The shilling,
which fell to a record low of Sh2,400 against the dollar last week,
jumped yesterday, sending a ray of hope to millions of Tanzanians that
the cost of imported goods will fall appreciably.
The shilling traded against the greenback for
between Sh2,208 and Sh2,400 last week, but had bounced back to hover
around the Sh1,900 mark yesterday in what experts said was an unusual
rally.
Last week’s plunge sent shockwaves through the
economy, and there was speculation the local currency could fall further
to between Sh2,500 and Sh2,800 to the dollar by the time the country
goes to the polls in October.
But in what is likely to bring about a sigh of relief, the shilling gained to trade at between Sh1,967 and Sh2,205 yesterday.
The director of economic and policy research at the Bank of Tanzania, Dr Joseph Massawe, confirmed to The Citizen yesterday that the local currency gained after the central bank’s intervention.
“We have taken the right steps, and we hope the local currency will now start to do well,” he said.
He reiterated the bank’s position that the fall of
the local currency had been precipitated by an improvement in the
economy of the United States.
With an improving US economy, global investors saw the dollar as their safe haven, thereby creating an increased demand for the vehicle currency, resulting in the depreciation of other currencies.
With an improving US economy, global investors saw the dollar as their safe haven, thereby creating an increased demand for the vehicle currency, resulting in the depreciation of other currencies.
Dr Massawe said local dealers took advantage of
this development and embarked on speculation that saw the shilling
become Africa’s second fastest depreciating currency this year after
Ghana’s cedi.
The speculators, according to Dr Massawe, started
buying dollars in large sums in the hope of making tidy profits later.
By doing so, they were creating an artificial scarcity of the dollar in
the market.
“We decided to mop up the high liquidity of the
local currency in the market to match with the dollars that are
available,” he said.
This is being done through tightening the monetary
policy in such a way that commercial banks’ statutory minimum reserves
with the central bank have been increased from eight per cent to ten per
cent.
Dr Massawe also said this was the time dollars started coming in from the tourism and agriculture sectors.
On the $800 million in loans to be borrowed from the Rand
Merchant Bank of South Africa and China Development Bank Corp, Dr
Massawe said the money would help to bolster the country’s
foreign-exchange reserves.
“But since it comes in dollars, it will also help
to boost the local currency, but its primary purpose is to plug the
budget deficit,” he said.
With the government coming up with new taxes as it
seeks to collect a total of Sh22.5 trillion from both domestic and
foreign sources to finance the 2015/2016 Budget, it is largely
anticipated that prices of imported products will go up further any time
starting tomorrow when the fiscal year starts.
Among the measures that include an additional
Sh100 (Sh50 as fuel levy and diesel, plus another Sh50 as fuel and road
tax) on every litre of petrol, diesel and kerosene, signalling that
prices of petroleum products would go up by not less than Sh100 any time
starting tomorrow.
BoT figures indicate that the country may have
imported oil worth $3.216 billion during the year ending April 2015.
This, plus $4 billion and some $2.6 billion import bills for capital
goods and consumer goods respectively are sending the local currency to
nothing, thus raising the cost of living.
Meanwhile, elsewhere in East Africa, the Kenyan
shilling weakened yesterday as importers bought dollars to meet their
end month requirements, while stocks rose.
According to a report by the Business Daily —
a Nairobi-based daily financial newspaper — at close of trade
yesterday, commercial banks in Kenya quoted the shilling at
98.70(Tsh2,072.70), to the dollar versus Friday’s close of
98.40/50.(Tsh2,066.40).
The trader said the currency is likely to hover between the 98 and 99 levels over the course of the week.
Source: The Citizen, reported by Samuel Kamndaya, from Dar es Salaam, Tanzania
Source: The Citizen, reported by Samuel Kamndaya, from Dar es Salaam, Tanzania
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