Tanzania Daily News (Dar es Salaam)

18 January 2013

Tanzania: Shilling Makes 'Some Headway' Against Dollar

The shilling made some headway against the dollar yesterday on the back of increased flows and declining corporate demand, with medium volatility expected in the near future.

Analysts said the shilling was bound to appreciate or stabilize further, thanks to favourable macroeconomics fundamental that are heading into the right direction. Tanzania Securities Chief Executive Officer Moremi Marwa said given the last year fluctuation pace of about one per cent, the local currency was relatively stable and likely to remain so.

"It's too early to predict on the shilling movement for this year as the current year's parameters might not be the same as last year's. " H o w e v e r , macroeconomics fundamental are pointing to the right direction of the local currency stability in this year," Mr Marwa told the Daily News. T

he country's letter of intent to International Monetary Fund shows that economic activities have remained robust with GDP projected to grow by 7 per cent last year and 6.7 per cent this year against the 6.6 per cent of 2011. On the other hand, inflation eased to 12.1 per cent last December from 19.8 per cent of January same year.

Headline inflation is projected to continue easing in the months to come and return to single digit by the end of June. Standard Chartered Bank said yesterday that the shilling gained some grounds against the dollar on the back of agro-inflows and declining corporate demand.

"We anticipate the shilling to further appreciate today (Wednesday) with the low to medium price volatility expected in the market," Standard Chartered Bank said on its Daily Market Report. National Microfinance Bank (NMB) said demand for the hard currency mainly came from energy sector and traders as agro-inflows and the central bank's intervention matching the same.

The bank said on its e-newsletter that the market closed at 1588/1609 with an upside risk in case of any significant demand days ahead. Mr Marwa has it that the shilling stabilising parameters are sound since the ups and downs that were experienced last year are expected to ease further in this year.

The shilling last year went off board to trade at over 1,600/- a dollar, following increased demand of oil to generate electricity and delays in disbursements of donors' budget support that created huge supply-demand gap. The government, through the letter of intent to IMF, said the exchange rate would remain market determined and the BoT will continue to participate in the foreign exchange market only for liquidity management purposes.

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