According to Raphael Mgaya, executive director of the Tanzania Association of Oil Marketing Companies (Taomac), the amount includes items imported mostly between March and July of this year.
“As of July 21, 2023, total demand was $ 747 million. This amount is needed by OMCs to clear the backlog of matured letters of credit (LCs), swaps, and post-import loans,” Mr. Mgaya told The Citizen (A Tanzanian news publication) on Tuesday.
Commercial banks have developed financial tools including swaps and post-import loans to help OMCs get by in the midst of the persistent US currency shortage. Given that interest is levied, these financial products have enormous expenses for the sector.
“It is imperative to note that without clearing the backlog of $747million, most OMCs have no extra lines of letter of credit to finance future importation of petroleum products,” Mr. Mgaya said. To further add insult to injury, he claimed that current market conditions make it nearly hard to get $747 million from sources like commercial banks and change bureaus.
In addition, OMCs require around $250 million (about Sh625 billion) per month to cover the cost of importing petroleum goods for the domestic market. He said that the needed quantity would be enough to import about 250,000 tonnes of fuel.
Currently, marketers of petroleum products are constantly describing how the US dollar’s appreciation was negatively affecting their company and leading to an increase in pump costs.
The price of imports, particularly petroleum items, has also surged as a result of the greenback currently selling for Sh2,510/Sh2,610 in bureaux de change, a tremendous increase from the rate of roughly Sh2,300 that had been there for over two years.
For instance, Dar es Salaam’s Energy and Water Utilities Regulatory Authority (Ewura) stated last week that the price of a liter of gasoline and diesel will increase by Sh463 and Sh391, respectively.
A liter of gasoline and diesel currently costs Sh3,199 and Sh2,935, respectively. Marketers point the finger at the strengthening of the dollar; Taomac vice chairperson Salim Baabde claims that a lack of dollars forced importers to reduce their purchases of petroleum.
According to Taomac data, compared to the same time last year, imports of gasoline and diesel fell by 24.2% between January and August of this year. The imports decreased to 1.43 million metric tonnes from 1.89 million metric tonnes, a significant decrease.
The governor of the Bank of Tanzania (BoT), Mr. Emmanuel Tutuba, responded to complaints about the lack of dollars by asserting that the bank was interfering in the market whenever required by issuing extra dollars and creating the export credit guarantee program.
According to official statistics, Tanzania has $5.5 billion in foreign reserves, which is within the required minimum of at least four months and is enough to cover nearly five months of imports.
On Friday of last week, the BoT sold $6 million (or around Sh15 billion) to oil marketing businesses that have established LCs, according to Mr. Tutuba, who spoke with The Citizen over the weekend. The Central Bank has also implemented other measures, such as prohibiting the use of US dollars in local transactions and buying gold to export in exchange for US dollars.