Tanzania’s economy is on the rise, yet the shilling faces substantial depreciation, down 8.9% this year, making it the worst currency globally. The decline is linked to surging imports and rising public debt due to infrastructure projects. Analysts foresee more weakening before any stabilization. Despite these challenges, long-term growth potential exists due to significant infrastructure investments.
The Tanzanian shilling has experienced a significant decline of 8.9% this year, marking it as the poorest-performing currency globally. Despite the nation’s economic growth, rising imports and swelling public debt, largely due to extensive infrastructure projects, are undermining the currency’s stability. Analysts forewarn that the shilling may continue to weaken before any signs of stabilization appear.
Currently trading at 2,645.10 per dollar, the shilling hit its lowest closing value since late November. Economists like Shani Smit-Lengton from Oxford Economics Africa have identified increasing seasonal liquidity constraints and a widening current-account deficit as short-term pressures on the currency, adding to its vulnerability. Nevertheless, the long-term outlook remains optimistic due to significant infrastructure investments expected to enhance economic performance.
Tanzania is actively pursuing a series of ambitious infrastructure initiatives, which include a deep-water port in Bagamoyo and a $5 billion pipeline linking Uganda’s oil fields to Tanga port. Additionally, plans for a $42 billion liquefied natural gas facility, in collaboration with Shell, Equinor, and Exxon Mobil, are underway, aimed at fostering substantial economic growth in the future. However, these projects are simultaneously driving up import levels and national debt, further compounding the challenges faced by the Tanzanian shilling.
Import data reveals a 5% increase in goods and services, amounting to $16.9 billion through January. This surge is partly attributed to escalated purchases of industrial supplies and transport equipment vital for the flourishing manufacturing and construction sectors. Concurrently, national debt remains approximately steady at $47.6 billion, even as external debt witnessed an 11.5% hike to reach $33.9 billion, adding to the fiscal strain on the shilling as the economy progresses.
The Tanzanian shilling is currently facing significant challenges, characterized by its status as the world’s worst-performing currency due to an 8.9% decline this year. The rising import costs and increasing public debt, stemming from extensive infrastructure investments, significantly pressure the currency. While immediate projections suggest further weakening of the shilling, there remains optimism for future economic benefits from ongoing infrastructure projects.
Original Source: africa.businessinsider.com
