Tanzania: 'Tanzanian Shilling Among Africa's Most Stable Currencies'

TANZANIAN shilling is one of the stable currencies in Africa in a year-to-date and tipped to strengthen further on the back of new cashew nut season.

The shilling is on number five after it registered a negative spot return of 0.12 per cent since last October, according to Bloomberg's World Currency Ranker.

The shilling was behind Djiboutian franc that slipped by 0.01, followed by Malawian Kwacha that registered 0.79 per cent positive spot return.

The report, ranking currencies in a real time, showed that Nigerian naira was second best currency in Africa after posting a positive spot return of 1.08 per cent.

The best currency was Egyptian pound that registered a spot appreciatiof 10.78 per cent year-to-yesterday.

The Bank of Tanzania (BoT), Research Department Manager, Dr Nicas Yabu said stability of the shilling is better for foreign direct investments due to currency certainty.

"Also, importers are certainly that whatever they order will reach them without any loss," Dr Yabu told Business Standard yesterday.

Economically, less volatile currency means stable foreign liquidity in the banking sector especially in Tanzania where there is growing foreign capital expenditure to feed numerous infrastructure projects undertaken by the government.

Orbit Securities, Market Analyst, Imani Muhingo, said stable currency on portfolio investment and stocks reduces the country risk which lower discount rate when foreigners consider Tanzania as an investment destination. "Considering a low and stable inflation [plus stable currency], the real returns should be stable as well.

"And with stable currency and inflation, the risk of real returns fluctuations is very minimal," Mr Muhingo told Business Standard yesterday.

For instance, if a stock that pays 10 per cent dividend yield, the real return is 6.48 per cent net of currency depreciation and inflation.

The discount rate referred is in the analysis of the cost of capital for specified investment avenue, different from the discount rate set by the Bank of Tanzania.

An economist-cum-banker, Dr Hildebrand Shayo, said effective supervision and implementation of monetary policies implemented by the central bank helped to stabilize the Tanzanian currency.

"To maintain the stability the government has been taking a number of initiatives" including promotion on the increase of local production of goods and services as well as increasing exports to regional and international destinations, Dr Shayo, who works for TIB Development Bank, said.

CRDB weekly financial market highlights projected the shilling will stabilize further as Tanzania enters cashew nut season next month.

"We anticipate appreciation of the local currency on the back of the cashewnut season," CRDB report showed.

In East African Community region, Tanzanian shilling was the best performer followed immediately by Ugandan shilling that depreciated by 0.15 per cent on the sixth position. Kenyan currency registered a negative 1.63 per cent to be on eleventh spot in Africa while Rwandan franc posted a 3.81 per cent and on 14th position out of the basket of 20 best African currencies.

The worst performer currency was Angolan kwanza that lost 34.97 per cent in year-to-date. Yesterday, Tanzanian shilling was trading at 2,301/41 a dollar down from 2,365/- in March.

The Egyptian currency appreciated from17.94 pound at the beginning of the year to 16.31 pound a dollar. Nigeria Naira was trading at almost same level since January.

The naira depreciated from 364.99 in January to 361.79 yesterday.

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