THE strengthened US dollar has plunged the shilling to a historical low, defying all attempts by the Central Bank to rescue the local currency.
The shilling was trading at over 2,000/- on Tuesday, the lowest level since Independence, notwithstanding strategies by the Bank of Tanzania (BoT) to check further depreciation through release of more dollars in the market.
"The government is taking steps to stabilize the local currency from further depreciation against the US dollar," BoT Director of Financial Markets Alexander Ng'winamila told the ‘Daily News' in Dar es Salaam on Tuesday.
He explained that global market forces have strengthened the greenback, subjecting the currencies of many countries including Kenya, Uganda and Nigeria to unprecedented depreciation.
"It is typical that when the shilling weakens, fear emerges among members of the public but the government is keenly taking appropriate steps to mitigate the depreciation, otherwise the situation would have been worse," he said adding that this month alone BoT has sold dollars more than twice.
Mr Ng'winamila noted that although the Central Bank does not announce all the steps it takes to save the shilling it does not mean the bank is not doing something to solve the problem.
"If we do not take steps to stabilize the shilling it will defeat the whole purpose of the government to fight inflations," Mr Ng'winamila noted.
According to media reports, the Central Bank of Kenya (CBK) on Monday was forced to sell dollars for the third time this month, after the shilling weakened to a three-year low.
The CBK intervened to help stabilize the shilling which had reached 94.40/50 against the dollar, its lowest level since November 2011 and after the central bank's move the shilling traded at 94.20/30 to the dollar its closing level on Friday.
Earlier on Tuesday, the Tanzanian opposition Shadow Finance Minister, Mr James Mbatia, appealed to the government through the central bank to step in and save the country's currency which has been depreciating fast against the US dollar.
Addressing a press conference on Tuesday at the national assembly offices, Dar es Salaam branch, Mr Mbatia noted with concern the 20 per cent depreciation of the shilling from 1,650/- to 2,010/- against the dollar within one month.
"Such kind of depreciation of the shilling against the dollar might affect the country's economic system if steps are not taken by the government through the Bank of Tanzania to stabilize the local currency," he explained.
He noted a number of causes for the shilling to fall at such a high rate mentioning the national budget's dependence on donors, low exports and high imports as well as corruption.
"Thirty per cent of the national budget depends on donors and when they do not release the funds, because we did not fulfil the agreements between us and them, they hold on to their money, which results in the shilling depreciating," he explained.
Source: dailynews
My take: BoT needs to act professionally and less political.