Shilling woes to offset low oil prices gains

THE shilling’s depreciation is likely to offset gains, by a big margin, expected from world oil prices drop that have plunged to the lowest rate in 12 years.

The shilling, on year-toyear basis, has lost almost 28 per cent to around 2,188/- as of yesterday, while since the beginning of this year, it depreciated by 1.25 per cent.

The local currency minimising the benefit of crude oil price drop, which analysts predicted it will go down to 20 US dollar a barrel from current 29 US dollars.

Prof, Humphrey Moshi, senior lecturer of University of Dar es Salaam (UDSM), said the oil prices slide far reached benefit to the economy as it is low operation costs.

“However,” Prof Moshi told ‘Daily News’ yesterday, “these gain might be offset by the shilling depreciation and become insignificantly.” The Prof said price dropping is a blessing for non-oil economies as reduces costs of running governments and businesses.‘It’s good economically. But it might not be a blessing at all as [in case of Tanzania] the shilling ate the gain expected to be received,” Prof Moshi said.

For oil-economy states, especially in Africa have to adjust and widen their revenue generation scope to avert the risk of economic contraction, the senior Prof said.

The economist said since there are little discrepancy between oil and gas prices, the country should slowly starting reduce its future projects on gas gains. “We should start reducing our expectations of gas gains,” Prof Moshi said.

He however said “at least, it is encouraging that gas is ours we can benefit from it’s by-products such as fertilizer as well”. And he said since a number of Africa economies have oil, and now gas, these countries should form their own association that would control prices similar to OPEC. “This way Africa oil and gas producing economies can control prices through production restrictions” Prof Moshi said.

In the past three months pump prices have gone down by between 150/-and 250/- but motorists feel that the level is still not significant compared to the fall in the global markets.

However, fuel prices in the country are carrying a number of levies and taxies amount to over 50 per cent for every litre, thus making the world market drop a little significant to motorists.

/Daily News.