THE country’s forex reserve is stable and the depreciating shilling is expected to stabilise soon due to various factors including natural gas production, Bank of Tanzania (BoT) Governor, Professor Benno Ndulu, has said.
Speaking at the consultation meeting with members of the Parliamentary Committee on Industry, Trade and Finance under the chairmanship of Luaga Mpina (MP) in Dar es Salaam on Sunday, Professor Ndulu assured the public that there was no need to panic as the government was working around clock to contain the matter.
“I am optimistic that our shilling shall stabilise in the near future. Production and supply of natural gas will make a big difference shortly. There is no need to fear,” Professor Ndulu insisted.
According to him, shortage psychology has accelerated devaluation of the local currency at the rate of 8 per cent for April, this year, as clients have continued to draw cash from their commercial bank accounts, in fear of general election aftermath in October, this year.“The fact that between January and April is a low tourist season, in-flow of foreign exchange decreased but the trend is expected to improve beginning June ending September during peak season,” he added.
Dating back to 1985 through 2010 he said, election periods have seen slight inflation as some of the alarmist depositors decide to withdraw large sums of cash leading to greater demand for dollars. Besides, several countries including South Africa, Japan and others have equally experienced the shakeup.
The fact that the US economy has gained strength as other countries like Europe experience downturn has created further demand for dollar, Professor Ndulu explained.
According to him, pumping cash to circulation would be a solution to curtail the shortage psychology because the current economic situation does not favour the approach, at least temporarily.
The experienced delay of remittance of funds from external sources also contributed to the slump of the local currency, he explained.
He cited some examples where 500 million US dollars was delayed from development partners, saying only 120 million dollars had been received so far.
Non-concession loans expected was 800 million US dollars, but only 500 million dollars was received, he added. “It was necessary to honour government obligations payment such as purchase of BVR kits, import of passenger train wagons and purchase of Tanesco machine, which all required foreign exchange.
However, the governor was explicit on the need to diversify economy for increased production and greater volume of export to generate more foreign exchange earnings instead of depending on gold alone.
Speaking at the meeting, Mr Mpina proposed application of a mechanism to control operations of local money exchange dealers (Bureau de Change) which function unmonitored.
“It is a common phenomenon to see that different Bureau de Change shops have different exchange rates of dollar way above rates offered by commercial banks.
This must be addressed,” Mr Mpina insisted. David Kafulila, MP (NCCRMageuzi) underlined the need for the country to fight corruption strongly for a cleanup of the tainted image for reported various scandals.
International financial institutions can support our development initiative when we prove the willingness to fight corruption, Kafulila insisted.
The Deputy Minister for Finance, Mr Mwigulu Nchemba said the fourth phase government under President Jakaya Kikwete has shown no tolerance to economic saboteurs and took appropriate action whenever necessary.
Margareth Mkanga (MP – Special Seats - CCM) requested for more time for in-depth discussion of factors behind depreciation of the local currency and insisted that deliberate efforts should be taken to revive local industries for increased export.
Mohammed Misanga (West Singida - CCM) called for serious measures to stop unnecessary imports like furniture, while the country is heavily endowed with wood and skilled carpenters.
The shadow minister, also national chairman of NCCRMageuzi, Mr James Mbatia called for love of local products and discourage importation of trivial and luxurious items as the practice crippled the strength of the local currency.
“Dollarisation is a fashion nowadays. House rents, tuition fees are pegged in dollars. Also unnecessary study tours of government officials in business class airplanes is another conduit to siphon the country’s foreign reserves,” Mr Mbatia observed.
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