25 Shilingi – Tanzania

In 1991, Tanzania's currency situation was characterized by a critical transition from a heavily controlled socialist-era system to a more liberalized market-oriented framework. The Tanzanian shilling (TZS) was officially pegged and grossly overvalued, leading to a vast and thriving parallel (black) market where the currency traded at a fraction of its official rate. This dual system created severe economic distortions, crippling formal exports, encouraging smuggling, and creating chronic shortages of foreign exchange for legitimate businesses, which stifled investment and growth.

The root of this crisis lay in the policies of the post-Arusha Declaration era, where the state maintained tight control over the economy and the financial sector. The Bank of Tanzania fixed the exchange rate, but with declining agricultural production (especially of key export crops like coffee and cotton) and a lack of foreign investment, the country faced a mounting external debt burden and dwindling hard currency reserves. By the late 1980s and into 1991, these pressures had become unsustainable, forcing the government to seek assistance from the International Monetary Fund (IMF) and the World Bank.

Consequently, 1991 was a pivotal year within a broader reform program. Under the Economic Recovery Programme (ERP), Tanzania agreed to implement structural adjustments, which included a significant devaluation of the shilling and a move towards a market-determined exchange rate system. This year saw major steps to unify the official and parallel market rates, a painful but necessary measure to restore macroeconomic stability, boost export competitiveness, and attract foreign exchange through formal channels, setting the stage for future economic liberalization.