After Mkulo's Crisis Meeting BOT 3 Key policies to rescue Shillings

[Kigarama]

Inflationa Tanzania huwezi kuipunguza kwa kufanya currency manipulation. Uchumi wetu asilimia kubwa ni informal na hatuna taarifa za kutosha sera hizo zitakuwa na madhara gani kwa uchumi; tunabahatisha.

In the red, You Killed the Ghadaff!!

 

[SOBY]

Topical,

Shillingi itaokolewa ikiwa hawa jamaa wako serious na fiscal policy. Gavana nadhani hana washauri wazuri kwani anakubali kusacrifice shillingi against inflation. Measures anazotaka kuzichukua zitafanya shillingi ianguke zaidi kwani wakiongeza interest on loans, benki za biashara zitaongeza riba ya mikopo na matokeo yake mikopo itakuwa migumu kulipika na baadhi ya biashara kufa. Wamarekani wenyewe na Waingereza wamekubali kuacha inflation iendelee na wao wanajitahidi kufocus zaidi kwenye growth ndio maana mpaka interest on loan marekani bado 0.25% wakati UK ni 0.5%. Isitoshe wao wanazidi kuingiza pesa katika mzunguko ili kuencourage growth.

Tanzania yetu shillingi itaokolewa tukiweza kudhibiti matumizi ya dollar na foreign currencies zenginezo nchini. Hili tatizo kubwa ambalo viongozi wetu hawataki kuligusa either pengine nao wanafaidika nalo au la. Demand for dollar needs to be regulated and monitored vyenginevyo shillingi itaendelea kuporomoka zaidi. Pia ni muhimu kwa ukuaji wa uchumi ukaendelea kuwepo ili kusaidia kutoa ajira kwa vijana. Hivyo BOT inatakiwa ipunguze interest on loans badala ya kuongeza interest loans.

Gold standard kama medium of exchange ni ngumu mkuu Topical kwasababu ya mabadiliko ya mara kwa mara in a commodity market. Gold and Silver bei zake zinategemeana sana mazingira ya uchumi duniani. They are not stable currencies na kutokana na hivyo some economies kama UK and US, Belgium France suffered alot from these sudden changes in the value of gold miaka ya 1900 na 1800. Kiufupi , gold bei yake haina muamana au kwa jina jengine haiko stable na matokeo yake kunaweza kupelekea uchumi wa kuwa hatarini.

Gold wazikusanye BOT for selling them to boost currency value au wazikusanye for trading mfano kipindi hichi dhahabu is high in value. Kutumika kama medium of exchange ni hatari mkuu kwani uchumi wa nchi unaweza kusinyaa kabisa kwani dhahabu unaweza kuamka kesho ikawa imepungua thamani kwa kiwango kikubwa na matokeo yake uchumi ukaanguka. Wakusanye dhahabu from wachimbaji wadogo wadogo na kuziuza whenever market prices rises.

Iwas hping someone atakuja na kuelezea kama ulivyoelzea hapo juu. Great thinking my brother!

 

[Njowepo]

Yaani nakosa amani na combination ya Ndulu na Mkulo katika kunusuru uchumi wetu
Labda mungu tuu atunusuru hiyo mikakati kwa hali ilivyo YANGU MACHO

 

[Mdondoaji]

I have been rather saddened by reading contributions from some JF members on this very serious subject, who seem to take it lightly. Of course some members are not very clear in their minds what policies should be adopted (even mixing up "Policy" with "polisi"!!!). Shame on these.

The information I have is that BoT, in spite of the ridiculously low rate of royalty (murahaba) charged on gold, i.e. 3%, has accumulated foreign reserves of more than US $ 2 billion. This is a historic high level and it is much more than what the regulation requires i.e. 3 months of imports. In other words Tanzania through the BoT is investing abroad this huge amount of money, whist her leaders are roaming all over the world asking for loans and grants to carry out development of infrastructure and social services.

