About the Bank of Tanzania
The region of British East Africa, which consisted of Kenya, Uganda, and finally Tanzania – then known as Tanganyika – after the Great War, had its currency governed by the East African Currency Board from 1919. In 1965, however, the nations were tasked by the East African Currency Board with establishing their own governing central banks, having gone independent from the United Kingdom in the early 1960s.
In 1966, Tanzania’s central bank, the Bank of Tanzania, came into power following the dissolution of the East African Currency Board and was inaugurated by president Mwalimu Julius Kambarage Nyerere. Mr Edwin I. Mtei was selected to be the Bank of Tanzania's first governor and oversaw the initial distribution of the nation’s local currency, the Tanzanian shilling. Amendments to the statute in 1978, 1995, and 2006 have altered the central bank’s focus to enable it to serve the nation better through changing economic climates. In 2008, the External Payment Arrears scandal emerged, leading to president Jakaya Kikwete sacking the then-governor Doctor Daudi T.S. Ballali.
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The Bank of Tanzania’s Mission
From its earliest inception and through amendments made in 1978, the Bank of Tanzania Act detailed many objectives for the bank to achieve. However, as learned through experience, central banks that were tasked with too many objectives ultimately failed to achieve any of their goals. So, the Bank of Tanzania Act 1995 set the primary aim of the Bank of Tanzania to be to achieve price stability. The bank was given more powers in the Bank of Tanzania Act 2006 which further enforced its need to hone in on seeking price stability in the long term. During this time, inflation was highlighted as Tanzania’s greatest economic enemy.
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The Tanzanian Shilling
Tanzania, and the rest of British East Africa, used the East African shilling under the rule of the East African Currency Board through the early 1900s, which was backed by the United Kingdom’s Pound sterling. As the nations Kenya, Uganda, and now Tanzania were to go independent in the early 1960s, they were tasked with governing their own currencies by establishing central banks. With the inception of the Bank of Tanzania, the Tanzanian shilling with issued in the United Republic of Tanzania to be used as the national currency.
The Tanzanian shilling, TZS in common shorthand, currently consists of coins and banknotes. Coins come in the values of 50, 100, 200, and 500 shilingi, while the banknotes consist of values of 500, 1000, 2000, 5000, and 10,000 shilingi. The United States dollar is also a widely accepted form of currency in the nation, but its influx into the local economy has been a primary factor in the Tanzanian shilling’s volatility throughout its history. The volatility has been so severe during periods of time that owning TZS have been compared to gambling.
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The Bank of Tanzania’s Governors and Board of Directors
The Bank of Tanzania is presided over by a board of ten directors, one of which is the ruling governor. The governor is the face of the central bank and the chairman of the board, responsible for implementing policies to achieve the bank’s goals.
The first governor of the Bank of Tanzania was Mr Edwin I. Mtei, who started life as a goat herder but studied hard and made his way to the prestigious position. Mr Mtei was tasked with issuing the first Tanzanian shilling, taking control of the central bank for one term of five years from 1966 to 1974. Mr Charles Nyirubu followed Mr Mtei, holding the role for what is now above the limit of two five-year terms with 15 years at the helm. His work through the 1980s towards economic reforms worked as the foundations for major reforms through the 1990s. Mr Gilman Rutihinda sat as the third governor of the Bank of Tanzania, but his death in 1993 drew his tenure short at four years. Doctor Idris Rashidi stepped into the position and governed the bank for five years.
In 1998, Doctor Daudi T.S. Ballali was named the governor of the Bank of Tanzania. Before his second term of five years could come to a close, Dr Ballali was sacked from the role following the emergence of the External Payment Arrears scandal, which pinned the disgraced governor as a primary culprit in the crime. Professor Benno Ndulu followed Dr Ballali and sought to regain the trust of the public as well as support financial inclusion and the embrace of mobile financial services. In 2018, Prof. Ndulu’s ten years as governor came to a close with him being hailed as one of the central bank’s most successful governors.
At the start of 2018, Professor Florens Luoga was assigned as the governor of the Bank of Tanzania, having been the deputy vice-chancellor of the University of Dar es Salaam and the chairman of the board of directors of the Tanzania Revenue Authority.
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Bank of Tanzania’s 2008 External Payment Arrears Scandal
Following a tidal wave of very serious allegations against then-governor Doctor Daudi T.S. Ballali and the Bank of Tanzania in 2007, international independent audit firm Ernst & Young was recruited to perform a thorough audit on the transactions made by the Bank of Tanzania. At the start of 2008, president Jakaya Kikwete announced that Dr Ballali had been dismissed as the governor of the nation’s central bank following the revelations of the audit. It was found that $131 million in illegal payments had been made to 22 local business, a couple of which were fabricated and not registered companies. Dr Ballali disappeared, reportedly passing away in the United States later in the year, with the highly-respected Professor Benno Ndulu being selected to repair the damaged reputation of the Bank of Tanzania.
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