Tanzania’s Tour Operators Struggle as De-dollarization Policy Bites Hard

By Adonis Byemelwa

Arusha – Tanzania’s tourism industry is navigating a financial storm triggered by the government’s de-dollarization policy, which has disrupted operations and forced operators to grapple with significant losses.

The policy, enforced on July 1, 2024, was designed to strengthen the Tanzanian shilling (Sh) and reduce dependency on foreign currency. However, its unintended consequences have created a challenging environment for one of the country’s most vital economic sectors.

The policy mandates that all transactions, including park entry fees collected by Tanzania National Parks (Tanapa), the Ngorongoro Conservation Area Authority (NCAA), and the Tanzania Wildlife Management Authority (Tawa), must now be conducted in Sh instead of USD.

This shift upended decades of reliance on USD transactions in a sector where most clients pay in foreign currency, leaving operators vulnerable to exchange rate discrepancies.

For example, commercial banks offered an exchange rate of Sh 2,360 per USD as of December 2024. However, tour operators were required to pay park entry fees using a rate of Sh 2,609 per USD, as fixed by government agencies.

This disparity of Sh 249 per dollar has caused operators to incur substantial losses. A $50,000 payment for entry fees, for instance, now translates into a loss of Sh 12,450,000 due to the unfavorable conversion rates.

“This situation is squeezing the life out of our operations,” said one frustrated tour operator. “We’re paying more than we earn from clients, and the financial strain is unbearable.”

While Tanapa clarified that it merely collects fees on behalf of the Tanzania Revenue Authority (TRA) and does not set the exchange rates, the burden remains squarely on tour operators.

The TRA determines the rates as part of its implementation of government policy, but this rigid approach has made it nearly impossible for businesses to adapt or plan effectively.

The Tanzania Association of Tour Operators (Tato), which represents over 300 members, has consistently voiced concerns about the financial impact of this policy.

According to Tato Chairman Wilbard Chambulo, the reliance on Sh for park fees has complicated the industry’s operations, particularly for businesses that price their services in USD to accommodate international clients. He called for the government to allow USD payments for entry fees to streamline processes and protect the country’s foreign reserves.

“The tourism industry is the backbone of Tanzania’s economy,” Chambulo stated. “Policies that jeopardize its efficiency and profitability will have ripple effects on the entire nation.”

Adding to the complexity, operators are struggling to maintain financial stability amid the fluctuating exchange rates. Many are absorbing these losses quietly, fearing the repercussions of publicly criticizing the policy.

Meanwhile, the mismatch between the costs they incur and the revenue they generate has forced some to consider scaling back operations or increasing prices, potentially making Tanzania less competitive as a global tourist destination.

Despite the challenges, Tato’s Executive Director, Elirehema Maturo, remains optimistic that ongoing discussions with the government will yield a resolution.

He proposed establishing a fixed exchange rate for tourism-related payments or allowing operators to pay entry fees directly in USD as potential solutions to the problem.

Such measures, he argued, would help operators mitigate financial risks and restore predictability to their businesses.
To address these pressing issues, the government must act decisively. One solution is to implement a dual-payment system, where operators can choose to pay entry fees in either USD or Sh.

This would allow businesses to align their transactions with client payments and reduce losses caused by exchange rate discrepancies.
Alternatively, setting a stable exchange rate exclusively for tourism-related transactions would offer predictability and ensure operators are not penalized for fluctuations beyond their control.

The de-dollarization policy is a bold move aimed at strengthening the Tanzanian economy, but its implementation must be carefully calibrated to avoid undermining the tourism sector.

Collaborative dialogue between policymakers and industry stakeholders is essential to ensure that reforms achieve their intended goals without compromising the viability of key economic contributors.

By addressing these concerns, Tanzania can strike a balance between its economic ambitions and the needs of its tourism industry. Such an approach will not only safeguard the sector’s profitability but also reinforce its role as a cornerstone of the nation’s development and global appeal.