If the BoT was to intervene and release some of its hoards to prevent the TSh from sinking below a given level, then we would not have our currency at this pathetic level of depreciation. Readers will note that I do not agree with those who think that Monetary Policy should not be used to bolster the TSh. The Governor's major responsibility is to protect the strength of the TSh.

As for Hon. Mkullo, I would advise that he lowers or scrap VAT on sales of all inputs for agricultural production like fertilizers. packaging materials like sisal bags in order to boost production: not only of foodstuffs, but also for export. This is where Fiscal Policy comes in. Consideration could be given to the raising of import duty on imported foodstuffs like Mchele and sukari to give local producers encouragement BUT care has to be excersized so that low income earners are not hurt too much. Indeed it may be more prudent to boost low income earners by subsidizing inputs, supplying cheap tractors and concentrating on improved access to rural areas.

Imports of essentials like petroleum products should not be restrained when the Central Bank is awash with foreing currency. Government deficits spending mean the BoT is printing money and injecting it into the economy, and it results in prices rising, hurting those who have to sweat in orger to eanm thei keep. Similarly, even those public servants who steal or squander goverment money, inject money into the economy and cause escalation of prices for those poor who must sweat in order to earn a living. The fight against mafisadi has therefore to be joined by Mkullo and governor Ndulu if their policies are to bear the intended results.

Brother/Sister Kilasara,

I remember the reserve for currency at BOT used to be $3 Billion I did not know that this has decline to $2 Bilion (which shows that government has been pumping money quitely into the economy since May this year). Unfortunately, the shilling has continue to plumet despite that effort. This is not foreign investment mkuu bali ni foreign currency reserves that BOT holds and supply into the economy. Usually there is minimum balance which needs to remain at the BOT (3 months supply - 4 months supply).

BOT may help the government by preventing corrupt officials from offshoring fund abroad. BOT needs to monitor the growth of the economy as well as ensuring stimulating sekta mikopo.

 

[Mdondoaji]

Iwas hping someone atakuja na kuelezea kama ulivyoelzea hapo juu. Great thinking my brother!

Mkuu,

Tuko pamoja je wakuu wanasikiliza vilio vyetu au ndio vilio vya nje havinyimi mwenye nyumba usingizi?

 

[Ndinani]

It is an issue of fiscal policy and not monetary policy. Minister Mkulo should raise tariffs on imports e.g. shangingis; toilet paper; food items etc which we are currently importing. Other measures could include high licence fees for all luxury cars, castle tax for all residential buildings of above say 400 square metres built area. Further government should curb all unnecessary expenditure e.g. poshos; seminars and workshops, foreign trips etc. All these measures will reduce current account deficit as well as restore a balance in the government budget which is now heavily relying on borrowing[printing money] from the banking sector.

Bot wanachofanya ni hiyo single mandate yao ya kutumia monetary policy i.e. interest rates na reserve ratios manouvring ili kuthibiti mfumuko wa bei ambao hauwezi kuthibitiwa bila pia fiscal mandate nayo kufanya kazi yake. Tunapozungumzia fiscal mandate ni mamlaka aliyonayo waziri wa fedha kuhusu kodi na matumizi ya serikali. Bila ya hizi dual mandates kufanya kazi in tandem itakuwa vigumu kuthibiti mfumuko wa bei ikiwamo kushuka kwa thamani ya shillingi. Policy measures walizochukua BOT ni short term , in the long run the country will have to take measures za kukuza uchumi i.e. the economy has to grow with an emphasis on self reliance[ relying less on imports}Ningemshauri waziri wa fedha kuwa kwenye mambo nyeti kama haya asitegemee sana hao jamaa wa BOT na hazina peke yao kutoa ushauri wa national policy prescriptions kwani kuna wataalam wengi nje ya hazina, vyuo vikuu na Bot ambao wangeweza kutoa ushauri unaofaa kwa Taiafa tofauti na hao washauri wake; intisha open public forum ambapo wananchi from all works of life wahudhulie.

