The Bank of Tanzania (BoT) has recently announced that the country’s full capital account liberalisation would soon be implemented as a proposal is waiting for the Bank’s approval to be presented to the Tanzanian parliament for endorsement.
The measure to ease the flow of cross border capitals from and to Tanzania had been announced to be fully implemented by the end of 2015.
However BoT decided to postpone its approval in January, 2016, to focus on the Foreign Exchange (Bureau de Change) Regulations, 2015 that needed to be fully approved by the Bank.
A BoT’s technical team has already completed and presented a proposal for the country’s full capital account liberalisation from the East African Community (EAC) members to the rest of the world and is waiting for the required approval before being presented to lawmakers, explained BoT Director of Economic Research and Policy, Dr. Suleiman Misango.
The capital account liberalisation as well as the Foreign Exchange (BDC) Regulations, 2015 are within a group of financial reforms backed by the International Monetary Fund (IMF) to embrace foreign direct investment (FDI) inflows to the country.
Tanzania the capital account liberalisation is being gradually established from 2014 when the government decided to raise the foreign participation in listed companies from 60% to 100% and allow EAC investors to buy up to 40% of the country’s Treasury Bills and Bonds.
However, a number of prudential measures as minimum holding periods of foreign participation in the debt and equity markets have been maintained until the monetary policy framework is completely modernized to support the capital account liberalisation.
According to the BOT, the country has proceeded carefully with the liberalisation process since the country’s debt holds the highest rate compared with neighboring countries, which would attract many corporate and individual investors to the DSE but affect the returns on issued debt due to major liquidity.
According to the Dar es Salaam Stock Exchange CEO, Mr. Moremi Marwa , after the liberalization Tanzania will SEE free flows of investment capital to and from the country which would bring more efficiency on capital allocation in different instruments listed at the DSE.
On the other hand, Tanzanians will be also allowed to invest in securities in other markets like Uganda, Kenya, Rwanda and South Sudan.