currently, some local companies and government institutions quote tenders in dollars which, according to Kamote, is against the law on procurement.
Citing mobile phone companies, he said before switching to local currency, air time prices were fluctuating, depending on the exchange rate of the day.
``But today prices of airtime vouchers are stable after switching to local currency``, he said, adding that air time users were now enjoying more than they previously did, when they even failed to estimate the exact amount of money that could be used during a single transaction,`` he said.
An economist and director with the Dar es Salaam-based MIC Investment Company Limited, Salum Sadiki, said the government should give first priority to the use of local currency in domestic transactions so as to reduce the demand of the US dollar.
``It is high time the government stopped the use of US dollar in domestic transactions. This will create high demand of the Tanzanian shilling,`` he said, adding that foreign currency should only be used for importation and exportation of goods.
He said some government institutions and private companies were paying their employees in dollars, thus contributing to the weakening of local currency.
``To stop this, the government should create special initiatives that will discourage the use of foreign currency in domestic transactions,`` he said
A businessman, Ernest Jumanne, said the use of dollar could not be discouraged in international transactions, but only in domestic transactions.
Jumanne said the government should give priority to the purchase of local products rather than depend on imported products.
He said: ``If the question is quality, then the government should be able to create a certain limitation that will make suppliers match with stipulated standards.
This will encourage local suppliers to increase their purchasing power, thus give room to producing high quality products that could win the local market.
``If the government gives power to local producers by using 60 per cent of the earmarked fund for purchasing local products, demand for the dollar will fall, hence strengthen our local currency,`` Jumanne said.
He said the government procurement policy was liberal but gave no room to Small and Medium Entrepreneurs since it did not support their growth by purchasing their products.
Jumanne also said that most of the tourist hotels were charging their customers in dollars. ``This practice can be stopped by the intervention of regulatory bodies such as Bank of Tanzania,`` he said.
However, Hirji Abdallah, Tax Manager with Pannel Kerr Foster (T), said the undertaking of domestic transactions in dollars did not undermine the country`s economy but rather manifested the growth of the economy.
On the other hand, he said that the problem lay with foreign exchange control.
``Our government is not controlling its foreign exchange. This gives room to customers to decide either to buy using foreign currency or Tanzanian shillings in domestic transactions,`` he said.
The government should control foreign exchange in domestic transactions to boost the use of local currency, he said.
Luckson Kataraihya, a Consultant and Business Adviser for FPK, said most business people were likely to use dollars in domestic dealings as they avoided local currency fluctuations.
``Our Tanzanian shilling is not stable because of high interest rates, the reason that makes people operate their business in dollars,`` he said.
Kataraihya said use of the US dollar in domestic transactions could only be regulated by improving the exportation of local products.
On Wednesday, four allied opposition parties said it was a pity to see the government allowing the on-going dollarisation of the national economy for such a long time such that the strength of the shilling has been weakened when compared with the currency of neighbouring countries.
The call came amid continuous weakening of the Tanzania shilling when measured against the Kenyan and Ugandan shillings. Last year alone, it dropped by almost 18 percent.
In 2006, one US dollar was exchanged at 1,100/-; Ush 1,800; and Ksh. 80. While the Kenyan and Ugandan shilling had appreciated against the US dollar, the Tanzania shilling has depreciated as it is currently being exchanged at 1,300/- per one US dollar.
The current exchange rate shows that Ugandan shilling had picked up to Ush 1,679 against the US dollar.
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