The Tanzanian shilling, after a brief rally in December 2024, is depreciating against the US dollar due to increased demand for dollars from rising imports, decreased agricultural sales, and seasonal dips in tourism. Financial analysts suggest that while short-term fluctuations are expected, continued depreciation may have significant economic impacts.
The Tanzanian shilling, which experienced a brief appreciation against the US dollar in December 2024, is now facing depreciation yet again. As of October 4, 2024, the Bank of Tanzania (BoT) reported the shilling at Sh2,721.68, rising to Sh2,513.1169 by December 10. By the end of the year, it closed at a mean rate of Sh2,394.7558 per dollar, but the upward trend did not last, as it depreciated to Sh2,486.6387 by the end of January 2025, further declining to Sh2,611.786 by early February.
The BoT attributes this decline to several factors, including an increased demand for US dollars due to rising imports in preparation for Ramadan and the Chinese New Year. BoT Governor Emmanuel Tutuba noted that heightened fuel imports and recent landslides disrupt small-scale mining operations, adding to economic pressure. Additionally, a decline in agricultural sales that usually boosts dollar inflows, along with the low tourist season, restricts the availability of foreign currency.
Financial analyst Oscar Mkude views the shilling’s decline as a temporary cyclical movement that is expected to stabilize in the short term. He emphasizes that while demand for foreign currency may lead to fluctuations, the issue is not yet serious. On the other hand, Professor Dickson Pastory from the College of Business Education highlighted a noticeable reduction in exports from pivotal sectors such as minerals and agriculture, which exacerbates the imbalance due to heightened import demands.
Professor Pastory cautioned that limited foreign investments and remittance flows, combined with a globally strengthening US dollar, further tightens the supply of foreign currency, leading to economic ripple effects from the shilling’s depreciation. This depreciation will likely result in increased fuel import costs, thereby driving up transportation expenses and contributing to inflation.
Moreover, independent analyst Christopher Makombe remarked that the shilling’s dip to Sh2,640 aligns with historical trends. He explained that post-holiday recovery leads to increased foreign currency demand while foreign exchange inflows from tourism and agricultural sectors decline as seasonal activities diminish, contributing to this economic challenge.
In summary, the Tanzanian shilling is experiencing depreciation against the US dollar primarily due to heightened import demands, decreased exports, and seasonal fluctuations affecting tourism and agriculture. While analysts predict short-term stabilization, the current trajectory may lead to long-term economic repercussions, including increased inflation and transport costs. This situation underscores the broader implications of currency fluctuations for the Tanzanian economy.
Original Source: www.thecitizen.co.tz
