Tanzania: Declining Tourism, Exports' Earnings Stress the Shilling

THE shilling has continued to depreciate against US dollar largely due to decline of inflows from tourism and exports.

For example, last week, the shilling, lost 61 percentage in points (pips) to close at a weighted average

rate of 2,302/67 against a green back.

"The depreciation is caused by halted tourism activities and lowered exports due to the coronavirus.

The Global consequences of the coronavirus are expected to keep stressing the shilling despite a sufficient foreign reserve by the BoT," Orbit Securities has said.

Orbit Securities, the largest stock brokerage firm in the land, said the value of transactions on the Interbank Foreign Exchange Market (IFEM) have risen for four straight weeks.

"It is possibly the central bank's injection of foreign currency into the banking system to support the shilling," Orbit said in its weekly market synopsis issued on Monday.

The firm added: "This shall be obvious in a monthly report for May by the Bank of Tanzania".

The value of transactions during the week was 8.9 million US dollars compared to 6.8 million US dollars in the previous week.

Tanzania Securities said in a report also that during the week, the total volume traded was at an average rate of 2,302/31 from at an average rate of 2,301/95.

The highest and lowest rate was shilling/dollar 2,314/- and 2,300/70 from 2,313/- and 2,300/45 in the previous week respectively.

Fortnight ago, money market analysts had it that the shilling started to feel the pinch of the coronavirus contagious in four straight weeks after losing 148 pips since mid-last month.

As of February, BoT said in its latest Monthly Economic Review, the country's reserve amounted to 5.5billion US dollars, enough to cover 6.4 months' worth of imports.

"[The amount] sufficient to cover... projected imports of goods and services excluding foreign direct investment related imports," BoT report showed.

On the other hand, foreign assets of banks amounted to 1.04billion US dollars at the end of February from 958.5million US dollars last February.

The extent of the impact on the economy and policy responses taken to cushion the economy will be reported in the subsequent publications of Monthly Economic Review, BoT said.