Tanzania’s currency, the shilling, has depreciated by 8.9% this year, making it the world’s worst-performing currency due to rising imports and public debt linked to infrastructure projects. Analysts predict further weakening before stabilization, despite the country’s strong GDP growth prospects and ongoing investment in infrastructure.
Tanzania is experiencing significant economic growth; however, its currency, the Tanzanian shilling, has depreciated by 8.9% this year, rendering it the worst-performing currency globally. This decline is largely attributed to escalating imports and a surge in public debt associated with various extensive infrastructure initiatives. Analysts anticipate further weakening of the shilling prior to any potential stabilization.
As of Tuesday, the shilling fell another 0.2%, reaching 2,645.10 per dollar, its lowest closing value since late November. Despite a projected GDP growth of 6% this year, the pressures on the currency from rising imports and increasing debt are evident. Economic experts forecast further declines in the shilling before it can stabilize.
Shani Smit-Lengton, a senior economist with Oxford Economics Africa, highlights the widening current-account deficit and seasonal liquidity challenges as immediate factors exacerbating this decline. Nevertheless, she emphasized that the substantial infrastructure investments currently underway in Tanzania are expected to yield long-term economic benefits, despite short-term adversity.
Tanzania’s ambitious infrastructure development includes projects such as a deep-water container port in Bagamoyo and a $5 billion East African Crude Oil Pipeline linking Uganda’s oil fields to Tanga port. Additionally, plans for a $42 billion liquefied natural gas (LNG) facility are progressing alongside international partners like Shell, Equinor, and Exxon Mobil, which are intended to spur long-term economic advancement.
During the year leading up to January, Tanzania’s imports of goods and services rose by 5%, totaling $16.9 billion, primarily driven by increased industrial supplies and transport equipment. This trend mirrors a growth trajectory in the manufacturing, construction, and transportation sectors, as indicated by the Bank of Tanzania’s monthly economic review. Concurrently, national debt has stabilized at $47.6 billion, with external debt rising significantly by 11.5% to $33.9 billion, intensifying financial strains on the Tanzanian shilling amidst ongoing investments.
In summary, while Tanzania’s economy continues to develop with promising infrastructure projects, the Tanzanian shilling is notably suffering, having fallen 8.9% this year. Factors such as rising imports, increasing public debt, and economic pressures are contributing to this decline. Economic analysts predict that the shilling may experience further depreciation before any signs of recovery, indicative of the challenges faced amidst the ongoing growth.
Original Source: africa.businessinsider.com
