Tanzania’s currency retreated to an all-time low as demand for dollars by companies investing in East Africa’s fastest-growing economy overwhelmed central bank efforts to support the shilling with foreign-exchange sales.
“Inflows are a bit low and we are experiencing robust growth in construction and the overall economy,” Albert Ngusaru, the Dar es Salaam-based head of treasury at FBME Bank Ltd., said by phone Wednesday. The need for machinery imports “results in big demand for foreign currency” and prompted the central bank to intervene, he said.
Tanzania’s economy, the biggest in the five-nation East African Community after Kenya, is set to expand 7.2 percent this year, according to International Monetary Fund estimates. The growth is being fueled by a developing natural-gas industry including construction of a pipeline and power plants. The shilling is down 6.8 percent against the dollar in April, the worst performance in the month among 24 African currencies tracked by Bloomberg.
It weakened 1.5 percent to 2,000 per dollar by 3:44 p.m. in Dar es Salaam, the commercial capital, to the lowest since at least December 1988, when Bloomberg began compiling data on the currency.
The central bank has “been selling foreign currency to banks to help their customers,” Ngusaru said. “We would like to see the central bank increasing scale of intervention.”
The Bank of Tanzania is taking steps to stabilize the shilling from further depreciation, the Dar es Salaam-based Daily News reported Wednesday, citing the central bank’s director of financial markets, Alexander Ng’winamila. Beatrice Ollotu, a spokeswoman for the bank, didn’t immediately reply to e-mailed questions.
Foreign-exchange inflows into Tanzania may pick up in the second half of the year when exports of agricultural products and tourist arrivals increase, Ngusaru said.
Tanzania sold 62 billion shillings ($31 million) of five-year bonds on Wednesday, with yields falling 44 basis points from the previous sale in February to 14.8 percent, according to central bank data compiled by Bloomberg.
The Kenyan shilling weakened 0.3 percent to 94.60 per dollar, the lowest since November 2011, to extend its decline this month to 2.4 percent. The Ugandan currency gained 0.5 percent to 2,990 per dollar, the most since April 6 on a closing basis.