 

[Mwita25]

Thanks to all who spent their time to comment on one or two things pertaining to current country's economy situation. I acknowledge your priceless contributions though I'm afraid I won't buy any because I have to stick on what the CCM's manifesto directs me to do.
Regards.
Mustafa Mkulo.

 

[Mkandara]

Thanks to all who spent their time to comment on one or two things pertaining to current country's economy situation. I acknowledge your priceless contributions though I'm afraid I won't buy any because I have to stick on what the CCM's manifesto directs me to do.
Regards.
Mustafa Mkulo.

Haaa! haaa! sawa wakikwambia jump basi waulize How high? kuliko kuruka tu!

 

[BAK]

Angalizo:

Pumping more foreign currency will only solve the situation in short term baada ya miezi michache Shillingi itazidi kuporomoka. Kuongeza Interest rate on loans kutaua ukuaji wa sekta ya uzalishaji which may lead to a much tougher fall in Tanzania economy. Increasing reserve ratio will force banks to lend less na matokeo yake mikopo itakuwa haba na wafanyabiashara wadogo wataumia.

Ninarudia tena there is a little monetary policy will be able to do to save Shilling. Shillingi inaathiriwa na demand kubwa ya foreign currencies nchini. Bila ya kuwepo a tightening of fiscal policy this is pointless . Litatuliwe tatizo la umeme ili kuboost uzalishaji nchini. Punguzeni dollarisation nchini. Wahamasisheni wawekezaji kujiandikisha nchini ili kupunguza demand for foreign currency.

Inflation nchini inasababishwa na imported factors (kutokana na kutegemea zaidi imports kuliko exports), pia inasababishwa na kuongezeka kwa gharama za uzalishaji nchini kutokana na kupotea kwa umeme. Isitoshe ufisadi nao unachangia kwani watu wana fedha mfukoni zisizokuwa na mpangilio na matumizi makubwa ya fedha za kigeni.

I agree with your assessment Mkuu, I don't think the measures that were taken by central bank (BoT) will be able to save Tanzanian shilling from further depreciation. It is only a matter of time before we reach that magic number of U$1=T.sh 2,000

 

[SEAL Team 6]

Thanks to all who spent their time to comment on one or two things pertaining to current country's economy situation. I acknowledge your priceless contributions though I'm afraid I won't buy any because I have to stick on what the CCM's manifesto directs me to do.
Regards.
Mustafa Mkulo.

Mr. Mkulo Hi!! as of 21st October 2011

 

[Mdondoaji]

Thanks to all who spent their time to comment on one or two things pertaining to current country's economy situation. I acknowledge your priceless contributions though I'm afraid I won't buy any because I have to stick on what the CCM's manifesto directs me to do.
Regards.
Mustafa Mkulo.

You made my day mkuu pokea hiyo kilike ila nachekelea huku nalia kwani nakumbuka mwaka 2008 tulionya kuhusu unequal distribution of income nchini tukaambiwa tuna wivu. Jumatano nimemsikia Nape analalamika kuwa ati tofauti ya matajiri na maskini nchini inahatarisha usalama wa nchi wakati wasomi walishatahadharisha tangia 2008. 2009 Tulimwonya mkulo kuhusu tatizo la umeme na tatizo la uchumi na nakumbuka nilisema uchumi wa Tanzania utakuwa kwa bahati sana ni 4.5% au 5%. Mkulo akatangaza uchumi utapaa kwa 7.6% unfortunately that has not happen since hadi sasa uchumi unangangania 6.0% na kuna dalili uchumi unazidi kuporomoka kwenda mwisho wa mwaka huu. CCM manifesto ni muhimu ila when it come to serious matters siasa zinabidi ziwekwe pembeni. Hapa sio siasa bali economics na kwenye economics hakuna siasa kwani numbers do not lie!!!!

