Shilling nears 2,500 mark against dollar

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MPs congratulate Finance minister Saada Mkuya after Parliament passed the government’s 2015/16 Budget in Dodoma yesterday. PHOTO | EDWIN MJWAHUZI      

By The Citizen Reporters

Posted  Wednesday, June 24   2015 at  09:16<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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IN SUMMARY

Get ready for tough times come July 1. This is the consequence of the market hitting back and sending the shilling close to the 2,500-mark against the dollar after a simple majority endorsed the budget in Dodoma yesterday.

Dar es Salaam/Dodoma. Get ready for tough times come July 1. This is the consequence of the market hitting back and sending the shilling close to the 2,500-mark against the dollar after a simple majority endorsed the budget in Dodoma yesterday.<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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As lawmakers from CCM used the tyranny of numbers to overwhelmingly pass the budget without any changes, the shilling surged to a record high, trading at Sh2,400 to the US dollar. This development came as defiant Finance Minister Saada Mkuya told the House there was nothing the government could do. All major currencies in Africa are in freefall, according to the minister, thanks to the stronger dollar.

Analysts predicted earlier that the shilling would reach 2,500-mark against the dollar in October but, judging by the trend, there is a strong possibility that it could surpass the earlier prediction and rise to Sh3,000<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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The opposition voted against the budget, insisting that it was burden to the business community and ordinary citizens. But the CCM lawmakers were joined by three lawmakers from the opposition--Wawi MP Hamad Rashid (CUF), John Cheyo (Bariadi East-UDP) and John Shibuda (Maswa East-Chadema).

Virtually all MPs proposed that the government change its decision to raise the fuel levy in the next budget but Ms Mkuya spent time convincing the MPs that the proposed increase should stay because it was designed to collect Sh276 billion for rural electrification.

The minister spent an hour responding to the concerns the lawmakers raised before they passed the Sh22.5 trillion budget that was tabled on June 11, giving the government the green light to start implementing the plan on 1 July. Ms Mkuya had a rough time of it convincing the MPs to endorse the budget, though.

Her claims were totally unverified, with no evidence that lower consumption of kerosene was caused by the wider use of electricity. Had that been the case, kerosene imports would have dropped by almost 80 percent. According to independent data The Citizen obtained, over 7.6 million households were using kerosene as their source of energy in 2010.

Ms Mkuya also spent time explaining the shilling’s depreciation against the US dollar, saying that the American economy was currently stronger and that was why many currencies had become weaker.

Because the country was approaching the next General Election, she added, many foreign investors were withdrawing for fear that the chaos experienced in other African countries could also flare up here. But she was optimistic that the shilling would stabilise because the Bank of Tanzania (BoT) governor had taken steps to stabilise the shilling.

Another freefall

The shilling changed hands at Sh2,208/Sh2,400 against the greenback in commercial banks yesterday, extending its freefalling spree to new levels from the Sh2,197/2,380 on Monday.

This is happening at a time when Parliament unanimously endorsed the budget unchanged despite the fact that it has provisions that will trigger a rise in the cost of living and pile more pressure on the Shilling in a country where fuel accounts for a good chunk of the import bill.<script async src="//pagead2.googlesyndication.com/pagead/js/adsbygoogle.js"></script>
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