By the end of the third quarter (last week of September), the Tanzanian Shilling had modestly strengthened against the USD. The strengthening was due to large increase of forex in the market, aggressive tightening of liquidity by Bank of Tanzania and the recent global weakening of the USD against other major currencies.
Last week, the Shilling was trading at 1,230/= against the USD compared to 1,281/= at the end of the first quarter. By today, the currency had dropped further to 1,190/=. Dealers predict the Tsh. to further appreciate in the next few months as conditions continue to persist.
Large donor inflows in the month of July were also partly responsible for the appreciation. The foreign exchange reserves grew to 2.3 billion USD over the last few years, according to Deputy Governor of Bank of Tanzania, Prof. Beno Ndulu and IMF statistics.
The central bank is reported to be aggressively fighting the inflation (currently at 7.8%, above the 5% desired by the IMF) by selling foreign currency, hence increasing its supply while reducing Tsh in the circulation.
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