Tanzanians may lack a savings culture at home, but it has now emerged that its citizens abroad annually send home $200 million.

Meanwhile, despite the recent global financial crisis, which took its toll on the country’s export earnings, foreign exchange-denominated deposits held with commercial banks by Tanzania residents amount to $1.5 billion — equivalent to two months’ worth of imports of goods and services.

Foreign exchange-denominated assets held by commercial banks add another half a month to this stock.

By the end of March, the country’s gross official foreign exchange reserves stood at $3,498.2 million, sufficient to cover 5.4 months of imports of goods and services.

Foreign exchange is crucial for Tanzania’s net import economy as it eases the dollar demand pressure at the inter-bank foreign market, where the shilling has lost over 5 per cent against the dollar since January, falling to Tsh1,367.

According to an Economic and Social Research Foundation report on the impact of the global financial crisis issued recently, “The most direct short-term impact on the economy would be declining funds from Tanzanians living abroad whose incomes, are affected after losing jobs and reduced income from wages and dividends from investments they had made in real estates and financial markets.” The report was compiled jointly with the Overseas Development Institute.

The report, titled “The Global Financial Crisis and Tanzania: Effects and Policy Responses,” says the Bank of Tanzania reported getting some indicators on reduced personnel remittances, but hard data on the subject will be available after completion of a special study by the bank’s Policy and Research Directorate.

However, a recent study by the International Organisation for Migration indicated some signs of reduced remittances to Tanzania and Uganda, although data was for up to July 2009 only.

BoT Director of Economic Policy Dr Joseph Massawe told The EastAfrican that data is hard to get as most remittances are informal, but the bank is working with the National Bureau of Statistics, to include the subject in its next household budget survey scheduled for this year.

“I think the data is underestimated but the survey will shed more light on the subject. The data that we have shows that the diaspora is remitting about $200 million a year,” says Dr Massawe.

New Interest

Banks such as CRDB and Commercial Bank of Africa have, however, reported a surge in interest by the diaspora in investing in “safe,” high dividend projects in Tanzania, citing increasing default by friends and relatives at home to whom they send money for projects.

To cushion from the global financial crisis and encourage trade among businesses within the East Africa Community, the Bank of Tanzania has simplified cross-border remittances by eliminating the need to use clearing banks in the United States and Europe.
However, the central bank continues to restrict liquidity outflows.

CRDB Bank Plc managing director Dr Charles Kimei says the bank through its external account for Tanzanians living abroad — the “Tanzanite account” — has attracted 3,312 depositors who deposited some $15 million in the past six years.

“The Tanzanite account attracted mainly Tanzanians living in the United States, the United Kingdom, United Arab Emirates and East Asia,” Dr Kimei told The EastAfrican.

The bank in collaboration with Unit Trust of Tanzania has embarked on a campaign to woo Tanzanians living overseas to invest into the Trust’s Umoja units via CRDB bank’s network abroad.

The diaspora remittances are important in the short run to offset the inflows gap from traditional exports, which start to pick up in July.

BoT Deputy Governor Dr Enos Bukuku (Economic and Financial Policies) said that, in order to reduce the deficit in the balance of payments “We have to increase our export levels and other foreign exchange earnings — diaspora remittances, tourism, etc.”

The aftermath of the global financial crisis saw the country put in place a stimulus rescue package worth Tsh1.7 trillion ($1.307 billion) in the 2009/10 budget to bail out the economy, certain areas of which had already been hit hard by the crunch including agricultural exports and tourism.

The report indicates the need to establish new lines for foreign inflows including promotion of diaspora remittances or establishing diaspora financial instruments.