On the face of a gloomy economic outlook, and a widespread of the United States Dollar usage within our economy, Tanzanian shilling is rapidly losing its grip against major global currencies. This is a great concern currency regulators and the political establishment must urgently act to contain.
Among other economic and fiscal tools, United States dollar usage containment within the main stream economy must be a priority to save the shilling, and our ailing economy from further damage and possible descent into the economic drainage
Less than two years ago, one United States dollar traded at TSH 1,250. Last week in Dar-es-salaam, I exchanged one USD for TZSH 1680; a 36% leap, and seemingly the dollar is sprinting towards TZSH 2,000. This instability is quite worrisome, not only to the domestic and foreign corporations; but to the entire economic spectrum.
People are losing their wealth and cost of living is constantly rising. The upward trend may unravel uncontrollable inflation, and perhaps retard or suppress economic activity –growth- in entirety.
Fall of the shilling is a serious national concern with chilling effects on the direction of our economic future. By all accounts, global economic crisis, energy problems and poor national productivity would bear the blame. However, rampant and unregulated use of United States dollar in our main stream economy has rendered the shilling a worthless piece of paper to say the least. This debilitating, and contagious factor has been overlooked even though its obvious effects continue to weaken and crush the shilling
United States dollar has become the currency of choice in Tanzania. Purchase of foreign made industrial, agricultural equipment and spare-parts requires the dollar. Rent in many segments of the country is priced and paid in United States Dollar.
Accommodation and other services within the economy have for a long time, been and are still being priced in the United States dollar, creating an artificial excessive demand for the dollar while making the shilling less valuable. In the face of high unemployment, stagnant wages, and high cost of living, this sharp fall of the shilling, proportionally diminishes ordinary citizens purchasing power, hence extreme inflation and loss of accumulated wealth
Business people from neighboring countries, Far East, and Europe have found Tanzania to be a safe haven to launder money. They are greatly contributing to the demise of the Tanzanian shilling by creating an artificial scarcity for the dollar, in the sense that, after they dispose of their merchandise, both legal and illegal into the country, they either demand payment in US dollars, or dump altogether the TSH at the local Bureau -Dechange’s before returning to their home countries. After few days of being in Dar-es-salaam, I met a Kenyan businessman who had dumped 75million Tanzania shillings at a local bureau de-change in one day
Fall of the shilling means investments will result in lower returns when converted back to foreign currency, as such, most of foreign corporations operating in the country, will have no choice but to raise cost of their goods and services to meet their operating cost and other margins. Otherwise, they may be forced to shut down their doors.
Likewise, when the value of a domestic currency falls sharply, importation of essential goods and commodities proportionally decreases, resulting into a massive inflation, characterized by sky high prices of essential necessities.
Pricing and paying for housing, air ticket, maritime, and other services in foreign currency end up creating an artificial demand for foreign currencies. Due to our country’s negative balance of payment, our foreign currency reserve will always play in the negative territories, while dollarization only contributes and worsen the situation. What the country is experiencing today is without a doubt, a beginning of an extreme structural inflation which could hit 30% by early next year if not contained.
Inflation fuelled by dollarization and other factors, is becoming a major event in the coming months, and major part of 2012 with the consumer price index likely to triple. Taking into account the rate of unemployment, and stagnant wages vs. rise in the cost of living, I tend to see prices for basic commodities tripling as the shilling continue to take a beating from the dollar and other currencies.
This situation is likely to force many importers out of business as a result of high cost of the foreign goods in relation to the revenue needed to remain operational.
Without enforcement of strict monetary policies, domestic usage of the dollar will only thrive. It is therefore imperative and extremely important for the government to OUTLAW the US dollar usage, if at all there is an economic and political will to save our currency and economy.
Honorable Mkulo, and Governor Ben Ndulu, must employ all the economic and fiscal tools at their disposal including reigning on commercial banks, and other financial institutions exhilarating the currency problem. Else, we must reconcile with the emergence of new class of worthless billionaires as the shilling continue to tumble.
Mungu Ibariki Tanzania.
John Mashaka
mashaka.john@yahoo.com
hivi huyu mashaka ni magamba au people power? angefaa sana akiwa people power kwa maana ana hoja nzito sana
ReplyDeleteLittle knowledge is dangerous and I affirm what another person has said. Where did you go to school? Never read simple macro-economics, money economics? We have the Governor of the Central Bank. He is equivalent to the Federal Reserve chairman in America, Mr Greenspan.
ReplyDeleteCurrency flactuation depends on factors factors:
1. Trading partners
2.Political environment
3.Economic models adopted by the country
4.Security and general perception by the other world.
5.Debts accumulation and debt servicing.
6.Capital/Stock markets and a couple of other factors.