Bila kutatua tatizo la umeme hali itakuwa mbaya. Bila ya kupunguza dollarisation people will loose faith in Tanzania shillings na watahamia kwenye foreign currencies kitu ambacho kitasababisha shillingi kuporomoka kabisa.

 

[Mdondoaji]

I agree with your assessment Mkuu, I don't think the measures that were taken by central bank (BoT) will be able to save Tanzanian shilling from further depreciation. It is only a matter of time before we reach that magic number of U$1=T.sh 2,000

Bubu,

Unakumbuka mwaka 2009 nilitahadharisha kuhusu uchumi wa Tanzania kusuffer kwasababu ya athari za matatizo ya kibenki yaliyotokea mwaka 2008. Athari zake tunaziona sasa. Viongozi wetu wanahitaji kutusikiliza kama wanapenda hatuwalazimishi. Ufisadi, Umeme, dollarisation is the main factors of shilling depreciation but haziguswi why? Ufisadi ulisababisha shillingi kupoteza thamani miaka ya 2005-2006 mpaka ikafikia thamani ya dollar moja kuwa sawa na Tshs 1600. Kwasababu watu walikuwa either wananunua dollar na kuzificha katika majumba yao au katika account zao kwenye benki au walikuwa wakizipeleka nje ya nchi. Kwanini nazungumza hivyo hakuna logical explanation ya mabadiliko haya sarafu kipindi ambacho uchumi wa Tanzania ulikuwa mzuri na duniani uchumi ulikuwa unakuwa kwa kasi. Hivyo kilichokuwa kinapelekea kuporomoka kwa thamani ya shillingi Tanzania ni DEMAND FOR FOREIGN CURRENCY. Tunaweza kusema pengine waliimport sana miaka hiyo lakini import kiwango cha ukuaji kinajulikana na this sudden increase in value of dollar between 2005-2006 is irregular pattern. Sasa ukichunguza kulikuwa na nini kipindi hicho ndio utakuta ufisadi wa EPA, Meremeta ulikuwa ukifanyika kipindi hicho.

Sasa hivi hali inazidi kuwa mbaya kwani ufisadi unasambaa kila sekta ya serikali, Vile vile wafanyabiashara wanapata hasara kutumia shillingi na hivyo wanaamua kutumia dollar kwasababu ya stability etc. Nilienda Mlimani city nikakuta vitu vinauzwa in USD, EURO nchi zilizoendelea maduka yanayofanya hivyo ni DUTY FREE SHOPS wakati Tanzania even local shopping malls wanauza kwa dollar or EURO. This is a problem.

Worse enough hali ya kiuchumi duniani iko katika stage mbaya kwani kuna jinamizi la madeni kwa nchi za ulaya na rumours zinasema kuna big disagreement between wajumbe wa ulaya (especially Germany and France) jinsi gani watakavyopambana na tatizo la madeni ulaya. Kuna ugiriki ambayo kwa uhakika iko njiani kufilisika na wananchi wake wanapinga austerity measures wanazotaka kuzianzisha nchini. China kasi ya ukuaji uchumi inapungua dalili kwamba global consumer demand is slowing down. Uchumi wa marekani uko katika dalili ya kurudi kwenye recession kwa mujibu taarifa mbali mbali. So kuna dalili tukarudi kwenye recession even possible depression kama suala la madeni ya nchi za ulaya halijatatuliwa. 2012 Will be a very tough year kwakweli kwani wachumi wengi hawakutegemea tatizo hili litakuwa kubwa hivi.

Tanzania iko kwenye dhoruba hii kwani tunategemea wawekezaji kuja nchini kuwekeza. Tunategemea imports kuweza kuishi nchini. Tunategemea mafuta kuendesha uzalishaji nchini. Kuongezea kuna matatizo yetu wenyewe nayo hatuyatatui nayo ni ufisadi, umeme, dollarisation Je tumejiandaaje?

