Shilling appreciates during Sept, says central bank

The country`s currency has appreciated impressively for the year ending September 2007 from an average of 1313/06 per USD1 in September 2006, to 1,257/27 in September 2007.

This was revealed by the country`s Central Bank`s (BoT) Deputy Governor, Prof. Beno Ndulu, in a statement on the Tanzania Shilling Exchange Rate made available over the weekend.

Prof. Ndulu said the shilling recorded significant gains against the dollar during the first quarter of 2007/08 from 1,281/- per USD1 at the end of July 2007 to 1,230/- at the end of September 2007.

He said the magnitude of appreciation of the shilling against the US dollar during the past three months was mainly due to a large increase of foreign exchange in the market and the recent weakening of the dollar against other major currencies.

The Deputy Governor said that the main sources of that supply included large donor inflows including USD212m that came in July instead of June 2007, proceeds from tourism, cotton, cashews, minerals, manufactured goods and fish products.

`It is noteworthy that, foreign exchange reserves of the Bank of Tanzania have remained high, around USD2bn over the last three years,` he said.

Deputy Governor Ndulu said: \"This level of foreign reserves is equivalent to five (5) months of import, which is a higher level than that of most of neighbouring countries.`

He added that the experienced robustness of foreign reserves augurs well for the shilling?s stability and confidence in the economy.

Prof Ndulu said that in the coming months the BoT would maintain its presence in the foreign exchange market largely on the selling side to compliment the other market instruments used in liquidity management operations in the economy.

He said that the BoT participates in the foreign exchange market mainly for managing liquidity in the country.

He said that there was excessive amount of shillings in the economy, putting pressure on the prices, adding that the bank normally sells foreign currency to withdraw excess liquidity from circulation.

`When there was too little liquidity, the bank buys foreign exchange and injects shilling into the economy,` he revealed.

He said the bank has recently been selling foreign currency mainly to help mop us excess liquidity of local currency in the economy, adding that in August 2007, it sold a total of USD45.7m, while in September 2007 it sold a total of USD65m.

`This approach is used together with the selling of government securities, for example, treasury bills to the same end,` he said.

SOURCE: Guardian