The shilling has significantly lost
ground against the US dollar in the last two months, heading to lowest
level in almost a year, sending bad signals to investors.
The dwindling of the shilling in such a short
period was associated by growing demand for the US currency by
manufacturing and energy sectors, amid unmatched supply.
The National Microfinance Bank (NMB)
said the shilling went down after it failed to stand against heavy
demand pressure from manufacturing and energy sector that did not match
the inflows from agricultural and tourism sectors.
“The shilling
continued to weaken against the dollar as demand for the greenback from
importers grew up.
“Given the market’s recent moment,
further shilling weakness is imminent before we see any meaningful
reversal,” NMB said in the e-market report.
To rescue the local
currency, Bank of Tanzania intervened in the market to cool the tempo
but the demand for the greenback surpassed supply from the mining and
agricultural sectors.
The Tanzania Securities Chief Executive
Officer, Mr Moremi Marwa, told the ‘Daily News’ that the major reason
for the shilling’s fall in the last three months was due to strong
demand for dollars from importers.
“We are out of traditional cash crop
exports and in the second quarter a mine (Geita Gold Mine) was
temporarily closed for maintenance… this impacted negatively on the
supply side of foreign exchange,” Mr Marwa said.
He also said there was increased demand
for fuel for normal vehicle consumption and energy generation, hence
pushing up the demand side of the dollar in the forex markets. The
closure of Geita Mine, one of the biggest gold mines in the country,
reduced the availability of forex and it took time to put the situation
back on track.
The mining sector grew by 1.2 per cent
in the second quarter, compared to 5.6 per cent of last year mainly
because of Geita Gold Mine’s temporary closure. Oil alone ate up 3.46
billion US dollars or slightly over 27 per cent of total imports of
12.78billion US dollars at the end of August this year.
Money market
analysts are worrying for the ‘shilling cliff’ as sufficient supplies
are coming slowly while demands are increase rapidly due to economic
expansion.
Confederation of the Tanzania Industries
(CTI) Director of Policy and Research Mr Hussein Kamote said revenues
from agro-exports are insufficient due to bad weather hence failed to
support the shilling. “If donor (due to poor agro-export) delayed to
remit their general budget support commitment timely, the shilling will
surely suffer further during this quarter,” Mr Kamote told the Business
Standard.
Donor funds are one of the dependable
foreign currencies sources for the country apart from exports and
Diaspora remittance. Barclays Bank said the shilling is yet to see
better days as the greenback continue to put it under pressure and
intervention by BoT could not salvage the shilling from falling to
lowest level since January.
“Despite the Central Bank intervention,
the market is still struggling to maintain the dollar at 1,610 levels
(mid last week) as supply continues to be thin,” Barclays indicates in
its e-newsletter.
But others are optimistic that the shilling might make
a good turnaround as the economy is heading towards end month and
traditional corporate are looking for local currency to settle taxes and
salaries obligations.
“…As we approach month end, the trend
might reverse as corporate demand the local currency for taxes and
salary payments, Standard Chartered bank said. However, at the end of
last month this traditional trend failed to work. The shilling,
according to the rule of thumb, gains ground during the last week of a
month as corporate demand for the local currency for tax and salary
obligations go up.
The BoT quoted the shilling exchange at
1,581/- a US dollars, which was slight better rate compared to 1587/- of
ten months ago.
But was not a good rate in comparison to mid last month
of 1,576/-. The weakening of the shilling as the economy is approaching
the end year holiday season means that the prices of imported goods and
services are going to be higher.
Source: The Daily News, www.dailynews.co.tz, reported by Abduel Elinaza in Dar es Salaam
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