 

[Mkandara]

Mdondoaji,

Shukran mkuu tena kwa kuongezea tu...
Mahitaji ya dollar yanazidi kupanda kwa sababu asilimia 75 ya nyumba zote za Mjini, Upanga, Msasani, Masaki na Mbezi wanapokea kodi za nyumba kwa dola na sio Tsh Pia baadhi ya nyumba za Kariakoo na Kijitonyama na ukiangalia kwa makini hawa watu wanaotoza na kutozwa kwa dola ndio wanaoshika na kuendesha Uchumi wa Tanzania leo kwa asilimia 90 na ndio sehemu kubwa ya wenye bank accounts zilizosajiliwa ktk mabenki yetu. Kodi za nyumba ni zaidi ya asilimia 70 ya matumizi ya watu hawa toka ktk pato lao..

Hawa ndio Wafanya biashara au wafanyakazi wa Mabenki, mashirika na viwanda. Hawa ndio wanaoibadilisha Tanzania ya leo kutotegemea Kilimo.. Kati yao ndio wenye mikataba feki na serikali na kuna hesabu kubwa ya Mafisadi wanaotafuta kila njia ya Utajirihata ikiwa kwa gharama ya kubwa ktk uchumi wa nchi. Hawa hawana tofauti na kundi la Makabaila walioangusha Uchumi wa Marekani na nchi za Ulaya kwa Ulafi na uroho wa utajiri mkubwa mwaka juzi.. -

 

[Kilasara]

Thanks to all who spent their time to comment on one or two things pertaining to current country's economy situation. I acknowledge your priceless contributions though I'm afraid I won't buy any because I have to stick on what the CCM's manifesto directs me to do.
Regards.
Mustafa Mkulo.

I am afraid, Hon. Minister if you think your Party has drawn up a Manifesto which can be implemented under conditions of run-away inflation with a TSh as worthless as it is currently, then your Party has outlived its useful functions, and it is time it handed over to others better equiped to run Tanzania.

I have also noted a comment above whereby Mdondoaji asserts that the reserves of the BoT are not Investments abroad. If Mdondoaji cared to look at the Annual Balance Sheet of the BoT, he would have noted that the Bank earns interest on these foreign reserves as they are held as fixed deposits or time deposits in the BoT's correspondent banks abroad. Of course, they can be recalled at anytime, depending on BoT's needs.

 

[Ame]

Mdondoaji,

Shukran mkuu tena kwa kuongezea tu...
Mahitaji ya dollar yanazidi kupanda kwa sababu asilimia 75 ya nyumba zote za Mjini, Upanga, Msasani, Masaki na Mbezi wanapokea kodi za nyumba kwa dola na sio Tsh Pia baadhi ya nyumba za Kariakoo na Kijitonyama na ukiangalia kwa makini hawa watu wanaotoza na kutozwa kwa dola ndio wanaoshika na kuendesha Uchumi wa Tanzania leo kwa asilimia 90 na ndio sehemu kubwa ya wenye bank accounts zilizosajiliwa ktk mabenki yetu. Kodi za nyumba ni zaidi ya asilimia 70 ya matumizi ya watu hawa toka ktk pato lao..

Hawa ndio Wafanya biashara au wafanyakazi wa Mabenki, mashirika na viwanda. Hawa ndio wanaoibadilisha Tanzania ya leo kutotegemea Kilimo.. Kati yao ndio wenye mikataba feki na serikali na kuna hesabu kubwa ya Mafisadi wanaotafuta kila njia ya Utajirihata ikiwa kwa gharama ya kubwa ktk uchumi wa nchi. Hawa hawana tofauti na kundi la Makabaila walioangusha Uchumi wa Marekani na nchi za Ulaya kwa Ulafi na uroho wa utajiri mkubwa mwaka juzi.. -

Hii inaelezea why Mkulo ali opt demand pull measures kama intervention measures maana anajua akigusa cost-push meassures anagusa mifuko ya mafisadi ambao kwa bahati mbaya ndiyo waliokamata dollar.....ufisadi ni janga la kitaifa!

