Bank of Tanzania ‘working on CBDC’, governor says

The Bank of Tanzania “has already begun preparations to have its own” central bank digital currency (CBDC), governor Florens Luoga said on November 25.

Luoga said the central bank had to “ensure that our country is not left behind in the adoption of central bank digital currencies”, several media outlets reported.

The central bank’s Twitter feed quotes Luoga as telling a financial conference that “we cannot give timelines when to issue regulations”, as the central bank is “still researching”. Luoga also stated that “as far as we know cryptocurrencies are not safe”.

The central bank’s move may be in response to a June 2021 speech by Tanzania’s president Samia Suluhu, who also attended the conference. She urged the central bank in June to “be prepared” to adopt digital currencies.

Suluhu said she “would like to advise the central bank to start working on those issues”, according to Reuters. The central bank told Reuters in June that it was “working on the directives given”.

In November 2019, the Bank of Tanzania issued two public notices declaring that Tanzanian law did not provide for private cryptocurrencies. The central bank counselled Tanzanians against transactions with cryptocurrencies, saying in one release that “doing so is contrary to existing foreign exchange regulations”.

According to a report by market research firm Chainanalysis, Africa comprises only 2% of the global cryptocurrency market in 2019–20. The report notes that many Africans use crypto assets to compensate for unstable currencies. However, the Tanzanian shilling has been stable at around 2,300 to the US dollar since early 2019.

Luoga began a five-year term as governor in January 2018, after John Magufuli, the then-president, announced his appointment in October 2017. Magufuli died in March 2021 and was succeeded by Suluhu, who had been his vice-president.  

CBDCs and Africa

The Tanzanian initiative follows Nigeria’s introduction of a CBDC scheme. The Central Bank of Nigeria debuted its enaira on a small scale on October 25, issuing about $1.2 million in digital money.

In August, the Bank of Ghana said it would pilot its own CBDC, working with commercial partner Giesecke + Devrient.

The Central Bank of the Bahamas pioneered the first fully operational CBDC, the “sand dollar”, in 2020. The People’s Bank of China and the Eastern Caribbean currency union are also running CBDC pilots.

Tanzania receives IMF aid

Economic growth seems to have persisted despite Covid-19 and the president’s refusal to undertake pandemic control measures. Magufuli had declared the country “Covid-free” after a period of official prayer in June 2020.  At the time of his death, rumours circulated that Magufuli had died of Covid.

Despite economic growth, Tanzania has faced balance of payments problems. The IMF approved $372.4 million in emergency loans on November 12. This will fund external trade and support the Tanzania Covid-19 Socioeconomic Response Plan, a $1.6 billion programme that includes a vaccination drive.

Tanzania is part of the six-nation East African Community, a regional organisation that includes a common market and customs union. The EAC has been planning a monetary union with a common currency by 2024.