Typically Authoritarian Government – Tanzania Cracks Down On Foreign Exchange Bureaux

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The stated reason for Tanzania cracking down on foreign exchange bureaux is that some of them are fronts for money laundering, are operating without a licence perhaps. The actual reason is that the market foreign exchange rate is not what the Tanzanian government thinks it ought to be. In the habit of authoritarians everywhere they’re thus cracking down on the market rather than changing their opinions.

We should also see this closure of free market exchange bureaux as being part and parcel of the censorship of The Citizen newspaper. Their crime being to report that free market exchange rate – you know, the one the government disagrees with:

Censorship is a little like that pornography that the Supreme Curt decided upon – I know it when I see it. So it is in Tanzania with the week long closure of The Citizen newspaper. Their crime was simply to report the reality happening out there in the street. The reason it’s a crime being that the Tanzanian Government under John Magufuli would prefer the citizenry listed to them, the government, rather than observed reality.

We should mull over that at the same time as we consider this:

The Bank of Tanzania (BoT) on Thursday announced that it has launched a crackdown on foreign exchange shops in the east African nation’s commercial capital Dar es Salaam where it found several illegalities.

They’re best considered as two prongs of the same fork:

A statement released by the central bank said the crackdown began on Wednesday and found most of the shops were running the foreign exchange business by breaching procedures, rules and regulations. The statement said BoT has started revoking licenses of foreign exchange shops that operated without observing rules and regulations. “This crackdown is continuous,” said the statement, adding that foreign exchange services were available in all banks and banking institutions, including foreign exchange shops owned by the Tanzania Postal Corporation.

One of those rules and regulations undoubtedly being carrying out FX business at the price the government desires FX business to be carried out at. The restriction of the smaller and less controllable shops being part of diverting the business to the larger where price control is rather easier. The state owned post office, for example, isn’t going to vary from the state set price now, is it?

What all of this is really evidence of is that Magufuli’s regime is losing control of the economy. They can’t keep the free market exchange rate at the government approved level. They’ve not enough foreign exchange themselves to be able to flood the market and thus determine prices. So, rather than admit error in either their economic management or their price ideas they’re trying to close down that reality which disagrees with their wishes.

This doesn’t work of course, any competition between an economic plan and the universe will be won by that reality out there. Eventually – it’s how long it takes which causes the pain.