The Tanzanian shilling has started to depreciate against the US dollar after gains in December 2024. Factors influencing this trend include increased import demands, reduced exports, and disruptions due to landslides. Analysts suggest that while the depreciation may be cyclical, it poses risks for the economy, especially in terms of inflation and rising import costs.
The Tanzanian shilling has recently depreciated against the US dollar, reversing gains made in December 2024. On October 4, 2024, the shilling was valued at Sh2,721.68, rising to Sh2,394.7558 by year-end. However, by January 2025, it slipped to Sh2,486.6387 and further declined to Sh2,611.786 by late February 2025.
The Bank of Tanzania (BoT) attributes this depreciation to increased demand for US dollars, driven by rising import activities in anticipation of Ramadhan and the Chinese New Year. Additionally, significant fuel import increases and disruptions caused by recent landslides affecting mining operations are putting economic pressure on the currency.
BoT governor Emmanuel Tutuba indicated that declines in agricultural sales, which typically bolster dollar inflows, coupled with the low season for tourism, are constraining foreign currency availability. Independent analyst Oscar Mkude maintains that this depreciation is likely a temporary cyclical movement, suggesting stability may return soon unless trends persist.
Prof Dickson Pastory of the College of Business Education emphasized the impact of decreased exports in minerals and agricultural products, essential for foreign exchange. He highlighted that the high demand for dollars due to imports, paired with declining exports and global trends favoring the US dollar, creates an economic imbalance.
The effects of a depreciating shilling are significant, particularly with rising fuel import costs which may inflate transportation expenses and overall inflation. The expenses of imported goods will rise as well, affecting both businesses and households.
Christopher Makombe, another independent analyst, noted that the shilling’s depreciation aligns with historical patterns, mainly due to increased foreign currency demand as businesses replenish stock post-holidays. With seasonal declines in tourism and agricultural exports, foreign exchange inflows are currently reduced.
The Tanzanian shilling is currently experiencing a depreciation against the US dollar due to increased demand for imports and seasonal declines in foreign exchange inflows from tourism and agriculture. Although analysts suggest this trend may be temporary, the implications for the economy, such as increased costs for imports and inflation, warrant close monitoring. Stakeholders are advised to prepare for potential ongoing fluctuations in currency value.
Original Source: www.thecitizen.co.tz
