 |
| Dr Masawe |
Bank
of Tanzania (BoT) said yesterday the shilling movement remains unpredictable,
but its agenda is to stabilize the exchange rates to make it easier for the economy
to function at near of full penitential.
Currency
instability affects businesses by making it difficult for firms and traders to
plan accordingly due to failure to peg the prices or value of goods and
services in the short and long runs.
BoT’s
Director of Economic Research and Policy Dr Joe Masawe said the shilling
instability is currently a result of a number of variables including
speculation and liquidity movement in the economy.
“The
shilling is unpredictable due to a myriad of factors…the central bank wants to
stabilise the exchange rates by avoiding sudden fluctuations in the market,” Dr Masawe said told the Daily News
in an tele-interview.
He
said it is currently difficult to predict the movement of exchange rates in the
market as sometime the financial market reacts on speculation or changing
demand, unlike previous trend where the demand mainly came from the dollar
side.
The
Director ruled out that the central bank was practicing band exchange rate
regime where a certain margin level is set and the BoT make sure it does not go
beyond the band.
The
BoT intervened the market to manage liquidity level in the economy or balance
the exchange rate selling short term government instrument—Treasury Bills.
“Our
policy is not to target the exchange rate but to stabilise the shilling by
maintaining money circulation,” Dr Masawe said adding, “We have to balance
between intervention and T-bills interest rates to avoid distorting the
market.”
Since
the beginning of this year, the shilling has traded flatly against the dollar
at between 1,580/- and 1,595/-, a level that signifies a band regime and new
equilibrium, according to BoT data.
Standard
Chartered Bank said the shilling continued trading flat against the US dollar
last Friday on the back of matched flows in the interbank and corporate
markets.
“Tuesday we expect a similar trend with low to moderate level of
volatility,” the bank said in its daily market commentary yesterday. The
shilling stabilization assisted interbank market to remain stable on close of
business last Friday with overnight rates trading within the 2 to 10 percent
range.
“The
secondary market demand for assets remains high with five year paper seeing
strong purchase at 13 per cent. Supply of the papers is still low as most
players are anticipating a decline in the yield curve,” Standard Chartered
said.
The
local currency though appreciated handsomely in the last four months from last
October, hitting 1,870/- the highest level since inception of the shilling in
June 1966.
The
shilling stability will also easy inflation rate hovering at 19.8 per cent as
of December last year. The country being a net importer, the depreciating
shilling pushes consumer price index upwards.
Economists,
however, have it that the inflation would not be termed as long the central
bank is using monetary tools to curb fiscal indiscipline—pushed by structural constraints
and public fund mismanagement.
Source: tzexchange.blogspot.com
0 comments :
Post a Comment