Tanzania Investment and Consultant Group Ltd

| Economic Research Centre

In November 2024, the Tanzania shilling exhibited notable appreciation
January 14, 2025  
A Sign of Economic Stability In November 2024, the Tanzania shilling exhibited notable appreciation, trading at an average of TZS 2,659.03 per USD, up by 2.3% from October's TZS 2,719.91. This improvement reflects enhanced foreign exchange inflows from sectors like tourism and exports, alongside effective monetary policies. The annual depreciation rate also slowed to 6.3% […]

A Sign of Economic Stability

In November 2024, the Tanzania shilling exhibited notable appreciation, trading at an average of TZS 2,659.03 per USD, up by 2.3% from October's TZS 2,719.91. This improvement reflects enhanced foreign exchange inflows from sectors like tourism and exports, alongside effective monetary policies. The annual depreciation rate also slowed to 6.3% from 9% the previous month, indicating strengthening financial stability. With the Interbank Foreign Exchange Market turnover surging to USD 186.7 million, the shilling's performance highlights a resilient economy poised for sustained growth.

Financial Stability: Performance of the Tanzania Shilling in November 2024

The Tanzania shilling demonstrated signs of stability and appreciation during November 2024, supported by improved foreign exchange inflows and effective monetary policy measures.

1. Exchange Rate Performance

  • The average exchange rate of the Tanzania shilling against the US dollar was TZS 2,659.03 per USD, marking a 2.3% appreciation from TZS 2,719.91 per USD recorded in October 2024.
  • On an annual basis, the pace of depreciation slowed significantly to 6.3% in November 2024, compared to 9% in October 2024.

2. Foreign Exchange Market Activity

  • The Interbank Foreign Exchange Market (IFEM) turnover rose sharply to USD 186.7 million, compared to USD 50.7 million in October 2024 and USD 13.1 million in November 2023.
  • The Bank of Tanzania purchased USD 23 million in November 2024, significantly higher than the USD 4.5 million purchased in October, contributing to stabilizing the shilling.

3. Drivers of Stability and Appreciation

  • Improved Foreign Exchange Inflows:
    • Increased earnings from key sectors such as tourism and cash crop exports (e.g., cashew nuts, tobacco, and minerals) strengthened foreign currency availability.
  • Policy Effectiveness:
    • The Bank of Tanzania's tight monetary policy stance and enforcement of regulations (e.g., restricting foreign exchange use for domestic transactions) bolstered the shilling's performance.
  • Global Economic Conditions:
    • Favorable international capital market conditions, driven by policy rate cuts globally, eased financial pressures on the domestic economy.

Key Figures in Summary

MetricNovember 2024October 2024November 2023
Exchange Rate (TZS/USD)2,659.032,719.91--
Monthly Change in Exchange Rate+2.3% appreciation----
Annual Depreciation Rate6.3%9%--
IFEM Turnover (USD Million)186.750.713.1
Bank of Tanzania Purchases (USD)234.5--

Implication:

  • The appreciation of the Tanzania shilling reflects financial stability, supported by strong foreign inflows and effective monetary policy.
  • The reduced annual depreciation rate (6.3%) highlights improving external conditions, mitigating pressures from previous years.
  • The significant increase in IFEM activity (from USD 13.1 million in November 2023 to USD 186.7 million in November 2024) indicates robust participation in the foreign exchange market, ensuring liquidity and stability.

Conclusion

The Tanzania shilling's performance in November 2024 underscores its strengthening position, driven by sound economic fundamentals, improved foreign inflows, and prudent monetary policies. This stability enhances confidence in Tanzania's economic outlook, fostering a conducive environment for trade and investment.

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