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Kenyan companies with operations in Tanzania now face rising currency risks following a ban on the use of foreign currencies for domestic payments as the government aims to increase demand for the local currency and take greater control of its monetary environment.
- •The Bank of Tanzania introduced this rule through the Foreign Exchange Regulations, 2025, which took effect on 28th March 2025, to strengthen its local currency and reduce dependence on dollars and other foreign units.
- •Under the new law, businesses must use Tanzanian shillings (TZS) for all goods and services sold within Tanzania.
- •For Kenyan firms, especially those in logistics, retail, and real estate, this rule adds financial pressure and operational hurdles.
Tanzania has used similar currency rules before. This time, enforcement is stricter and businesses that previously relied on informal invoicing practices now face a more rigid system. In turn, businesses—especially foreign ones—will have to adapt quickly.
Key Highlights of the Regulation
- •Local Payments Must Use TZS: All goods and services sold within Tanzania must be priced and paid for in Tanzanian shillings. This rule applies to all businesses, regardless of ownership or customer nationality.
- •Foreign Currency Pricing Banned: Businesses can no longer quote, invoice, or accept payments in US dollars, Kenyan shillings, or any other foreign currency.
- •Contract Review Period: Firms have 12 months to amend active contracts that include foreign currency payments. The government may void any non-compliant contract unless the Finance Ministry grants an exception.
- •Legal Enforcement: Companies that reject TZS or continue to use foreign currencies for local deals risk criminal penalties.
Notable Exceptions
The regulation allows a few exceptions:
- •Government payments to international or regional institutions based in Tanzania.
- •Transactions involving embassies and international organizations.
- •Foreign currency loans issued by Tanzanian financial institutions.
- •Purchases made at duty-free shops.
How Kenyan Firms Can Respond
For Kenyan firms, the best approach is to realign contracts, strengthen internal controls, and monitor the regulatory environment closely. With the right changes, they can stay compliant and protect their bottom line.
Kenyan companies should act quickly to stay compliant and avoid exposure:
1. Revise Contracts
Update all active agreements to reflect payment terms in TZS.
2. Reprice Goods and Services
Adjust pricing models and marketing materials to reflect the local currency.
3. Update Internal Systems
Ensure accounting, billing, and financial platforms support transactions in TZS.
4. Track Forex Trends
Monitor exchange rates regularly to plan for currency conversion impacts and minimize financial losses.