Shilling projected to slip further this year

The shilling is likely to continue slipping due low export earning and high import bill, analysts say. 
They argued that generally in 2012 the shilling enjoyed a higher degree of stability, but remained vulnerable to shifts in investor appetite due to high current account deficit, which is likely to increase due to higher oil prices.
The Tanzania Securities Chief Executive Officer, Mr Moremi Marwa, said in a research paper that the shilling may slip from the last year's average of 1,529/- to 1,626/- this year, before dropping further to 1,670/- of 2014.

"We expect the shilling to slip in 2013," Mr Marwa said in a research dubbed Equity Research on Local Listed Banks March 2013.

He added: "We believe that persistent double digit inflation together with an easing of liquidity conditions will impair confidence in the domestic currency going into 2013, impeding a lasting stabilisation in the foreign exchange market".

The document, moreover said, the country reliance on foreign aid and investment inflows will result into further weakness in current account deficit. "The medium trend for the shilling will be determined by the maintenance of a positive outlook for the external sector," the document shows.

Other medium outlooks include the steady return of foreign direct investment and aid flows to emerging markets, as well as good performances in the tourism, mining and agricultural sectors. 

On the other hand, the shilling strengthened against the US dollar as the end of the quarter approaches on the back of increased inflows from non-trading sources and local currency demand.

The shilling was quoted by the commercial banks opening the week courageously and appreciated to 1,609/1,619 a dollar against 1,610/1,620 of last Friday. 

The National Microfinance Bank said the shilling appreciated on the first day of the week on the tightening of shilling liquidity in the market raised by the corporate demand for settling their end-quarter obligations.

"(The) shilling strengthens against US dollar as the quarter end approaches,) NMB said on its Daily Market report. NMB added: "Further shilling strengthing is likely as more companies exchange dollars for local payments this week and as this begins to tighten shilling liquidity in the market."

The bank also said the shilling strengthened slightly against the dollar on the back of dollars "inflows from NGOs." While CRDB Bank said the "local currency continued to appreciate against the greenback-thanks to the increase in inflows".

Another bank, Standard Chartered said, the shilling made some gains against the greenback yesterday (Tuesday) on the back of increased shilling demand for quarter end, corporate tax payment and salary purposes. 

"We anticipate the shilling to continue its gains today (Wednesday) with medium price volatility," the bank said.

On the other hand, the Bank of Tanzania (BoT) said for the past 14 months the exchange rate of the shilling against dollar remained stable in comparison with the depreciation for the previous year and in comparison with many currencies including those of our major trading partners. 

The shilling depreciated by merely 1 per cent in the 12 months ending last month, the Kenyan shilling sank by 4.6 per cent and the Ugandan shilling by 11.7 per cent.
Source: The Daily News,, reported by Abduel Elinaza in Dar es Salaam
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