Earlier this year, the Governal said he will not interfere with the currency. He will let market forces take care of this. So preach to many Tanzanians who leave abroad to send alot of dollars home this holiday season, sell Tanzania to tourists, and start selling Tanzanian products where you are. And stop encouraging Tanzania to think things made in Tanzania are not of high quality(because they are). When this is achieved, we will have many dollars etc in Tanzania. The dollar value will be reasonably low.
For now, the idea is to encourage people with stronger currencies to buy Tanzania products. This way, it will favour the balance of trade, more goods outboud, more moeny inboud.
Simple macro-economics.
Pay me with a green note and I will show where I will take it.
bw. yohana mashaka, mawazo yako ni mazuri sana, sema tatizo ni kuandika kwako kiingereza. ingekuwa vyema zaidi haya maandiko yangekuwa katika lugha ya taifa. yanagusa sana na yana ukweli mwingi ndani yake, ikiwa kiswahili ni tatizo, basi ongea na michuzi akufanyie tafsiri uiweke hii makala upya. maoni yangu tu
ReplyDeleteIt is acrazy wave of dollarisation going on in our country. I fully agree with the lerned Mashaka that the financial institutions must do something and quick. Even learning institutions such as IMTU is now closed because the students refused to pay fees in dollor. Thanks to the TBL for many brands of beers in the market that has reduced the importation of Henecken beer. The importation of Heneken beer , red bulls, shark, Foster beer and so called Amercan Gardeen products is dollar demanding. Tanzanians should say no to foreign beers/drincks to save our dear economy. Use locally made products.
ReplyDeleteMashaka natushauri uanzishe talk shoo ya kisiasa na uchumi ya Afrika mashariki, utapata watazamaji wengi sana. umaarufu wako unatosha kuuza, kwani hata mada za kuongelea unazo ambazo zinakubalika
ReplyDeletewe have economists in our country, what are they doing waiting for mr mashaka to highlight the danger...please those who are concerned don't let our currency go that way...i support mashaka that the government must outlaw the usage of dollar in our country and off course increase the exportation of home made products, invite foreigners so as they bring foreign currencies and things like that. thanks mashaka. am Eng. and hence not deep in economic things but u can see how valuable your message is...
ReplyDeleteMungu ibariki Tanzania.
hnt
wewe anony wa 12.00pm fed. reserve chairman wa USA sio Greenspan ni Ben S. Bernanke. kaangalie tena sababu za Exchange Rate Misalignment in Developing Countries
ReplyDeletehalafu changia mada yako.
The artificial demand is what kills Tanzania shilling. The EU crisis, the big donors cant afford to send you the same money. So, what they do? Ask you to devalue your money and they will send you less money.
ReplyDeletePoor Tanzania... Ben is a product of World Bank the worse institution.
Free market & interprise fool..., I thought you being from Wall Street know to much in this theory
ReplyDeleteMr. Mashaka is a deadly polirizing figure in Tanzania, ill bent t take the leadership. We dont expect a Wall-street pupet to tell us what to do. Mashaka must be the solution to the problem not part of the problem. His theories are not applicable in this country. WE have wahat is called bongonomics. Mashaka's DUKE universit theories are not workable in Tanzania. Dollar is the only way
ReplyDeleteI challenge John Mashaka, because he is a product of Wall-Street greed. All he wants is to come back and get a leadership position from JK. As long as I am in this country, Mashaka would only be mjumbe wa nyumba kumi and not a national leader
ReplyDeletendio ana uwezo mkubwa wa kuchambua maswala na upeo wa hali ya juu, ila mashka hawezi kujitenga na ukweli kwamba yeye ni mmoja wa watu waliochangia kuanguka kwa uchumi wa dunia. kwa maana hiyo ushauri wake ni bure. tunataka watu safi kutushauri siyo wezi kutoka wallstreet. mashaka ww siyo safi hauna tofauti na wanasiasa wa bongo wanaopiga kelele ili wazidi kula mali zetu.
ReplyDeleteMashaka umenen, lakini nawashangaa baadhi yetu ambao ni wabishi na hawataki kukubali mambo. kama hizo theory zenu za kiuchumi (import, export n.k) zingekuwa realistic China isingepiga kelele kupinga matumizi ya dola kimataifa. iingetaka kuwepo na hela itakayotumika kimataifa. China inaexport sana. lakini vile vile ulaya wasingepiga marufuku matumizi ya dola.
ReplyDeletewatanzania acheni kulala, acheni kutumia theory za vitabuni kwenye reality, waoneni wazungu kwa jinsi walivyo siyo kwa jinsi wanavyojileta kwetu.
ahsante
Mimi ni exporter na nina export kahawa. I get paid in USD and buy coffee in local currency. Bado dollar iko low nataka ifikie TSHS elfu kumi ndo ntafurahi.
ReplyDelete