The Tanzanian shilling is depreciating against the US dollar after a brief rally in December 2024. Key factors include increased demand for dollars due to rising imports, economic pressures from disrupted mining operations, and declines in tourism and agriculture. Analysts suggest this fluctuation may be temporary, although there are concerns about long-term economic implications.
The Tanzanian shilling, having experienced a temporary appreciation against the US dollar during December 2024, is currently facing depreciation again. As reported by the Bank of Tanzania (BoT), on October 4, 2024, the shilling was valued at Sh2,721.68, climbing to Sh2,513.1169 by December 10, 2024, and closing the year at a rate of Sh2394.7558. However, this trend reversed in January 2025 when the shilling fell to Sh2,486.6387, continuing its decline to Sh2,611.786 as of the latest report.
Several factors have contributed to this depreciation. The BoT cites a surge in demand for US dollars due to escalated imports, particularly in anticipation of the holy month of Ramadhan and the Chinese New Year. Governor Emmanuel Tutuba indicated that rising fuel imports and disruptions to small-scale mining operations from recent landslides also compounded economic pressures.
The agricultural sector has experienced a downturn in sales, which has traditionally bolstered foreign currency inflow, while tourism has entered its low season. Tutuba emphasized that these combined factors have created a narrowing of foreign currency availability.
Independent financial analyst Oscar Mkude interpreted the shilling’s decline as a cyclical trend, suggesting that it is likely to stabilize shortly. He noted that temporary surges in foreign currency demand could create short-lived fluctuations, rather than a lasting trend. Prof. Dickson Pastory from the College of Business Education observed significant drops in exports of minerals and agricultural products, which had been substantial sources of foreign exchange.
In conclusion, the Tanzanian shilling’s recent decline against the US dollar is attributed to several interconnected factors, including an increase in import demand, reduced exports, and seasonal declines in tourism and agriculture. While independent analysts foresee potential short-term volatility, there are concerns regarding the long-term implications for the economy, particularly related to inflation and the rising cost of imports. The overall depreciation trend needs to be monitored closely to assess its economic impact going forward. Understanding these dynamics is crucial for stakeholders navigating this challenging currency environment.
Original Source: www.thecitizen.co.tz
