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| Prof. Ndulu |
The Bank of
Tanzania has said strengthening the shilling could hurt exports and tourists
inflows although it could lead to a lower imports bill.
The BoT Governor,
Prof Benno Ndulu told the ‘Daily News’ that it was important to balance the two
as in most cases people forget about exports, which are the main source of the
foreign currency.
Currently, the shilling
exchanges for between 1,560/- and 1,600/- to the US dollar, rates critics see
as too high but are supported by the BoT for economic growth.
Critics want the
shilling to exchange for at least around 1,000/- and 1,200/- to a dollar in
order to check inflation.
“We have to
encourage exports as a weaker shilling makes our exports cheap,” Prof Ndulu
said on Wednesday night at a Capital Markets and Securities Authority farewell
part for Chairman and CEO.
The Governor, a
former professor of economics at the University of Dar es Salaam said weakening
the shilling increases farmers’ earnings thus encouraging them to increase
productivity and at the same time increases the country’s foreign earnings.
“The major
causes of cashew nut saga are the shilling appreciation, as it lowered the
price of nuts per kilo,” The BoT governor said, “when indicative price was set,
the shilling was very low but appreciated when the season starts.”
The Governor
said despite the country being a net-importer, it is very important to look
critically at the level of exchange rate as we are exporting similar products
like neighbour countries.
But
economists differ, saying stabilisation of the exchange rate is important for
the economy as it makes it easier for businesses to function at full potential.
Therefore, its predictability is very important, they argue.
Shilling
stabilisation also helped money mongers to shift attention to treasury bonds
and bills, and also to overnight borrowing and repurchase agreements
(Repos).
Mzumbe
University Dar es Salaam Business School, lecturer Dr Honest Ngowi said although
the shilling had stabilised, the rate was still high and of little effect on inflation.
He prefers the shilling exchanging at least at 1,000/- to a US dollar.
According to
Standard Chartered Bank daily market report the shilling remained to be well
supported following monthly end tax flows have a “made scarce liquidity even
scarcer”.
“Most companies have
had to withhold demand as tax payments are given priority and in turn this has
continued to buoy the dollar/shilling,” the bank said in a recent report.
Source: The Daily News,http://www.dailynews.co.tz, reported by Abduel Elinaza
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