The Tananian shillings is ending the year with strong peromance against the greenback. PHOTO | FILE
Dar es Salaam. The Tanzanian shilling is ending the year with strong performance against the US dollar, thanks to a steady flow of the greenback from recovering tourism, exports and funds from development partners.
The local currency started the year with an average exchange rate of Sh2,298.46 per dollar and strengthened to a mean of Sh2,297.73 per dollar yesterday.
In a span of nine months, Tanzania has secured concessional loans amounting to at least $3 billion from international lending agencies – the World Bank (WB), International Monetary Fund (IMF) and the African Development Bank (AfDB).
This also comes in the wake of improving performance of the tourism sector which is recovering from the impact of Covid-19.
Experts predict the performance may even be better in the coming months due to good prospects in the external sectors.
An economist from the University of Dar es Salaam, Dr Abel Kinyondo, told The Citizen that the shilling has remained stable this year due to funds from IMF, World Bank and the AfDB.
“When there is adequate dollar reserves the shilling does not chase the dollar, and therefore it gains stability and its value increases,” he said.
He noted that the country’s exports have also increased significantly compared to 2020 when a majority of countries were in lockdown.
Appreciation of the shilling against the dollar – a currency in which international purchases are mostly made – means that local prices of imported goods, including petroleum products, capital goods, clothes and cooking oil, among others, would not be negatively affected by the value of the local currency.
The Bank of Tanzania (BoT) predicts that the shilling will remain stable in the coming months, saying that the appreciation actually started in July this year.
The director for economic research and policy at the central bank, Dr Suleiman Missango, recently told The Citizen that the appreciation means that both importers and exporters were able to make sound business decisions.
He said since July this year, there has been an increase in foreign exchange inflows, sourced from a number of areas, including exports and from development partners, particularly, funds from the IMF.
On September 7, 2021, the IMF approved $567 million in emergency lending for Tanzania’s healthcare system and economic recovery efforts after President Samia Suluhu Hassan changed the approach of the nation in the battle against the coronavirus pandemic.
Of the money, $189 million was to be released under the Rapid Credit Facility, while $378 million was to be released under the Rapid Financing Instrument.
The resources are meant to pay for Tanzania’s “urgent balance of payment needs” stemming from the coronavirus, the IMF said, noting that the Covid-19 outbreak had led to the collapse of the tourism sector - and, thus, the need for significant financing.
According to Dr Missango, however, there has also been a fairly good performance of some exports in the past few months while tourism receipts have been improving since the global economic recovery from the Covid-19 pandemic started to be seen.
The BoT’s Monthly Economic Review (MER) also indicates that Tanzania earned $2.941 billion from gold exports during the year to August 2021, a significant improvement from the $2.735 billion during a similar period last year.
“This was largely boosted by relatively high prices in the world market,” the BoT says.
Tanzania also recorded a 33.2 percent rise in exports of manufactured goods in the year to August 31, 2021.
The goods - mostly ceramic products, cosmetics, plastic products, iron and steel - brought in a total of $1.125 billion in the year which ended on August 31, 2021.
“Most of the manufactured goods were destined to DRC, Zambia, Uganda, Rwanda, Burundi and Malawi,” the BoT says.
A massive rise in exports of edible vegetables - including peas, green beans, onions and tomatoes - saw Tanzania’s horticultural exports reaching $370.8 million during the year to August 31, 2021, from $181.8 million in the same period last year.
Exports of oil seeds, cereals, cocoa, raw hides and skins, and wood products earned a staggering $1.277 billion for Tanzania in the year to August 31, 2021, rising by 71.5 percent from the $744.4 million earned in the year to August 31, 2020.
“Exports are performing better than last year when the Covid-19 pandemic was at its peak,” said Dr Missango.
The BoT says though on a year-to-year basis there was a reduction in the number of tourists and therefore tourism receipts, the situation was improving gradually if measured on a monthly basis.
“In August 2021 for instance, services receipts increased to $262.8 million compared with $150.6 million in August 2020, owing to a rise in travel receipts, suggesting a gradual pickup of tourism activities from last year,” the BoT says.
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