 

[Mdondoaji]

I am afraid, Hon. Minister if you think your Party has drawn up a Manifesto which can be implemented under conditions of run-away inflation with a TSh as worthless as it is currently, then your Party has outlived its useful functions, and it is time it handed over to others better equiped to run Tanzania.

I have also noted a comment above whereby Mdondoaji asserts that the reserves of the BoT are not Investments abroad. If Mdondoaji cared to look at the Annual Balance Sheet of the BoT, he would have noted that the Bank earns interest on these foreign reserves as they are held as fixed deposits or time deposits in the BoT's correspondent banks abroad. Of course, they can be recalled at anytime, depending on BoT's needs.

Brother/Sister Kilasara,

Balance sheet of Bank of Tanzania there is a section in statement with a title Foreign currency deposit in National currency and Foreign currency in US dollar? Do you mean the $2 Billion of Foreign currency deposits?

 

[Ben Saanane]

It is an issue of fiscal policy and not monetary policy. Minister Mkulo should raise tariffs on imports e.g. shangingis; toilet paper; food items etc which we are currently importing. Other measures could include high licence fees for all luxury cars, castle tax for all residential buildings of above say 400 square metres built area. Further government should curb all unnecessary expenditure e.g. poshos; seminars and workshops, foreign trips etc. All these measures will reduce current account deficit as well as restore a balance in the government budget which is now heavily relying on borrowing[printing money] from the banking sector.

If the Governor has paid pivotal attention to the shiling the currency would have taken a very positive appreciation given the current stagnation of US dollars. Tanzania stabilizing, does not in anyway mean that BoT is doing anything exceptional. The Gold since Mkullo's inception to office has appreciated. Is Tanzanian Shilling correlated to the dollars

"No one knows it all. The important thing is that one is objective enough to see obvious errors and admit them. I don't know it all either. Economics is a diverse subject and if solutions were so obvious, all economists would have the same ideas and approach, but of course we know they never do, even in very intellectual societies like America"

Clearly there is a gap between the two of us. Largely enough...demand and supply has nothing to do with currency. Currency is a different economic dimension. Is like a third dimension which Americans and the English mastered a long time ago. Pounds, Dollars, and so on have no inherit value...pounds is also earned and therefore has no inherit bias so is Euro.

In fact the shift from dollar correlation to gold to pure paper is the work of Arthur Burns lifting pages from John Maynard Keynes. Maynard Keynes arguments if followed carefully did not quite avoid Gold as 'junk'. Keynes never quite make the argument that the relationship between gold and money is negligible.

Though some currencies has potential value like junk bonds especially Euro...which is not real currency. Like Chinese and Brazilian currencies which are 'pre-value' and set, which are intended to preserve wage and price and which are not real time currency. They do not float

But legal tender such as pounds and dollars and East African shillings are the world greatest example of free market system. They float freely...they are currency per excellent. Their value and value alone is so kinetic, so dependent on usability that every move that dollars makes, must affect the East African shillings and the pounds. Every move that East African shillings makes must apply to US D.

If the Tanzania Shilling will stabilize it will not gain, it will be 'loosing' in future since the stability means that other factors 'will' affect the currency and positively US D is then negatively on Shilling. The shilling iis at war with dollars, pounds, and so on and it must win them every day,every second, it must gain. The Bank of Tanzania must check on both parameters and establish a radical mechanism to rectify the situation.ndiyo kusema tunahitaji mfumo radical kabisa katika sera za uchumi,sera za mabenki nk.yes we need radical reform.Let us not rely on old fashion theory of floating the foreign currency to curb depreciation.Najua njia hii huwa anipendekeza sana Dr.Honest ngowi wa mzumbe University hata katika Articles zake but ni lazima tuwe makini.

