Shilling closer to low record against dollar

The shilling has significantly lost ground against the US dollar in the last two months, heading to lowest level in almost a year, sending bad signals to investors.

The shilling, according to commercial banks, depreciated by almost 38/- against a green back in the last six weeks. It opened at 1,587/- at mid last month before sinking to 1,625/- at the end of last week. 

The dwindling of the shilling in such a short period was associated by growing demand for the US currency by manufacturing and energy sectors, amid unmatched supply.

The National Microfinance Bank (NMB) said the shilling went down after it failed to stand against heavy demand pressure from manufacturing and energy sector that did not match the inflows from agricultural and tourism sectors. 

“The shilling continued to weaken against the dollar as demand for the greenback from importers grew up.

“Given the market’s recent moment, further shilling weakness is imminent before we see any meaningful reversal,” NMB said in the e-market report. 

To rescue the local currency, Bank of Tanzania intervened in the market to cool the tempo but the demand for the greenback surpassed supply from the mining and agricultural sectors.

The Tanzania Securities Chief Executive Officer, Mr Moremi Marwa, told the ‘Daily News’ that the major reason for the shilling’s fall in the last three months was due to strong demand for dollars from importers.

“We are out of traditional cash crop exports and in the second quarter a mine (Geita Gold Mine) was temporarily closed for maintenance… this impacted negatively on the supply side of foreign exchange,” Mr Marwa said.

He also said there was increased demand for fuel for normal vehicle consumption and energy generation, hence pushing up the demand side of the dollar in the forex markets. The closure of Geita Mine, one of the biggest gold mines in the country, reduced the availability of forex and it took time to put the situation back on track.

The mining sector grew by 1.2 per cent in the second quarter, compared to 5.6 per cent of last year mainly because of Geita Gold Mine’s temporary closure. Oil alone ate up 3.46 billion US dollars or slightly over 27 per cent of total imports of 12.78billion US dollars at the end of August this year.

Money market analysts are worrying for the ‘shilling cliff’ as sufficient supplies are coming slowly while demands are increase rapidly due to economic expansion.

Confederation of the Tanzania Industries (CTI) Director of Policy and Research Mr Hussein Kamote said revenues from agro-exports are insufficient due to bad weather hence failed to support the shilling. “If donor (due to poor agro-export) delayed to remit their general budget support commitment timely, the shilling will surely suffer further during this quarter,” Mr Kamote told the Business Standard.

Donor funds are one of the dependable foreign currencies sources for the country apart from exports and Diaspora remittance. Barclays Bank said the shilling is yet to see better days as the greenback continue to put it under pressure and intervention by BoT could not salvage the shilling from falling to lowest level since January.

“Despite the Central Bank intervention, the market is still struggling to maintain the dollar at 1,610 levels (mid last week) as supply continues to be thin,” Barclays indicates in its e-newsletter. 

But others are optimistic that the shilling might make a good turnaround as the economy is heading towards end month and traditional corporate are looking for local currency to settle taxes and salaries obligations.

“…As we approach month end, the trend might reverse as corporate demand the local currency for taxes and salary payments, Standard Chartered bank said. However, at the end of last month this traditional trend failed to work. The shilling, according to the rule of thumb, gains ground during the last week of a month as corporate demand for the local currency for tax and salary obligations go up.

The BoT quoted the shilling exchange at 1,581/- a US dollars, which was slight better rate compared to 1587/- of ten months ago. 

But was not a good rate in comparison to mid last month of 1,576/-. The weakening of the shilling as the economy is approaching the end year holiday season means that the prices of imported goods and services are going to be higher.
Source: The Daily News,, reported by Abduel Elinaza in Dar es Salaam
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