Shilling’s new troubles to hurt economy

Its new troubles started on April 1 when BoT indicative rates were Sh1,621 when buying dollars and Sh1,637 for every greenback sold. PHOTO/FILE 

By The Citizen Reporter

In Summary

Bank of Tanzania (BoT) exchange rate data shows that the weakening of the local currency is the longest since an eight-week period between June and July 2011.

Dar es Salaam. The shilling once again performed poorly against the dollar this week making it the seventh in a row.It is an unprecedented stretch of losses in almost three years.

Bank of Tanzania (BoT) exchange rate data shows that the weakening of the local currency is the longest since an eight-week period between June and July 2011.

Its new troubles started on April 1 when BoT indicative rates were Sh1,621 when buying dollars and Sh1,637 for every greenback sold. A year back, the exchange rate was Sh1,582 and Sh1,598 respectively when buying and selling dollars.

Some treasury experts have attributed the latest losses to declining foreign exchange earnings from export trade, which has limited the supply of dollars in the economy. However, money markets have so far remained calm with some foreign exchange traders saying there was no need to panic because the trend is temporary.

“There’s a shortage of dollars in the market because there’s no inflow from agriculture and tourism,” the head of money markets at Commercial Bank of Africa, Mr Hakim Sheikh, told the influential US business publication, Bloomberg.

“There’s a big demand for dollars coming from the oil companies and construction sector,” he added.

According to the Friday Bloomberg report, the shilling depreciated by 0.7 per cent in the past five days and it is East Africa’s worst performer this year, falling by 4.4 per cent.

“It retreated 0.1 per cent to Sh1,663 per dollar by 5:14 p.m. (on Friday) in Tanzania’s commercial capital.

The currency’s run of weekly losses is the longest since an eight-week period that ended in July 2011.”

This week, BoT said the shilling depreciated against the dollar by 0.5 per cent in March this year.

That was after trading at an average rate of Sh1,634.3 per dollar during the month compared with Sh1,625.8 in February. Annually, it depreciated by 2.4 per cent from an average of Sh1,594.4 per greenback in March 2013.

During the same one-year period, the value of exports of goods and services declined by 1.7 per cent to $8,709.5 million. On the other hand, exports went up from $12,909 million in March 2013 to $13,765 million in March 2014.