Falling shilling should be propped up

Written by EDITOR

THE Bank of Tanzania (BoT) was again this week forced to intervene against a rapidly depreciating shilling. The local currency hit an all-time low at over 2,000/- against the United States dollar.

The central bank’s intervention has successfully contributed towards stabilising the shilling but, as experts argue, such a measure is only temporary.

Ultimately the local currency’s value has to be backed by strong local production and consumption of locally-made products instead of imports.

If local farmers increase the quality and quantity of commodities, manufacturers boost their volumes and skilled professionals jack up services, the shilling will be strengthened.

It is important that instead of being excited at the rapid depreciation of the shilling, local producers and consumers should listen to economists and do as they advise to avoid such scenarios.

Weak consumption of locally produced goods and our love for imports are two of the most fundamental factors affecting the shilling’s performance, hence the need for people to change their attitudes.

Local consumers and producers should understand that when we sell more abroad, we earn more in terms of foreign currency which means more US dollars, pounds sterling and Euros in the market which helps the shilling appreciate.

But when the country imports biscuits, sweets, ear-pads and toilet papers using foreign currency, even if more local commodities, finished goods and services are exported, the shilling is affected.

Therefore, it is necessary to stop focusing on consumption of imports and dependence on donors to boost our budget and instead boost local production backed by domestic consumption.

In addition, local consumers, traders and producers should pay their taxes to Treasury. There has been a tendency especially by importers of foreign finished goods to evade taxes which also contributes in undermining the local currency.

If importers evade taxes or under declare the value of their goods, they end up selling cheaply in the local market which affects domestic producers who pay a number of taxes.

Cheap imported goods also lure local consumers who see their money getting better value than going for locally made goods whose cost of production is raised by taxes and other domestic charges including energy.

It is therefore important that cheating importers and their collaborators in regulatory authorities understand that the damage caused to the economy for their actions, is among many others, affecting the value of the shilling.

It is our hope that Treasury through Tanzania Revenue Authority (TRA) will continue taking measures to address the problem of import duty cheating so that the country’s foreign reserve at BoT are not used to back up a weak shilling whose weakness is artificial.