FRIDAY December 13, 2024
By Adam Ihucha
The Tranquility News Correspondent, Tanzania
Tanzania’s de-dollarisation policy, which aimed at strengthening the Tanzanian shilling and reducing the country’s reliance on foreign currency, is now emerging as a major challenge for the tourism industry.
Tour operators are facing mounting financial losses due to fluctuating exchange rates, with many feeling caught in a difficult position between complying with the government’s directives and maintaining their businesses’ profitability.
The government’s decision to enforce a nationwide ban on US Dollar transactions on July 1, 2024, was driven by the desire to curb dollarisation and reinforce the shilling’s value.
However, the policy has sent shock waves throughout the tourism industry, where the use of US Dollar has long been a standard practice, particularly for transactions with major state-run entities like Tanzania National Parks (TANAPA), Ngorongoro Conservation Area Authority (NCAA), and Tanzania Wildlife Management Authority (TAWA).
These agencies quickly adopted the policy, mandating that all park entry fees and related payments be made in Tanzanian Shilling, a significant shift from the tradition of accepting US Dollar.
While the move aims at bolstering the local currency, it has inadvertently caused financial strain for tour operators, many of whom say are losing money due to unfavourable exchange rates.
Tour operators claim the exchange rates offered by commercial banks are consistently lower than those set by TANAPA, NCAA, and TAWA for converting US Dollar into Tanzanian Shilling.
This discrepancy has created a situation in which tour operators pay more in Shilling for entry fees than they charge their clients in dollar, thereby incurring losses.
As of December 12, 2024, the exchange rate for US Dollar to Tanzanian Shilling dropped to around TSh2,360 per Dollar at most commercial banks.
However, tourism agencies like TANAPA, TAWA, and NCAA continued maintaining their own exchange rate of TSh2,609 per Dollar, creating a loss of TSh249 for every Dollar transacted. For large-scale operations, this can quickly add up.
For example, a tour operator paying $50,000 in park entry fees could lose as much as TSh12.45 million due to the exchange rate’s mismatch.
“These discrepancies have severely impacted our revenue,” shared one frustrated tour operator, adding: “We are forced to pay higher amounts to TANAPA, NCAA, and TAWA than we charge our clients. It’s simply unsustainable.”
Clarifying the policy, Tourism Development Manager at TANAPA, Ms Juliet Lyimo explained that the authority is merely acting as an intermediary in collecting fees on behalf of the Tanzania Revenue Authority (TRA).
She clarified that TANAPA did not control or set the exchange rates, as they adhered strictly to the rates established by the TRA.
However, the Tanzania Association of Tour Operators (TATO) has voiced concerns over the policy’s unintended consequences.
The TATO Chairman, Mr Wilbard Chambulo, confirmed that numerous members, especially those in the large-scale tourism business, had reported financial strain due to the de-dollarisation policy.
Many of these operators have long priced their services in US Dollar, and the switch to Shilling had introduced unnecessary complexities and inefficiencies.
“The new policy adds layers of financial and logistical challenges, especially for those of us who deal with international clients,” said Mr Chambulo, explaining:
“The process of converting Dollars to Shilling leads to delays and increases operational costs. We argue that US Dollar transactions were vital for international contracts and foreign reserves, and removing that flexibility is putting us at a significant disadvantage.”
Mr Chambulo’s comments were echoed by TATO Executive Director, Mr Elirehema Maturo, who emphasized that negotiations between the association and the government were ongoing.
“We’re still in discussion with the government to address these concerns. We’re hopeful that a solution will be reached soon. In the meantime, I urge our members to remain patient,” he said.
One potential resolution being explored is the introduction of a stable exchange rate for the Tanzanian Shilling, which would remain fixed for the entire year.
Mr Maturo proposed that if the policy mandates entry fees be paid in Shilling, then a consistent rate should be applied to minimise the financial risks faced by operators.
“If the government insists on payments in Shilling, we believe it’s only fair to establish a fixed rate for the entire year,” said Maturo, explaining:
“This would help tour operators with long-term financial planning and provide stability in the face of fluctuating exchange rates.”
While the government’s de-dollarisation policy is driven by broader economic goals, such as reducing dependency on foreign currencies and enhancing the Tanzanian Shilling’s role in the domestic economy, its impact on the tourism industry underscores the unintended consequences that often accompany sweeping financial reforms.
As negotiations continue, the industry remains on edge, hoping for a resolution that will balance national economic priorities with the practical needs of Tanzania’s vital tourism industryΩ
