Tanzanian Shilling Soars, But Rural Communities Grapple with Skyrocketing Costs

By Adonis Byemelwa

Shinyanga. The Tanzanian shilling has made impressive gains against major global currencies, including the US dollar, which has seen a significant depreciation in recent weeks.

On December 13, 2024, the Bank of Tanzania (BoT) quoted the shilling at Sh2,294 per US dollar, marking its lowest exchange rate of the year and a notable improvement from Sh2,513.1169 just days earlier.

The shilling has also strengthened against the Euro and British Pound, trading at Sh2,406 and Sh2,919, respectively, signaling a positive shift in the currency market. This appreciation is particularly significant as it contrasts with global economic uncertainties and volatility.

For car dealers and importers of goods from abroad, the strengthening of the shilling presents both opportunities and challenges.

With the shilling at its highest level against the US dollar in months, importers can benefit from a lower cost of purchasing foreign goods.
Car dealers, in particular, have reported that the prices of vehicles and spare parts are becoming more affordable as the cost of imports drops. "It’s a good time to import vehicles," said a car dealer in Dar es Salaam. "The exchange rate has helped lower the cost of cars, and our customers are benefiting from the decrease in prices."

However, economists caution that the situation may not be sustainable in the long run. While the appreciation of shilling may seem beneficial for some sectors, such as car dealerships, it could put pressure on Tanzania's export industries, which may struggle to compete in the global market.

“Currency fluctuations are part of any economy, but excessive reliance on a strong currency could harm the country’s export competitiveness,” says Anna Tibaijuka, a renowned economist and expert on the balance of trade and financial policy. She points out that Tanzania’s trade balance is highly sensitive to these shifts, as the country is a net importer of various goods, particularly oil, machinery, and consumer goods.

The government’s optimism about the trend’s sustainability is based on some factors, including the stabilization of the US economy and lower interest rates in the United States, which have led investors to look for opportunities in emerging markets like Tanzania.
BoT Governor Emmanuel Tutuba attributes the shilling's steady appreciation to these global economic shifts, along with strong domestic fiscal policies aimed at maintaining financial stability.

“We are confident that the current exchange rate trends will continue well into 2025,” said Governor Tutuba. “The fiscal discipline and the right economic policies are creating an environment conducive for currency strength.”

According to Mr. Tutuba, regionally, the Tanzanian shilling has outperformed the Kenyan shilling, trading at a rate of 17.7 compared to 21 just a few weeks ago, it has also appreciated against the Uganda Shilling, signaling its growing strength in East Africa.

However, there is concern among local communities, especially in rural areas like Shinyanga, where the effects of the strengthened shilling are seen differently.

Many residents, especially women who rely on small-scale businesses and daily goods for their livelihoods, are skeptical of the significance of the dollar’s depreciation.

In Shinyanga’s Bugweto Centre, a group of women who sell local food products, including cooked meals, express their frustration.
“The dollar is losing value, but that doesn’t help me buy things like cooking gas, which keeps going up,” says Amina Zuberi, a cook at Bugweto Centre. "A 15kg gas cylinder now costs Sh 58,000, and even the small one costs Sh 25,000. It’s just too expensive for people like us."

Many residents of Shinyanga, including traders and small business owners, find that despite the shilling’s strength against the dollar, the cost of basic goods continues to rise, making life even more difficult for those who depend on small-scale businesses.

“The clean energy policy may sound good on paper, but how can we switch to cleaner options when even the prices of cooking gas are so high?” asks Salma Juma, a street vendor in Shinyanga Municipality. “For us, we don’t care about the dollar anymore. We care about surviving in these hard times.”

The sentiment in Shinyanga is shared by many, and it reflects a deeper concern about the disconnect between national economic policies and the realities faced by ordinary Tanzanians.

While the government celebrates the appreciation of the shilling and the lower import costs, the average person struggles with rising local costs that do not align with currency changes.

The situation calls for a more balanced approach to ensure that the benefits of a stronger currency are felt by all sectors of society, not just by those engaged in international trade or the formal economy.

To make the situation more sustainable, economists like Prof. Anna Tibaijuka suggest that Tanzania should focus on enhancing its export industries to balance the effects of a stronger shilling. “Tanzania needs to find ways to ensure that its export base is strong enough to withstand currency fluctuations,” says Tibaijuka. “This requires investments in agriculture, manufacturing, and local industries that can produce goods for both the domestic and international markets.”

Additionally, there needs to be more support for small businesses in regions like Shinyanga, where locals are still grappling with the high cost of living.

For the clean energy policies to be successful, The Kawe Member of Parliament Bishop Josephat Gwajima says, they must be implemented with careful consideration of local realities.

“Government policies must be adapted to the practical needs of the people,” he concludes. “It’s not just about promoting energy efficiency; it’s about making sure that people can afford the solutions being proposed.”

Behold, while the strengthening of the Tanzanian shilling is a positive development for the economy, it’s clear that the benefits are not equally distributed. Car dealers and importers may see a reduction in costs, but the less educated, particularly in rural areas, are left to grapple with rising prices on everyday goods, like cooking gas.

Indeed, Projections indicate that the shilling will likely maintain its strength well into 2025, with expectations for continued stability through at least February 2025. Policymakers must take these realities into account and ensure that future economic strategies are more inclusive, with a focus on balancing trade, fostering sustainable local industries, and addressing the pressing concerns of Tanzanians on the ground.