The Indian High Commission (IHC) in Dar es Salaam issued a press release on Thursday informing that India and Tanzania have approved using local currencies — Indian Rupee and Tanzania Shilling — to settle bilateral trade.
Overview
The release said that stakeholders must allow authorised Indian banks to set up Special Rupee Vostro Accounts (SRVA) of Tanzanian banks and vice versa. All requests to Indian banks will finally be verified and approved by the Reserve Bank of India (RBI).
The IHC further highlighted that Tanzania’s Bank of Baroda branches have already secured the RBI’s approval for setting up SRVAs in corresponding branches.
Good news for India-Tanzania Trade; Rupee & Tanzanian Shiling(Tsh) can now be used for settlement of bilateral trade;Reserve Bank of India has allowed such mechanism; business community from both sides should make best use of it #IndiaTanzania @MEAIndia @PMOIndia @DrSJaishankar
— Binaya Pradhan (@binaysrikant76) March 16, 2023
The release welcomed Tanzanian banks and businesses to “make full use of this framework” to ensure “seamless payment transactions” to help preserve foreign reserves and bolster bilateral trade.
RBI Allows Domestic Currency Trade Settlement with 18 Countries
This move closely follows the Indian government’s Tuesday announcement that the RBI had allowed bilateral trade settlements in domestic currencies with 18 countries, namely:
- Botswana
- Fiji
- Germany
- Guyana
- Israel
- Malaysia
- Mauritius
- Myanmar
- New Zealand
- Oman
- Russia
- Seychelles
- Singapore
- Sri Lanka
- United Kingdom
1. Every country that has attempted to replace the dollar trade has been targeted by the West for regime change. Iraq was building a petroleum exchange. Libya had planned an African gold currency. Both countries are in ruins today. India needs to be careful because it has more… https://t.co/pT2TZpqPzV pic.twitter.com/WjpVZyAi0d
— Rakesh Krishnan Simha (@ByRakeshSimha) March 10, 2023
As in the agreement with Tanzania, Indian banks will open SRVAs of corresponding banks in foreign countries. Indian importers will pay Indian Rupees, which will be deposited in these accounts against the invoices by the foreign exporters.
Similarly, Indian exporters can also receive payment in Indian Rupees through their SRVAs.
Growing Distrust of Dollar as Trade Currency
According to Union Minister of State for Finance Bhagwat Kishanrao Karad, Russia had been using the mechanism regularly to support the overall calls for “de-dollarisation.”
The RBI began setting up the system in July 2022.
The US dollar is still the King, but not the Emperor of currencies. Its share of global trade payments through SWIFT is 45% -- impressive, but not a monopoly.
— S.L. Kanthan (@Kanthan2030) March 13, 2023
When that number drops to 30%, the share of the pie will be something like:
🔹USD: 30%
🔹Euro: 30%
🔹Yuan: 20%… https://t.co/UPocXTu8ZH pic.twitter.com/cb9DjIvLB8
Since Russia’s military invasion of Ukraine on 24 February 2022, a commodity crisis following a series of sanctions has obstructed supply chains globally. Accordingly, the international community is looking for alternatives to settling bilateral trade in US Dollars, the primary currency for international trade for decades.