Moving currency to Tanzania via Western Union and company to pick up dollars and pounds in Tanzania, is Shiling capitulation (which is also where you may be coming from supply demand paradigm) and is a losing positive on the Shilling. We don't have to wait for a strong dollars through interest rate spike of the US Feds to understand that there is no hedge on the currency...the Shilling

Shilling is equal to the Euro, equal to the dollars, equal to the cedis and equal to any currency in the world. But their exchange rate - the 3rd dimension of market - make all the difference. The difference (we can compute the differentials) if so stretched is a summary of the deciding economic strategies of these countries.

 

[Mdondoaji]

Experts dismiss BoT moves on inflation

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Monday, 24 October 2011 09:42

digg Ubungo MP (Chadema) John Mnyika address press conference in Dar es Salaam yesterday.He is expecting to present a bill to the next parliament meeting which will urge the parliament to indicate the price control of essential goods in the country. PHOTO/ FIDELIS FELIX By Alawi Masare,The Citizen Reporter Dar es Salaam. Economists and bankers have cautiously supported the measures the Bank of Tanzania (BoT) is taking in attempts to strengthen the shilling against the dollar. Moreover, they have criticised the move of tightening the country's monetary policy, arguing that it would only help on the short-term basis in bringing down the double digits inflation. The experts suggest that the weakening of the currency and high inflation rate could only be effectively addressed through strengthening balance of payment by increasing exports and ensuring adequate supply of food, energy and fuel. They also warn that although the measures would successfully tighten liquidity and strengthen the shilling, the move would result into high lending rates, something that is unhealthy to growth of the economy. The BoT move involved introducing such key policy actions as tightening money supply and releasing more forex to the market. BoT chief Benno Ndulu, told bankers that the central bank increased the Bank rate from 7.58 to 9.58 per cent. This is the interest rate at which commercial banks can borrow from the BoT. The Bank also increased cash reserve requirement on government deposits from 20 to 30 per cent to tighten liquidity in the market. At the same time it reduced the foreign exchange net open exposure requirement to 10 per cent of core capital from 20 per cent to help the local currency. Despite the measures, reports from three commercials banks indicate that the shilling continued to fare poorly against the dollar last week as more importers demanded for the greenbacks. At Barclays, Stanbic and NMB the shilling traded at Sh1713/1733, Sh1,698/1,702 and Sh1,680/1,730 per US dollar respectively last Thursday. Dr Haji Semboja of the University of Dar es Salaam economics department terms the BoT actions as "cosmetic measures" aimed at merely stabilising the situation in a short-term. "We have diverted from the direction we took in 2008 and actually the way our economy is performing is no different from the way it did 30 years back. It's not about the central bank alone, other factors are at work as well," says Dr Semboja. The factors he lists include: inefficiency of the economic system, political instability that has failed to guide economic progress, administrative interference and low appetite to invest in the mining sector. Prof Delphin Rwegasira from the University of Dar es Salaam commends the BoT measures but he says they would only supplement other long-term anti-inflationary measures. "The Central Bank is doing well through its tight monetary policy but they should be supplemented by adequate supply of energy, food and fuel," says Prof Rwegasira who also chairs the Mwalimu Nyerere Professorial Chair in Economics. Bankers on the other hand concur with the economists that the BoT policy actions would only address short-term problems. NBC managing director Lawrence Mafuru warns that the measures would result into increased interest rates, which could strangle economic growth by making financing to the private sector limited. "The central bank wants to reduce money from the circulation, but this would result into higher rates across the board that are not healthy to the economy," Mr Mafuru argues. NMB Treasury director Aziz Chacha says that as the shilling becomes scarce the overnight lending rates – these are rates that banks loan to each other -- have already gone up. "They have already risen from eight to 11 per cent between October 10 and October 14. As banks lend to each other at higher rates, they also lend to customers at even higher rates," he adds. Retail lending rates -- on loans to individual customers--stand at between 19 and 20 per cent.

