Tanzania Shilling Heads for Biggest Two-Day Drop in Six Years
Tanzania’s shilling depreciated for the second day against the dollar, heading for its biggest two- day drop in more than six years, as commercial banks and oil importers purchased the U.S. currency.
The currency of East Africa’s second-biggest economy lost as much as 2.2 percent to 1,807.5 per dollar and traded down 2.1 percent at 1,805 by 1:41 p.m. in Dar es Salaam, the commercial capital. The shilling has lost 9.4 percent since yesterday, set for the largest two-day decline since June 2005.
“There is demand for dollars coming from the interbank market and oil sector,” Eric Chijoriga, a trader with Absa Group Ltd.’s National Bank of Commerce unit, said by phone from Dar es Salaam. “The central bank has started selling dollars directly to customers, particularly the oil sector, but they do not have enough funds to service their needs, and so they still have to come to us. So supply of dollars is still tight, which is maintaining pressure on the shilling.”
Tanzania’s shilling is trading at its weakest level against the dollar since June 1994, when government liberalized the currency market. The nation’s inflation rate climbed to 16.8 percent in September on higher energy and food costs, the National Bureau of Statistics said Oct. 15.
Last week, the central bank stopped commercial banks lending local currency to non-resident borrowers, Deputy Governor Lila Mkila said yesterday. It increased the repurchase rate to 9.58 percent from 7.58 percent, raised minimum reserves to 30 percent from 20 percent, and reduced the net-open position limit to 10 percent from 20 percent.
Joseph Masawe, the director of economic research and policy at the central bank, didn’t answer calls by Bloomberg News today.
To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at firstname.lastname@example.org
To contact the editor responsible for this story: Antony Sguazzin at email@example.com