The Tanzanian shilling has depreciated against the Ugandan and Kenyan currencies despite increasing exports to these countries. This trend is attributed to the dominance of US dollar transactions over the local currency. Consequently, Tanzania has become the largest source of imports for Uganda, surpassing Kenya, indicating a shift in trade patterns in the region.
Recent data indicates that the Tanzanian shilling has been depreciating against the Ugandan and Kenyan currencies despite a rise in exports to these neighbouring nations. Notably, exporters are primarily conducting transactions in US dollars, creating an inflated demand for the dollar that consequently undermines the value of the shilling. Analysts, including Bernard Mumwi, suggest that this currency demand results in a weakened local currency, which is also echoed by Bank of Tanzania’s governor, Emmanuel Tutuba. The statistics further reveal that from January 2021 to October 2024, the Tanzanian shilling lost approximately 0.7% against the Kenyan shilling and fell by 18% against the Ugandan shilling. In contrast, the Tanzanian currency has appreciated significantly against the Rwandan and Burundian francs during the same timeframe.
The dynamic of the Tanzanian shilling within the East African Community (EAC) highlights a profound shift in trade patterns, especially between Tanzania and Uganda. Recent analyses show that Uganda has increasingly turned to Tanzania for its imports, with nearly half of its goods from Africa originating from Tanzania, which has now surpassed Kenya as the leading supplier. During the year ending June 2024, Tanzania’s exports to Uganda reached $1.77 billion, a remarkable increase compared to previous years. Consequently, shipments and economic ties are evidently favoring Tanzania, signifying a substantial transition in the regional economic landscape.
Despite earlier trends where Kenya consistently topped Uganda’s import sources, recent reports demonstrate a significant decline in Kenya’s position, now contributing only $816.71 million vis-à-vis Tanzania’s increased share. Uganda’s primary imports from Tanzania include gold, steel, and various manufactured goods, underscoring a diversification in economic interaction across the region. This evolution suggests that while the shilling faces challenges, Tanzania’s export growth reflects underlying economic resilience amidst currency fluctuations.
The Tanzanian shilling’s depreciation against its regional counterparts, particularly the Ugandan and Kenyan currencies, arises despite rising export activities. Most transactions between Tanzania and its neighbors are occurring in US dollars, resulting in higher demand for the dollar over the shilling. This trend is further compounded by a broader economic context where trade dynamics have shifted in favor of Tanzania as an emerging leader in regional imports for Uganda.
In summary, the Tanzanian shilling’s weakened position against the Ugandan and Kenyan currencies stems from increased demand for US dollars in export transactions. Despite this, trade between Tanzania and Uganda is advancing, highlighting a realignment in regional economic partnerships that sees Tanzania emerging as a key supplier to Uganda. As these trends continue to develop, they may influence future currency and trade dynamics within the East African Community.
Original Source: www.thecitizen.co.tz