Source: The Citizen.

 

[Mdondoaji]

Shilling hits record low despite BoT intervertion

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Monday, 24 October 2011 22:13

digg A man views the Sun City Bureau de Change board displaying exchange rates in Dar es Salaam yesterday. the shilling has been losing ground against major currencies , with the economists forecasting the it might depreciate to Sh2000 against the greenback by the end of the year. PHOTO/JOSEPH ZABLON By Alawi Masare, The Citizen Reporter Dar es Salaam. The shilling hit a new, all-time low at Sh1,750 against the dollar yesterday despite last week's central bank intervention meant to stop further depreciation. Bankers said the markets closed at 1,755.The weakening of the local currency for a fourth consecutive trading day, after minimal gains early last week has been attributed to an increase in demand for foreign currency from importers.Others said panic buying of forex by dealers at midday yesterday also contributed to the declining of the shilling. Experts say the freefalling shilling pushes commodity prices higher, making it harder for low-income earners to make ends meet.The currency had gained as much as 0.6 per cent and traded at Sh1,685.5 against the dollar last Monday. It then reached Sh1,722.5 on Wednesday and lost further on Friday to trade at Sh1,733 against the dollar. Bankers said they expect the weakening trend to continue to the end of the year as importers of both raw materials and oil build their stock and meet rising demand. "There has been an increase in the use of oil because of the power crisis that necessitates the use of generators as alternative sources of power. The government must find a lasting solution to the power crisis," said NBC managing director Lawrence Mafuru. NMB treasury director Aziz Chacha said low supply of the greenback to the market is also to blame for the battering that the shilling is undergoing. "The demand of the dollar is not met by ample supply, so we expect the shilling to weaken even further," he said. He said despite the expected decline, the shilling would strengthen towards the end of the month as firms convert forex to meet tax obligations – an activity that results to creating additional supply of foreign currency. Demand for foreign currency during same period tends to slow down as the concentration shifts to ensuring tax obligations are met. "The primary trend is for a weaker shilling. However increased supply and low demand at the end of the month could strengthen the currency," he noted.The weakening of the shilling persists despite the Bank of Tanzania's move to stop further decline starting last week, after months of hesitation. Commercial banks and other forex dealers were obliged to release some of the foreign currency they had as their capital reserve (net open exposure requirement) were reduced to 10 per cent from 20. BoT also started reducing the supply of the shilling in the economy by taking in 10 per cent of the billions of shillings of government money, which is kept as deposit in commercial banks. The bank rate was raised to 9.58 per cent from 7.58 per cent. Economists say low supply of the shilling would push down the demand of foreign currencies, which is one of the causes for the weakening of local currency. The central bank said the policy moves it had initiated would bring relief to the falling currency, but economists and bankers said the measures were "merely cosmetic". They suggested dealing with the main issues that are troubling the economy, such as low exports and power cuts. They also warn that measures to tighten liquidity would result in high lending rates, thus increasing the cost of financing to the private sector. This is unhealthy to economic growth, they caution. "The central bank wants to reduce money from circulation, but this would result in higher rates across the board and that is not healthy to the economy," Mr Mafuru had said. Dr Semboja Haji of the University of Dar es Salaam economics department termed the BoT actions as "cosmetic measures" aimed at stabilising the currency for a short term while the long-term economic problem was not addressed. According to him, the current situation is a sign of microeconomic imbalance that may take the country back to an economic crisis. "We have diverted from the direction we had taken to 2008 and actually the way our economy is performing is the same as the performance in 30 years back. This is not the problem with the central bank alone as there are many factors contributing to the situation we are in," Dr Semboja had told The Citizen in an interview over the weekend.

Source: The Citizen.