SHORTAGE OF DOLLARS IN THE MARKET - CBA

Declining commodity exports and tourism has led to a shortage of dollars in East Africa’s second-biggest economy, Tanzania.

According to Commercial Bank of Africa’s Head of Money Markets Hakim Sheikh, Tanzania’s shilling fell for a seventh week in the longest stretch of losses in almost three years. “There’s a big demand for dollars coming from the oil companies and construction sector.”

The shilling has depreciated 0.7 percent in the past five days and is East Africa’s worst performer this year, falling 4.4 percent. It retreated 0.1 percent to 1,663 per dollar by 5:14 p.m. in Tanzania’s commercial capital. The currency’s run of weekly losses is the longest since an eight-week period that ended in July 2011.

Dollar inflows may pick up when the agricultural harvesting and exporting period happens from June to November, while tourism peaks in the second half of the year, Albert Ngusaru, head of Treasury at FBME Bank Ltd said.

“In the first few months of the year Tanzania does not have a lot of inflows. The economy is highly dependent on flows from agriculture and tourism,” he said.

The value of coffee exports fell 28 percent in March from a month earlier, while tea dropped 4.3 percent and tobacco plummeted 75 percent, according to central bank data. Tanzania has the widest external current-account deficit in East Africa after Burundi, the International Monetary Fund said.

The nation’s external current-account deficit is seen at 13.9 percent this year, compared with the sub-Saharan African average of 3.6 percent, according to the IMF. That’s prompted the government to cut spending in an effort to meet a target of 5 percent, the IMF said in a statement dated May 15.