MP: Why the shilling won’t recover any time soon

Finance Minister, Saada Mkuya 

In Summary

Mr Kangi Lugola (Mwibara-CCM) displayed cheap imported goods to show why the shilling has been in free fall in recent months.

Dodoma. Amid reports that the government has borrowed $800 million (about Sh1.76 trillion) to boost the shilling, an MP yesterday explained in Parliament why the local currency would not recover against the US dollar any time soon.

Mr Kangi Lugola (Mwibara-CCM) displayed cheap imported goods to show why the shilling has been in free fall in recent months.

Speaker Anne Makinda made an unsuccessful attempt to stop Mr Lugola from exhibiting the items in the debating chamber, and the maverick lawmaker went ahead and displayed socks, a washing brush, toothpicks, sweets, pencils, a handkerchief, notebook and chewing gum, which he said were all imported.

Mr Lugola’s lecture sought to explain in simple terms why a country that relies heavily on imports should forget about having a strong and stable currency.

The shilling has lost 21 per cent of its value against the dollar so far this year, and is Africa’s worst-performing currency after Ghana’s cedi.

Some analysts have predicted that the shilling will plunge further to a record low of Sh2,500 to the dollar by the time the country goes to the polls on October 25.

Mr Lugola told the House that the local currency was adversely affected by Tanzania’s reliance on imports due to a weak manufacturing sector.

“I came with a container full of imported products, but unfortunately it could not be brought to parliament grounds. It’s a shame that Tanzania imports such goods. Can’t we manufacture any of these or are we just being complacent and indifferent?

“The shilling cannot remain strong against major foreign currencies if this trend is not reversed. This is really a shame, considering that Tanzania is a 55-year-old nation,” the outspoken MP said.

He added that he supported the Budget despite the shilling issue because it had for the first time in five years avoided increasing tax on goods such as soft drinks, alcohol and cigarettes.

Ms Christowaja Mtinda (Special Seats-Chadema) said the main problem was dollarisation of the economy due to unrestricted use of the dollar in the country.

“If you go to any shopping mall in Dar es Salaam today with dollars, you will be able to buy anything without any problem. That is not the case in other countries. If you go to a Kenyan hotel with dollars, they will tell you to convert them into local currency first, but here in Tanzania, hotels quote their rates in dollars,” she said.