SHILLING continued to stabilise in the recent days losing merely 1.3 per cent to the US dollar in the first two months of this year, thanks to steady inflows and outflows of the greenback.
The shilling, according to Tanzania Securities, depreciated by some 30/- to 2,180/85 of yesterday from 2,150/76 of January. CRDB Bank attributed the shilling firmness to steady inflows and outflows of the greenback but cautioned the reprieve would be temporary. “...This stability is expected to persevere in the short run,” CRDB said yesterday.
The interbank trading opened at the levels of 2185/2195 and closed at the levels of 2185/2195 against the greenback during yesterday’s trading session, the bank said. The shilling experienced high volatility and depreciation in the first half of 2015, but has stabilized since July towards the end of the last year.The government said through a recently letter of intent that the situation was further compounded by delays in the mobilization of external program financing, which likely fuelled a foreign exchange shortage psychology.
The shilling depreciation against the dollar reached 25 per cent last year and the wedge between the exchange rates on the Interbank Foreign Exchange Market (IFEM) and the rates quoted by commercial banks and exchange bureaus widened considerably.
The IMF said when replying the letter early this month the depreciation largely reflected the global strength of the dollar, domestic factors also contributed to the volatility, such as the loosening of monetary policy in late 2014.
“Staff’s preliminary assessment is that the recent depreciation has brought the real effective exchange rate, which was last assessed in 2014 to be somewhat overvalued, closer to equilibrium,” IMF report showed.
Last year, BoT took several steps to address the situation by further restricting the use of currency swaps between banks last February and reducing the ceiling on banks’ forex net open position (NOP) to 5.5 per cent of core capital last April.
/Daily News.
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