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

In: Parallel Exchange Rates in Developing Countries

Author

Listed:
  • Daniel Kaufmann
  • Stephen A O’Connell

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.

Suggested Citation

  • Daniel Kaufmann & Stephen A O’Connell, 1997. "Exchange Controls and the Parallel Premium in Tanzania, 1967–90," Palgrave Macmillan Books, in: Miguel A. Kiguel & J. Saul Lizondo & Stephen A. O’Connell (ed.), Parallel Exchange Rates in Developing Countries, chapter 7, pages 247-290, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-25520-7_8
    DOI: 10.1007/978-1-349-25520-7_8
    as

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