BoT: Shilling slipping normal shock

The Bank of Tanzania has said the current depreciation level of the shilling was a “normal shock” which could be absorbed well by the markets without derailing macroeconomic fundamentals.

The shilling since the beginning of this year has depreciated by 1.31 per cent to close the foreign exchange market at 1632/- a US dollar against 1,610/9 of January. 

“The depreciation is no big issue,” the Bank of Tanzania Director of Policy and Research Dr Joe Masawe told the ‘Daily News.’

He said the shilling was behaving well despite the drop which is termed as “normal shocks” for currency fluctuations. 

National Microfinance Bank said the shilling weakened slightly against the dollar toward the end of the week with greenback demand continuing to be felt, particularly from the manufacturing and energy sectors.

“This strong demand was also reflected in the interbank market, and expected to be sustained in the near‐term,” NMB said on its emarkets newsletter. 

Another bank, Standard Chartered, said: “We expect a similar trend...with a slight bias on a strong dollar. Medium to high price volatility anticipated in the market.”

A senior lecturer with Mzumbe University’s Dar es Salaam Business School, Dr Honest Ngowi said the demand for dollar had gone up drastically something which calls for a proper analysis of the trend.

“Principally, we export less than we import. There is a need for a re-look at what we are importing. 

Some of the items we import can be produced locally,” he said. He added: “It’s a lost opportunity to import goods that could be produced locally.”

The way forward, according to the economist, was to increase productivity and marketing the country’s tourist destinations to maximize revenue from hospitality industry. 

Tanzania Securities, a stock brokerage firm, predicted the shilling would depreciate to an average of 1,626/- a greenback this year and 1,670/- next year.

The firm said although the shilling exchange rate is market determined, with only interventions by the Central Bank to smooth out excessive volatility, the currency has not been volatile or overvalued.

“With the expected fall in the inflation rate (current at 9.4 per cent), the exchange rate should stabilise in 2013 and 2014,” the firm said in its recently released report Cement Analysis 2013.

“Its continued depreciation could translate into higher domestic prices and result in inflationary pressures on the real economy, particularly through the cost of imported fuel and other inputs,” the brokerage firm said on the report.
Source: The Daily News, reported by Abduel Elinaza in Dar es Salaam
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.