Tanzania’s economy is reportedly growing, yet the Tanzanian shilling has plummeted by 8.9% this year, cementing its status as the world’s worst-performing currency. Factors causing this decline include rising imports and increasing public debt from major infrastructure projects. Experts predict further depreciation before eventual stabilization.
Tanzania’s economy is witnessing significant growth; however, the Tanzanian shilling has suffered a substantial decline of 8.9% this year, making it the poorest performing currency globally. The currency’s devaluation is primarily attributed to escalating imports and an increase in public debt associated with ambitious infrastructure projects. Analysts forecast that the shilling may continue its downward trend before any stabilization occurs.
Despite the economic growth, the performance of the Tanzanian shilling remains troubled, exacerbated by a dip on Tuesday, where it fell by 0.2% to reach 2,645.10 per dollar, marking its lowest point since November. Such fluctuations underscore ongoing challenges faced by the currency despite a projected 6% growth in the country’s GDP for the year.
Experts warn of further depreciation for the shilling due to significant pressures. Shani Smit-Lengton, a senior economist at Oxford Economics Africa, highlights factors such as a growing current-account deficit and seasonal liquidity constraints as immediate contributors to this instability. Nonetheless, the infrastructure investments represent a strategic long-term economic plan that is expected to yield future benefits despite current hardships.
Tanzania is aggressively pursuing infrastructure development, including notable projects like a deep-water container port in Bagamoyo and the $5 billion East African Crude Oil Pipeline connecting Uganda’s oil resources to Tanga port in Tanzania. Furthermore, substantial plans for a $42 billion liquefied natural gas (LNG) facility are progressing in collaboration with major international energy companies.
These significant investments are anticipated to foster long-term economic advancement, though they are concurrently inflating imports and increasing the national debt, thereby exerting additional stress on the Tanzanian shilling. Reports from the Bank of Tanzania indicate that imports surged by 5% to $16.9 billion, driven by higher demands for industrial supplies and transportation equipment, reflecting advancements across various sectors. At the same time, the national debt stands at $47.6 billion, with external debt rising to $33.9 billion, indicating stable yet concerning financial burdens.
In conclusion, the Tanzanian shilling is currently facing substantial challenges as it experiences an alarming decline amid a growing economy. The continued rise in imports and public debt linked to infrastructure projects contributes significantly to currency instability. Although expert analysts expect further weakening of the shilling before stabilization, the long-term benefits from infrastructure investments may ultimately pave the way for a stronger economy.
Original Source: africa.businessinsider.com
