Tanzania central bank says it does not set forex rate

NAIROBI – The central Bank of Tanzania (BOT) said yesterday it did not target any shilling exchange rate against the US dollar and denied it frequently intervened in the local currency market.

Tanzania’s shilling has lost close to 13 per cent against the greenback since the beginning of the year, hit by a high import bill caused by rising oil costs and dwindling exports from an agriculture sector emerging from drought. Yesterday, it was trading at 1 309/1 313 versus the US$, compared with 1 163/1 168 on January 2.”The bank does not either defend or set the exchange rate,” BOT said in a fax responding to questions from Reuters.”The bank intervenes in the market as a counterpoint of last resort in case of mismatch between demand/supply.(It) is not a regular participant in the interbank foreign exchange market.”Currency dealers at commercial banks say were it not for central bank intervention in the market, the local currency would have hit the 1 300 mark long ago.During the second quarter of 2006, the bank sold US$209,4 million on the interbank market to meet demand for the US currency, it said in its June Quarterly Economic Review.In the first quarter of the year, it sold US$48,3 million, while it sold US$36,5 million in the second quarter of 2005.BOT said it tries to ensure exporters are not disadvantaged by exchange rates, without upsetting macro-economic stability.”It is the bank’s responsibility to ensure the external sector competitiveness is maintained without prejudice to the primary objective of price stability,” the bank said.Tanzania’s main foreign exchange earners are mining, tourism and agriculture.Its main agricultural produce includes coffee, tobacco, cotton and cashew nuts, while gold is its main mineral.Major imports include oil and machinery for use in the mining, construction and agriculture sectors.BOT figures show a widening current account deficit, which stood at US$495,7 million in the quarter ending June, compared with U$370,7 million for the similar period last year.Nampa-ReutersYesterday, it was trading at 1 309/1 313 versus the US$, compared with 1 163/1 168 on January 2.”The bank does not either defend or set the exchange rate,” BOT said in a fax responding to questions from Reuters.”The bank intervenes in the market as a counterpoint of last resort in case of mismatch between demand/supply.(It) is not a regular participant in the interbank foreign exchange market.”Currency dealers at commercial banks say were it not for central bank intervention in the market, the local currency would have hit the 1 300 mark long ago.During the second quarter of 2006, the bank sold US$209,4 million on the interbank market to meet demand for the US currency, it said in its June Quarterly Economic Review.In the first quarter of the year, it sold US$48,3 million, while it sold US$36,5 million in the second quarter of 2005.BOT said it tries to ensure exporters are not disadvantaged by exchange rates, without upsetting macro-economic stability.”It is the bank’s responsibility to ensure the external sector competitiveness is maintained without prejudice to the primary objective of price stability,” the bank said.Tanzania’s main foreign exchange earners are mining, tourism and agriculture.Its main agricultural produce includes coffee, tobacco, cotton and cashew nuts, while gold is its main mineral.Major imports include oil and machinery for use in the mining, construction and agriculture sectors.BOT figures show a widening current account deficit, which stood at US$495,7 million in the quarter ending June, compared with U$370,7 million for the similar period last year.Nampa-Reuters