Tanzania’s economy is growing, but the Tanzanian shilling has declined 8.9% in 2023, making it the worst-performing global currency. This is due to higher imports and public debt tied to major infrastructure projects. Analysts predict further weakening before any stabilization occurs, despite potential long-term economic benefits from these investments.
Tanzania’s economy is experiencing growth; however, the Tanzanian shilling has depreciated by 8.9% in 2023, making it the world’s worst-performing currency. This decline is primarily attributed to rising imports and increased public debt associated with significant infrastructure projects. Analysts caution that further weakening before stabilization is likely.
On the latest reports, the Tanzanian shilling fell another 0.2% to 2,645.10 per dollar, marking its lowest closing level since late November. Despite Tanzania’s GDP projected growth of 6% this year, the current-account deficit and liquidity constraints exacerbate the shilling’s woes, as noted by experts like Shani Smit-Lengton, a senior economist at Oxford Economics Africa.
The ongoing infrastructure investments in Tanzania include a deep-water container port in Bagamoyo and a $5 billion East African Crude Oil Pipeline linking Uganda’s oil fields to Tanga port. Additionally, plans for a $42 billion liquefied natural gas facility with global companies like Shell and ExxonMobil are set to bolster long-term economic growth, albeit contributing to import and debt pressures.
According to the Bank of Tanzania, imports rose by 5% to $16.9 billion during the year leading up to January, driven mainly by industrial and transport equipment purchases. The national debt remains mostly stable at $47.6 billion, with external debt rising by 11.5% to $33.9 billion. While investments support economic growth, they place additional strain on the Tanzanian currency.
In summary, while Tanzania’s economy shows signs of growth, the Tanzanian shilling faces significant challenges due to rising imports and public debt. The predicted continued depreciation of the currency raises concerns, although long-term infrastructure investments may yield beneficial effects. Stakeholders must monitor these developments closely as the economic landscape evolves.
Original Source: africa.businessinsider.com
