In August 2024, the Tanzania Shilling (TZS) depreciated slightly against the US dollar, continuing a trend of gradual weakening. The average exchange rate for the month was TZS 2,694.25 per US dollar, compared to TZS 2,663.76 per US dollar in July 2024, representing an annual depreciation of 10.3%​.

The Tanzania Shilling's depreciation in August 2024 reflects increased demand for foreign currency driven by imports, combined with reduced central bank intervention in the foreign exchange market. While the currency’s decline was moderate, it indicates ongoing pressure on the shilling due to Tanzania's growing import needs, despite robust export performance and healthy foreign reserves.

Key Factors Behind Depreciation:

1. Demand for Foreign Currency: The depreciation was partly driven by higher demand for US dollars, particularly for imports. Tanzania's growing import bill, which includes fuel, capital goods, and machinery, has increased the demand for foreign exchange. In August 2024, the import of goods rose to USD 1,468.3 million, up from USD 1,163.9 million in the same month of 2023​.
2. Seasonal Export Inflows: Despite seasonal increases in export earnings from sectors like tourism and agriculture, the shilling continued to experience depreciation. The improvement in foreign exchange liquidity due to these inflows wasn’t enough to offset the increased demand for foreign currency.
3. Limited Central Bank Intervention: The Bank of Tanzania's participation in the foreign exchange market (Interbank Foreign Exchange Market - IFEM) decreased significantly. In August 2024, the Bank sold a net amount of USD 2.1 million, a sharp decline from USD 10.5 million in July. This limited intervention allowed the market to adjust naturally, contributing to the slight depreciation​.

Foreign Exchange Reserves:

Tanzania’s foreign exchange reserves increased to USD 5,379.7 million, which covers 4.4 months of projected imports. This buffer is above the country’s benchmark for external reserves, allowing the Bank of Tanzania to stabilize the currency if necessary. However, the limited intervention in August indicates a decision to let market forces dictate the exchange rate, at least temporarily​.