Foreign exchange planning in Tanzania: University of Dar es Salaam

The major objective of foreign exchange planning is to monitor inflows of foreign exchange for Tanzanian economy. This objective actually contains a number of related components associated with greater control and nationalization of the use of scarce foreign exchange. One such component is a medium term forecasting of the principal variables which determine the net foreign exchange position, i.e. import requirement, expected export earnings, expected inflows and outflows on capital account. Another is to assign priorities, through a system of rationing over the use to which foreign exchange is put. Thus is implemented by import licensing. The experience of Tanzania over the last decade demonstrates both the severity of the foreign exchange constraint on the country’s development objectives and difficulties of effective monitoring. The Tanzania’s balance of payments first moved into deficit in late 1960s and since then has been characterized by uneven and generally worsening gap between foreign exchange inflows and outflows. The drought and food crisis of 1974/75 (as well as oil price increases) implied a critical running down previously accumulated reserves, and necessitated the introduction of the strict controls on imports. Following a temporary period of relief.