When Jimmy landed an international job in 1982, he had in his bank’s account savings some Tsh8,000, which enabled him to buy $,1000 he amount that was enough to make him live a comfortable life in Nairobi for about two months without taking his lucrative salary from his new job.
Today, it would have cost Jimmy Tsh1.6 million to buy the same amount or two hundred times the 1980s amount, which however couldn’t sustain him even for one month in Nairobi, let alone in Dar es Salaam, taking into considerations the skyrocketing cost of living.
The Tsh8,000 was equivalent to KSh1,333, according to the 1982 exchange rates. But, today, the Tsh8,000 is equivalent to a paltry Ksh40 according to the current exchange rates.
Fury and bravado about the sins of using the green American buck popularly known as “the dollar” in transacting local business is not news – it simply masks inefficiency at home, The Guardian on Sunday’s analyst argues.
The analyst also draws similar lessons of our past failures, citing how the once mighty Tanzania has been reduced to pint size against the Kenya shilling by a factor of 10 within a short 30 years – and 20 times yet smaller in the next 15 years.
“The demand for the US currency that is being contested is at best limited to hotel services and often rental quotations, even if the latter would still be paid in the local currency,” our analyst says, arguing there isn’t anything to report home about this.
Beyond dark suits and land cruisers, our radical critics don't really spend time thinking why our shilling slides fast with regard both to the dollar and the Kenyan shilling.
“Were they to spend time thinking about the question, they would discover that the use of US dollars in air travel ticket quotations, paying hotel bills or for that matter renting furnished apartments in Masaki or Mbezi Beach isn't a factor in setting the rate of the local currency vis a vis the dollar,” he argues.
“What is more interesting is to explain why it took 30 years from the time of the Arusha Declaration to 1997, where -- at the time of the privatisation of the National Bank of Commerce to complete financial sector restructuring- for the shilling to slide to Tsh10 to Ksh1, compared to the later period.
“From 1997 to 2012 is another 15 years, half of the earlier period, and our shilling has travelled the same road, from Tsh10 to the Ksh1, to Tsh20 to Ksh1, which from an arithmetical point of view is comparable. It is double the previous rate in terms of linear progression,” he says.
He adds: “ …. the motion of exchange rate depreciation has taken half the previous period of linear progression where it had shifted from Tsh1 to Ksh1 early in 1967, to Tsh10 to Ksh1, reached after 30 years. But the same linear progression from Tsh10 to Ksh1 to Tsh20 to Ksh1 has been reached in 15 years from the time that it reached Tsh10 to Ksh1, one to ten in 30 years, which means it has depreciated at twice the old rate.”
Perhaps the most puzzling question is that at the time when East African countries have been eyeing the single currency, no convincing explanation has been given by the so called economists on why the Tanzanian shilling has tumbled freely for the past three decades.
There may be many theories including conspiracy theory behind the free fall of the Tanzanian shilling, but the bottom line is that it strongly affects the way Tanzanians trade with their counterparts in Kenya as well as the rest of the East African region.
The question is why the Tanzania shilling has taken such battering when “both countries were formally market economies.”
One possible explanation is that, in Kenya the market context has remained firm, and has possibly cut out what he describes as “a few abuses.”
Some economists will tell you that it’s the Tanzania-Uganda war that affected our currency, while others believe that it’s the abysmal performance of the exports sector caused mainly by the collapse of Agriculture that ‘killed’ the shilling.
But it appears The Guardian on Sunday’s analyst knows something our economists are not willing to discuss or are not even aware about.