CRDB BANK MD, CHARLES KIMEI'S TAKE ON THE SHILLING

CRDB Bank Managing Director, Dr Charles Kimei.

Dar es Salaam. A seasoned banker last week called upon the Bank of Tanzania (BoT) to leave the value of the Shilling to be determined by market forces.

The CRDB Bank managing director, Dr Charles Kimei, told journalists in the city that since Tanzania’s exchange rate policy is based on a floating regime, BoT’s intervention can only make sense in the short-term. “The shilling should be corrected by market forces, in this case, the interbank foreign exchange,” said Kimei who, prior to joining CRDB Bank, worked as the BoT’s director for policy and research.

Dr Kimei, who is also the chairman for the Tanzania Bankers Association said that BoT’s intervention in the interbank foreign exchange market reduces money in circulation to match with forex, thereby creating a money scarcity which ends up pushing lending rates up.

“This move increases the price of funds in the market to automatically push up interest rates—including for government securities,” he said.

He called upon Tanzanians to concentrate on interest rates which are key to economic growth since they (interest rates) affect every productive sector than a fluctuating local currency. “For the economy to grow at 15 per cent, proper money price and resource allocations are fundamental than currency fluctuation,” Mr Kimei said, “we need to increase productivity and the shilling deprecation will work in our favour.”

Dr Kimei said a depreciating local currency is also good to exporters as their export products appreciate in value when the local currency loses ground against the vehicle currency.

“We only need to move from an import-based economy to an export one….it needs time but that is the best way to go,” he said.

The Citizen