Shilling stable as BoT mops up liquidity from market
The first half of 2015 was bad for the Tanzania shilling as it depreciated to new levels that sent prices of imports soaring.
Until June 2015, the Tanzanian currency was leading other East African units in the free falling trend, courtesy of a decline in receipts from some exports, particularly gold and cotton, as well as low season of tourism.
It had depreciated by at least 26 per cent since January 2015.
The Uganda shilling, Kenya shilling and Rwanda’s Francs had depreciated by 20.9, 10.9 and 5.1 per cent respectively between January and June 2015.
The local currency fell to a record level of Sh2,400 against the dollar during the last week of 2015 before the Bank of Tanzania (BoT) intervened to bring it back to Sh1,967/2,205 levels during the first week of July, 2015.
Despite fears that it would fall further during the countdown to October 25, 2015 General Election, the shilling defeated analysts’ sentiments and remained resilient against the dollar. For instance, soon after the election, it remained within the range of Sh2,140/2,225 in bureaux de change and the situation has not changed much since then.
It has remained within the range of Sh2,180/Sh2,200 in bureaux de change even as the country heads towards a new financial year during the coming few weeks.
The Bank of Tanzania (BoT) attributes the situation to its own prudent involvement in the interbank foreign exchange market as well as the forces of demand and supply which are determined by some global and domestic economic happenings.
The BoT participates in the interbank foreign exchange market by buying and, or selling the US dollars as way of reducing excessive volatilities in the exchange rate.
The involvement also includes checking against unwarranted large volatilities in exchange rate that are inconsistent with its longterm path.