Commenting on the latest directive of the Central Bank of Tanzania concerning the ban on the use of foreign currencies, Mikatekiso Kubayi, a researcher at the Institute for Global Dialogue, told Sputnik Africa that the stranglehold of the US dollar poses a challenge for developing nations.
According to the researcher, the exchange rate between the local currency and the dollar "affects the cost of oil and gas" and, consequently, the price of consumer goods, contributing to inflation.
In addition, the reliance on the US dollar for domestic transactions implies risks of fluctuations in the value of the local currency with each decision of US policymakers and consequences of rate hikes by the US federal reserve on developing economies, the analyst argued.
Another negative impact of exchange rates, Kubayi noted, is the rising cost of imports and exports.
"The dollar dominance is a challenge for developing economies because of the exchange rates that make debt financing of infrastructure expensive as well as imports of equipment and other instruments for development, as well as making transactions expensive," the expert stressed.
On the other hand, he noted that trade in local currency makes it cheaper to do business, which contributes to the revitalization and boosting of the economy.
"Borrowing in local currency makes finance cheaper and therefore more accessible for vital programs such as infrastructure spending for development and stimulation of economic activity and growth," Kubayi underlined.
The expert concluded that the discussion of creating an alternative currency to replace the greenback is ongoing at the level of BRICS, South America and the African continent.
As for Africa, the most vocal proponent of de-dollarization is Kenyan President William Ruto, who has repeatedly questioned the need for the dollar in trade within Africa.
According to Ruto, instead of the US dollar, countries on the continent should opt for the Pan-African Payment and Settlement System in order to "trade more freely."