Exchange Controls and the Parallel Premium in Tanzania, 1967–90

Daniel Kaufmann and Stephen A O’Connell

Chapter 7 in Parallel Exchange Rates in Developing Countries, 1997, pp 247-290 from Palgrave Macmillan

Abstract: Abstract Developments in Tanzania’s parallel foreign exchange market have mirrored the evolution of macroeconomic policy in that country since its independence in 1961. At independence, Tanzania operated a relatively open trade and payments regime supported by conservative monetary and fiscal policies. These policies survived the introduction of the Tanzanian shilling in 1965, but the Arusha Declaration of 1967 generated a fundamental reorientation under the rubric of self-reliance and African socialism. In the two decades following the Arusha Declaration, the exchange rate in Tanzania’s illegal parallel foreign exchange market rose at a rate of nearly 2.5 percent per month, more than three times as rapidly as the official exchange rate. By early 1986, the parallel rate exceeded the official rate by more than 800 percent.

Keywords: Exchange Rate; Foreign Exchange; Banking System; Real Exchange Rate; Real Effective Exchange Rate (search for similar items in EconPapers)
Date: 1997
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-1-349-25520-7_8

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DOI: 10.1007/978-1-349-25520-7_8

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