Tight monetary policy delights BoT

BoT HQ in Dar
The Bank of Tanzania (BoT) has said the current exchange rate level has affected the real balance which allows for smooth flow of exports and imports.

This was said in Dar es Salaam on Wednesday by the  BoT Director of Economic Research and Policy, Dr Joe Massawe while commenting on the current exchange rate which ranges between 1,570/- and 1,590/-and how it supports the country's exports and imports.

"Despite pressure on the shilling due to trade deficit, the  central bank has successfully managed to contain the exchange rate fluctuations which went up to nearly 2,000/- per US dollar early this year," remarked Dr Massawe.

Due to disparity between exports and imports, Dr Massawe said that devaluation of the shilling is done carefully within the lines of the market forces without favouring either side.

"Industrialised countries like China have devalued their currency due to their large export base", he said. He added that the bank will continue keeping a close eye on the local currency performance to ensure its value is maintained as well as facilitating exports and imports.

Similarly, Dr Massawe said the bank is keen in observing that business ethics on exports and imports are tightly observed.  For example, he said it is illegal for exporters to own an offshore account without seeking permission from the central bank. He said the move aims to protect the local currency from volatility.

A 2011 report on the East African economies by  Delloitte & Touche shows that there has been a relentless depreciation of the local currency over the past four years mainly due to unfavourable balance of trade. 

The BoT monthly economic review for May this year indicates that the value of exports of goods and services was 7,015.5 million US dollars (about 11.22tri/-) compared to 6,240.2 million US dollars (9.98tri/-) of the previous period on account of the improvement in gold exports and travel receipts.

Also, the value of imports of goods and services hit 12,825.7 million US dollars (about 20.52tri/-), an increase of 36.4 per cent compared to the level recorded in the corresponding period in 2011, largely due to the surging value of oil imports. 

Commenting on the current shilling position, the Dhow Financial Limited Chief Executive Officer, Prof Mohamed Warsame, said that there is need for an increased investments on export-based products which will enhance foreign earnings.

"Currently, the unfavourable balance of payments signifies that the country imports more than exports. As a result we can not devalue the shilling more due to the narrow exports," he said. 

On his part, Dr Honest Ngowi from  Mzumbe University raised  alarm over the level of imports, saying that the negative trend will continue to hurt the economy.
Source: The Daily News,http://www.dailynews.co.tz, reported by Sebastian Mrindoko
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