Govt moves to save free-falling shilling

MPs Lorensia Bukwimba (left) and John Chiligati read their budget review speech handouts as they follow Finance minister Saada Mkuya’s presentation in Dar es Salaam yesterday. PHOTO|ANTONY SIAME      

By Veneranda Sumila, The Citizen Reporter

In Summary

Finance Minister Saada Mkuya Salum said yesterday that the Bank of Tanzania (BoT) has intervened in the foreign exchange market by issuing US dollars to commercial banks as a way of increasing the amount of the vehicle currency in circulation.

Dar es Salaam. Disturbed by the shilling depreciation against the US dollar, the government is undertaking several measures to cushion the negative impact of a weaker local currency on the economy.

Finance Minister Saada Mkuya Salum said yesterday that the Bank of Tanzania (BoT) has intervened in the foreign exchange market by issuing US dollars to commercial banks as a way of increasing the amount of the vehicle currency in circulation.

This will also help to check against speculators. “What is happening currently is that many people rush to commercial banks to buy dollars….the idea is to pump enough of the vehicle currency into the commercial banks and discourage speculators who rush there to buy the dollars in anticipation of a serious shortage in the near future,” she explained.

In the same vein, the government is working out a plan to improve the Export Processing Zones and Special Economic Zones to increase foreign currency through exports.

This week the demand for US dollar increased significantly, weakening the local currency to Sh2015 —the lowest in decades.

“Due to limited exports, the country has been forced to import a good number of commodities something which increase the demand for the dollar,” said Ms Mkuya.

She urged Tanzanians not to panic as measures were being taken to bring the situation to normal.

“The Bank of Tanzania has intervened; it is now supplying dollars to commercial banks so as to increase circulation and reduce speculation,” she said.

She, however, said the local currency was not losing its value, but rather the American dollar was gaining at a faster speed against all other currencies globally.

“It is not only our currency which has depreciated against the dollar, other currencies like Euro, Pound, Yen, and Rand have also depreciated significantly,” she said.

She said however that the pace of depreciation of the local currency is expected to slow in the near future as the government expects to receive $500 million and above as business loans.

“We are also approaching the tourists’ season which will start in May, export of agricultural goods is also expected to start in August, all these will increase the source of the greenback and reduce demand among people.”