The Tanzanian shilling, having gained in value against the US dollar in December 2024, is now depreciating due to increased demand for dollars driven by heightened imports and reduced exports. Economic pressures from various sectors have contributed to this trend, which may have lasting effects on inflation and costs of goods. Experts suggest potential stabilization in the short term but warn of ongoing challenges ahead.
The Tanzanian shilling, which previously appreciated against the US dollar in December 2024, has begun to decline once more. As of October 4, 2024, the Bank of Tanzania reported the shilling at Sh2,721.68, climbing to Sh2,513.1169 by December 10 and closing the year at a mean rate of Sh2,394.7558. However, it depreciated again, ending January 2025 at Sh2,486.6387 and February at Sh2,581.2878 before further declining to Sh2,611.786 recently.
The Bank of Tanzania attributes this depreciation to various factors, including increased demand for US dollars driven by heightened imports ahead of the holy month of Ramadhan and the Chinese New Year. Governor Emmanuel Tutuba mentioned that rising fuel imports and disruptions to small-scale mining, caused by recent landslides, have compounded economic pressures. Additionally, the agricultural sector is experiencing decreased sales, exacerbating foreign currency flow constraints.
Financial analyst Oscar Mkude indicated that the shilling’s devaluation is part of a cyclical pattern, expected to last briefly before stabilizing. He suggested that while short-term currency fluctuations are standard, prolonged depreciation would warrant concern. Prof. Dickson Pastory from the College of Business Education pointed to significant declines in exports from critical sectors like minerals and agriculture, indicating that less foreign exchange is available amid increased demand for imported goods priced in foreign currency.
The continuing depreciation of the Tanzanian shilling could significantly impact the economy, particularly in elevating fuel import costs, leading to higher transportation expenses and inflationary pressure. Furthermore, the cost of imported goods will rise, affecting both businesses and consumers alike. Independent analyst Christopher Makombe noted that this trend aligns with historical patterns, noting that increased demand for foreign currency typically follows the holiday season, while tourism and agricultural exchange inflows decline post-holidays.
In summary, the Tanzanian shilling has experienced a significant decline against the US dollar due to rising demand for foreign currency driven by increased imports and declining exports. Economic pressures from various sectors, including agriculture and tourism, compound the situation, leading to potential inflationary effects and higher costs for consumers and businesses. While some experts anticipate a short-term fluctuation, the persistence of these challenges may lead to ongoing concerns regarding the currency’s stability.
Original Source: www.thecitizen.co.tz
