THE shilling has gained against the US dollar, thanks to the end month tax and salary obligations that have created corporate demand for the local currency.
The shilling started to appreciate in the last three days as corporate firms settled taxes and salaries to their employees in the local currency. Commercial banks quoted the shilling at 1598/1609 against the dollar, a gain about 5/- between Tuesday and yesterday on the back of corporate demand estimated at over 150bn/-.
Tanzania Securities Chief Executive Officer Mr Moremi Marwa said the shilling sustainability depends on increasing foreign currency inflows through exports of more industrial goods. "We have to address the foreign currency fundamental issue by increasing export revenues," Mr Marwa said, adding: "BoT (Bank of Tanzania) cannot always intervene the market.
It failed last year; it won't work this time around. " Last year, the central bank attempt to intervene the market to rescue the shilling by pumping more foreign currencies when the shilling depreciated to the record low level of 1800/- failed. It only worked after tightening liquidity on circulation, but pushed up other market interest rates.
Mr Marwa said, "The best practice is to reduce oil dependence on generating electricity while at the same time increasing value added exports." The CEO said in the last two months, the shilling depreciated due to demand from the oil sector for generating power to cover hydro-deficit.
BoT said the total import bill grew to 12.78 billion US dollars (about 20.45tr/-) for the year ending August from 10.82billion US dollars (about of 17.3tr/-) last August largely due to an increase in "domestic demand particularly for thermal power generation."
According to BoT, oil alone consumed 3.46 billion US dollar (about 5.54tr/-) or 27.05 per cent of total imports. Total export for the year ending August clocked 8.28 billion US dollars (about 13.25tr/-). Traditionally the shilling gain at the end of the month because of increased demand from corporate to settle taxes and salaries.