THE TANZANIAN SHILLING CONTINUES LOSING GROUND

The Tanzanian Shilling continued losing ground against the US dollar and other major currencies, a trend that started several weeks ago.

According to Standard Chartered Bank Daily Market Commentary, expectations are for the local unit to continue to trade under pressure on the back of sustained dollar demand from importers and oil companies. On Monday, the local currency was expected to trade with low to medium price fluctuation.

The NMB e-markets report shows that the shilling closed the week on a stronger footing as liquidity tightness influenced traders to reduce their dollar positions.

Similarly, the Friday effect where traders tend to square their positions as they close a week could have as well supported the shilling. Liquidity tightness was discerned in the local money markets for the whole week with interbank borrowing rates at the highs of 13 per cent.

As a net importer, Tanzania spends substantial amount of foreign currencies to import various goods, which according to analysts the practice is putting the local currency under pressure and at great risk of losing its value.

For example, data from the Bank of Tanzania (BoT) monthly economic review for April shows that the country spent 13.76 million US dollars on imports of goods and services, with much of the increase observed in oil and all other consumer goods and transport payments.

The value of oil imports rose by 12.7 per cent to 4.22 million US dollars, due to an increase in volume as oil prices in the world market declined.

In addition, significant increase in the category of all other consumer goods was observed in pharmaceutical products, paper products and plastic items.

The share of oil to total goods imports increased to about 37.6 per cent compared to 35.7 per cent recorded in the previous year.