Fresh fears as forex shop crisis drags on

Thursday November 22 2018

 

By Zephania Ubwani @ubwanizg3 news@tz.nationmedia.com

Arusha. Fears of the return of illegal transactions of foreign currency gripped Arusha yesterday as closure of foreign currency shops entered the third day.

Equally worrying is the general economic downturn of the city which is largely dependent on tourism which goes with daily transactions of multiple foreign currencies from thousands of visitors.

“Dealing in foreign currency is an integral part of daily life in Arusha. The forex shops are here to facilitate business and trade and make life easier,” lamented a publisher. He told The Citizen he was surprised why the Bank of Tanzania (BoT) resorted to the measure, which he said had traumatized the local and international communities “as if we are in a state of emergency”.

He said the special audit operation by the central bank against the money changing outlets using the military has negatively impacted the flow of business and investor confidence in the country’s safari capital.

“The shutdown was taken in a manner that is not friendly to business. We are not in a state of emergency.

“Where was BoT all this time before the situation reached a stage where all forex shops are painted red”? he asked, noting that the outlets were licensed and routinely monitored.

Advertisement

A forex shop operator along the busy Sokoine Road which has a string of bureaux de change wondered why all shops had to be closed, bringing the multi-billion-shilling currency trade to a standstill.

He said on condition of anonymity that the central bank has an early warning mechanism to detect deficiencies for each licensed money exchange shop and that it was not likely for all of them to violate the rules.

He agreed that money laundering and claims that the forex outlets were used as conduit for capital flight out of the country could be true if there were sufficient investigations on each of the outlet.

“But it (the operation) was not carried out in a business fashion. People were scared to see people in military uniform at the forex shops,” he explained, noting that the measure would impact the ease of doing business in Arusha.

However, Arusha Urban MP Godbless Lema rejected reasons given by Bank of Tanzania governor Florens Luoga on why they used the military in their operation.

Speaking to journalists yesterday Mr Lema said it was wrong to use the military in matters involving civilians.

He said reasons that there were not enough police on grounds that they had gone to guard form two examinations do not hold water.

“In Arusha during that period government schools that were conducting examinations were 24 and 49 private schools, and going by that number it’s quite clear that there was still sufficient police for the job,” he stressed.

A survey by The Citizen yesterday found queues of people with foreign currencies lining up in various commercial banks to buy Tanzanian shillings.

Prof Luoga said here on Tuesday that people needing currency exchange services should use the commercial banks while the investigations are going on involving the closed outlets.

The rush for forex was more pronounced at the Clock Tower branch of NMB Bank where a special window has been created to serve those selling or buying local and convertible currencies.

One US dollar was selling at around Sh2,300 more or less the same rates with what was offered at string of forex shops, many of which had padlocks on their doors.

The Kenyan shilling is also among the highly traded currencies here due to Arusha being the gateway for traded goods to and from the neighbouring country.

However, there were indications that the unlicensed money changers may be back in business in the streets of Arusha where the demand for both local and foreign currencies remains high.

Such illegal dealers ruled the streets of the tourism hub decades ago before the government liberalized foreign exchange trade in the early 1990s as part of an all embracing financial sector reform.

“Money changing now takes place in the banks,” a merchandise seller along Goliondoi Road, along which several money changing shops are located, said.

The closure of the money bureaux continues to dominate discussions among many in Arusha with fears that the return of unofficial money changing business could only benefit the speculators.

Other business people reached for comment called on BoT and other government agencies to speed up investigations so that the bureaux de change operators found innocent are allowed to resume business.

However, a business consultant based here defended the central bank’s move, saying it was likely a number of forex bureaux were involved in dubious deals, including tax evasion.

He hastened to say some of the currency changing shops in Arusha had become notorious for violating the regulations under which they were licensed and registered.

Illegal transfers of money outside the country and associated transactions, he said, had led to the weakening of the shilling, increased inflation, the decline of purchasing power of people and increased hardships for people.