Dollar crunch weakens shilling further

President Jakaya Kikwete.PICHA|MAKTABA 

 

By  Veneranda Sumila ,The Citizen Reporter

In Summary

The BoT assistant manager for domestic market department, Mr Bakari Ally, said the shilling would appreciate after the commercialisation of oil and gas.

Bagamoyo. A dollar crunch has seriously depreciated the shilling.While indicative exchange rate by the Bank of Tanzania (BoT) was capped at Sh1,682.99 on Monday, for instance, commercial banks exchanged among themselves by up to Sh1,701 per dollar, the highest since the beginning of the year, the central bank figures show.

A BoT expert who did not want his name to be mentioned here said that the little supply of dollars in the market was partly attributed to the donors’ halting of funds issuance until a report by the Controller and Auditor General on the Independent Power Tanzania Limited deal is released.

Economists say the move might hurt the foreign reserves and increase the price of imported goods.

“Currently, there is low supply of dollars in relation to the demand. On Monday, for example, there was a demand of more than $12 million, but what was collected from the market was about $8 million. You can see the shortage,” an economist said.

According to him, when the promised donor funds ($558 million) is disbursed the supply of dollars will increase.

BoT principal financial analyst Mohamed Kailwa said there was a low supply of dollars as the tax collection season from mining companies was yet to start.

“When the local currency weakens, usually importers will suffer and as a result, transactions will become expensive. It may also result in the dollarisation of the economy,” said Dr Honest Ngowi, senior economics lecturer at the Dar es Salaam-based Mzumbe University’s Business School.

The BoT assistant manager for domestic market department, Mr Bakari Ally, said the shilling would appreciate after the commercialisation of oil and gas.

“As a country we spend a huge amount of our reserves for importing fuel, but with the production of gas locally we will be able to save all the dollars spent outside to purchase fuel, this in turn will increase the supply of dollars in the country hence boosting the performance of the shilling,” said Mr Ally.

He was however, not in a position to tell to what extent the currency would appreciate.

“The Research department can be in a good position to tell the extent of shilling stabilization after commercialization of gas and oil begins