Cheap money transfers

That’s a neat chart from xe.com. But it raises more questions than anything else.

The sure but steady decline might make sense: if the government is serious about its campaign to boost agriculture (Kilimo Kwanza), then a steady devaluation would make sense, at least for agricultural exports. In that case the recent relatively stable rates reflected in July/August may just indicate that the target exchange rate has been reached.

Or do they reflect a panicked and populist measure to prop up the shilling as the election bears down on us?

But what is really intriguing is the May/June instability? What was going on there? And, well, cui bono?

Exchange rate management seems to be back on the agenda, after Ethiopia’s recent 20 percent devaluation of the Birr. Do TZS trends indicate similar thinking, or is it just something that’s happening to us?

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4 responses to “Cheap money transfers

  1. The new budget came into effect on July 1st, and it vastly increases government spending. I just assumed there was a relation between last-minute budget debates and exchange rate. But I don’t follow Tanzanian politics and I wasn’t even in the country in May or June, so that’s just my guess.

    I’m not convinced a country with chronic food shortages should devalue its currency in an attempt to boost exports. (Explanation of food shortages.) I’ve also talked with several employed Tanzanians who complained their minimum wage effectively plummets as prices inflate. (Recent minimum-wage woes.) I suppose the shift is good for foreign investment, though.

    I blogged about this here: http://adamhooper.com/blog/posts/171.

    • thanks for sending me back to your post. I read it when it came out! The possible under reporting of inflation is definitely an issue. On the budget, things are just as unclear. The increases in allocations are astounding (42 percent for Min of Health, I believe). But allocations and actuals are two different things. I sometimes wonder what credence we should give the budget.

  2. Good point; but at least as far as the infrastructure spending goes, it certainly looks like spending is increasing. In July I saw new pavement being placed in Singida (or at least, around Singida–I can’t stay awake the entire bus ride…); work on a new paved road through Kahama (which stalled at a gravel-only phase while I was there); a huge new bus station near Kigoma; a renovated roundabout and newly-paved roads in Kigoma town; a road being built through Kigoma North to Burundi (and pavement being laid on the existing road to Kigoma from Kahama); bus station renovations in Shinyanga town; and new pavement in Dar es Salaam to the CCBRT hospital (finally!).

    (I don’t have enough experience in Tanzania to know whether all this is more than usual. I only visited Western Tanzania once three years ago, and back then I didn’t know what to look for. But my hunch is that there’s a recent spending boost.)

    As I understand it the budget is heralded as an “economic stimulus”, and on the ground in Tanzania I was reminded of Canada’s economic stimulus two years ago. Many of these projects started recently. To me, they all seem expensive and politically-interesting.

    You can tell it’s an election year. (Especially in Kigoma!)

  3. In the period of five years (2005 – 2010) 97km of tarmac road worth al,pst 100bn Tshs has been built in my constituency alone. NSSF is building a new bus stand at Mwandiga and TPA a port in Kagunga village. There are spending and it is really a stimulus as young people get jobs and their incomes increase.
    On devaluation, we will have to think deeply as we dont really have enough exports to benefit from it with exception of Gold and services (read tourism). Traditional exports which have direct links to the poor people in rural areas are declining. So what a benefit of devaluation? whata about elasticity of export demand bearing in mind we target Agro exports with a known gestation period. The strategy should be increasing productivity! Even with inflation, the policies shall target increasing productivity of food crops as food is weightier on the basket of goods and services used to measure inflation in Tanzania

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