Tanzanian president John Magufuli ordered the central bank on Wednesday to tighten controls on the movement of hard currency and take swift action against failing banks in a bid to tackle financial crimes and protect the local shilling currency.
The move comes as the International Monetary Fund (IMF) called on Tanzania to speed up reforms and spend more to prevent a slowdown in one of the world’s fastest-growing economies.
Magufuli pledged to reform an economy hobbled by red tape and corruption and begin a program to develop public infrastructure after he was elected in 2015.
“We now have some 58 banks in Tanzania, the [central] Bank of Tanzania should closely monitor these banks and take swift action against failing institutions. It’s better to have a few viable banks than many failing banks,” he said in a statement issued by his office.
“I also want restrictions on the use of U.S. dollars. As I speak, $1 million cash was confiscated at the … [main] airport in Dar es Salaam and there is no explanation on the movement of this money into the country. We have to be careful.”
Magufuli said his government was taking several monetary policy measures to improve lending to the private sector, and this had already started to ease pressure on shilling liquidity.
The IMF said late on Tuesday that Tanzania’s banking sector remained well-capitalized, but some small and mid-sized banks face a sizable reduction in capitalization ratios.
It said that progress has been slow, while a lack of public spending — coupled with private sector concerns over policy uncertainty — was curtailing growth in East Africa’s third-biggest economy.
“Improvements in the business environment — policy predictability based on a strong dialog with the private sector, regulatory reforms, timely payment of value-added tax [VAT] and other tax refunds, and eliminating domestic arrears — must be pursued with urgency,” the IMF said late on Tuesday.
Tanzania’s economy grew at an annual rate of 6.8 percent in the first half of this year from 7.7 percent in the same period in 2016.
The economy has been growing at around 7 percent annually for the past decade, but the World Bank said in November growth will likely slow to 6.6 percent in 2017.
The IMF said a sharp fall in lending to the private sector, prompted by high non-performing loans, pointed to a continued slowdown in growth.
In June, the IMF said Tanzania may have to delay implementing some of its infrastructure projects because its revenue expectations for 2017-2018 may not be achieved.
In a bid to profit from its long coastline, Tanzania wants to spend $14.2 billion over the next five years to build a 2,560 km (1,590 mile) railway network, part of plans that also include upgrading ports and roads to serve growing economies in the region.
The IMF said subdued government revenue collection and delays in securing financing for projects have held back development spending and hurt economic growth.