Shilling fall concern as Finance Bill discussed

 

By Alawi Masare The Citizen Reporter

In Summary

Yesterday, the shilling depreciated to a record low, reaching a maximum of Sh2,015 against the dollar in some bureaus de change, sending shock waves to importers as Bank of Tanzania (BoT) remained tight-lipped.

In February, this year, the shilling was trading at between 1,830 and 1,900 per dollar. Last year in January, the shilling traded at an average of 1,630 against the dollar.    

Dodoma. The opposition camp has raised concern over the fast depreciating of the shilling against the US dollar as it commented on the Finance Bill being debated by MPs.

Citing the exchange rate in Dodoma, Shadow Finance Minister James Mbatia, said that from June 11 when the government tabled its Budget, the local currency depreciated from Sh2,200 to Sh2,340 per dollar on June 23.

Mr Mbatia said, if the depreciation rate of 6.36 per cent in just 12 days will persist, the shilling will hit Sh3,000 per greenback in the middle of August.

“This is a disaster for business and the economy at large. Governments the world over have mechanisms to protect their currencies against shocks like this, but we wonder why the Tanzanian government is not taking reasonable measures to contain the trend,” said Mr Mbatia who also warned that the vice may pose a challenge in revenue collection.

Winding up the budget debate on Tuesday, Finance minister Saada Mkuya told the House that there was nothing the government could do as the fall of the shilling was prompted by the stronger dollar that also sent all major currencies in Africa in a free-fall.

“We are giving these figures because price for imported products will keep on rising and that will impact on the cost of living. High demand of dollars will drain the local money circulation and therefore it’ll be difficult to implement the budget,” said Mr Mbatia.

Ms Mkuya tabled the Finance Bill 2015 that, if passed, will authorise the 2015/16 Budget.

The Bill reduced import duty on industrial sugar from 50 per cent proposed during the Budget tabling to 25 per cent to avoid affecting business capital.

She said that once Tanzania Revenue Authority proves the proper use of industrial sugar, the particular businesspeople will be refunded by 15 per cent.

The Bill seeks to authorize issues proposed by the Budget and their amendment during winding up. These include reduction of minimum rate for income tax from 12 per cent to 11 per cent; removal of powers allowing Finance minister to offer tax exemptions on projects implemented under commercial loans; removing Skills Development Levy on agriculture; and establishing railway levy of 1.5 per cent on imports.

Other changes included increase of fuel levy to boost rural electrification and increase of minimum pension for retired public servants from Sh50,000 to Sh100,000 per month.

The Budget Committee expressed satisfaction with many issues they agreed with the Finance minister but was not happy with the participation of stakeholders in the implementation of the VAT Act expected to take effect on July 01, 2015.