Shilling falls to record low against the dollar

Dar es Salaam. Tanzanians are spending more on importing goods and services as the shilling continues to depreciate against the dollar.

The shilling plunged to a record low of Sh2,303 to the greenback on Monday. The previous record of Sh2,300 was reached in July 2015 before the Bank of Tanzania (BoT) intervened.

A survey of various bureaux de change in Dar es Salaam established that one US dollar was sold for Sh2,320 yesterday from less than Sh2,300 last week.

The BoT inter-bank foreign exchange market report showed that the shilling fell to the lowest rate of Sh2,303 to the dollar yesterday from Sh2,293 the previous week.

Commercial banks sold one dollar for Sh2,354 yesterday from Sh2,298 recorded at the end of last week. The buying price was more than Sh2,300.

BoT marketing and finance director Alexander Mwinamila said the shilling’s standing against the dollar depends on market forces.

“The current depreciation is nothing unusual, and has been partly caused by seasonal factors and a general strengthening of the US dollar across most currencies in the past few days,” he said.

Financial experts told The Citizen yesterday that the local currency’s depreciation to a record low against the dollar was a result of a slowdown of foreign direct investment inflows, low exports, increased yearend dollar demand and appreciation of the US currency.

“We have seen low FDI inflows, which have resulted in limited dollar inflows. At the same time, there hasn’t been a significant increase in our exports,” Mr Joseph Nyamonge, financial control manager at Access Bank Tanzania Limited, told The Citizen.

He added that this is the time of the year when demand for foreign currency, particularly the dollar, rises sharply among importers of goods and services.

“As we head towards December, demand for dollars increases as imports surge ahead of Christmas and New Year festivities,” Mr Nyamonge said.

The US currency has also appreciated against other major international currencies, he added.

Mr Nyamonge said he expected the trend to continue until next February or March when the shilling will start to stabilise.

The local currency has remained largely stable since January last year, mainly due to the central bank’s interventions.

In its monetary policy statement for June this year, BoT said it would continue to implement a floating exchange rate regime through participation in the interbank foreign exchange market for liquidity management purposes and stabilisation of the market in the event of excessive volatility.

Mr Sameer Milo, the managing director of the Dar es Salaam-based FX Bureau de change, said it was difficult to explain the shilling’s rapid depreciation in a few days.

“It is obvious that market forces are at play, but this is not enough to explain this rapid depreciation,” he said.