Interbank forex rate at record high
What you need to know:
Importers are currently paying more to import goods and services, following the depreciation of the Tanzanian shilling against the dollar. However, this is good for exporters of goods and services as they earn more when the shilling is weak.
Dar es Salaam. Dollar shortage in the market has continued to weaken the local currency, after hitting a record high last week.
The Bank of Tanzania (BoT) interbank foreign exchange market summaries show that the dollar was exchanged at a Weighted Average Rate (WAR) of Sh2,294.95 on Friday last week, a record high.
According to the summaries, the US currency was exchanged between Sh2,293.70 and Sh2,303 on Friday.
The summaries show that a total of Sh5.5 billion was traded overnight last week, higher than Sh4 billion traded a week before.
The central bank explained that the continued depreciation of the local currency was caused by the appreciation of the dollar, low export earnings and increasing imports.
In a statement issued last week, BoT said that the current movement in the exchange rate was a seasonal phenomenon related to low foreign exchange earnings from tourism and export crops.
“This is a common trend that usually normalizes in the second half of the year when earnings from tourism and exports pick-up. In addition, the dollar has recently been appreciating against major currencies,” said the BoT statement.
The central bank noted that the country has adequate foreign exchange reserves, which are sufficient to cover 4.9 months of imports of goods and services.
The import cover is well above the country and EAC benchmarks of 4 and 4.5 months, respectively.
“It should be noted that exchange rate in Tanzania is determined in the market based on demand and supply of foreign exchange. The Bank of Tanzania periodically participates in the market to smooth out volatilities in the exchange rate that are not in line with economic fundamentals,” it says.
The central bank added that continue to monitor developments in the exchange rate and ensure that participants in the foreign exchange market adhere to the rules and regulations governing the market.
