The Tanzanian Shilling

The Tanzanian shilling is the national currency of the United Republic of Tanzania, as issued by the Bank of Tanzania. Symbolised by TZS in common usage, the Tanzanian shilling consists of coins and banknotes. In the current circulation, shilingi coins are to the value of 50, 100, 200, and 500. Banknotes initially made up the same values that the coins do today, but through the 1980s and 1990s, larger values of Tanzanian shilingi had to be introduced, with coins replacing the lower denominations. Following a new series of banknotes introduced to circulation in 2011, the new values are 500, 1000, 2000, 5000, 10,000 shilingi.

The United States dollar is also a widely accepted currency in Tanzania, particularly in tourist areas.

History of the Tanzanian shilling

At the end of World War I, Great Britain took control of Tanzania from Germany via the Treaty of Versailles, with Tanzania joining Kenya and Uganda to form British East Africa. In 1921, the East African shilling was issued in the region to act as its currency. Backed by the Pound sterling and produced by the East African Currency Board, the East African shilling replaced the Indian rupee, which was being used across British East African states.

In 1964, however, the British East African Board declared that each nation of British East Africa would become responsible for issuing their own national currencies after founding their own central banks. In Tanzania, the Bank of Tanzania Act of 1965 brought in the Bank of Tanzania to commence operations in 1966. In 1966, the Tanzanian shilling replaced the East African shilling at a rate of 1:1, at par.

Monetary policy actions

The Bank of Tanzania has endured many trials in the keeping of the Tanzanian shilling: one such instance came in 1988 with the devaluation of the Tanzanian shilling. On the 4th of November, 1988 Tanzania announced that it had to devalue the Tanzanian shilling from 98 TZS to 1 United States dollar to 120 TZS. The decision was made following a review of economic developments which had resulted from the Economic Recovery Programme. At the time, president Ali Hassan Mwinyi described the decision as “very bitter but inevitable”. Inflation was the primary cause for the need to adjust the exchange rate, with the rate of Tanzanian prices increasing in comparison to the rate of inflation to the nation’s trading partners, forcing the move.

In 1995, the government introduced the 1995 Bank of Tanzania Act in order to combat the rapid rate of devaluation, inflation, and to adjust to the liberalisation of the economy. In the years leading up to the new act, and following the devaluation of the Tanzanian shilling, each year saw the inflation rate increase from between 20.7 per cent, in 1992, to 37.9 per cent, in 1994. The newly amended act established the primary goal of the central bank, which was to create a monetary environment that ensured price stability. In 2006, more amendments were made to the statute to further enforce this stance in the nation’s battle against inflation.

Since the 1995 amendments were introduced, the nation has experienced a significantly decreased inflation rate, as well as some years of particularly low inflation, with the rate falling to 5.1 per cent in 2001 and remaining below 4.7 per cent over the ensuing four years. From 1999 to 2017, Tanzania’s inflation rate has exceeded 10 per cent in only four years (2008, 2009, 2011, and 2012). In January 2019, the inflation rate softened further to 3 per cent, down from 3.3 per cent in December 2018.

The volatility of the Tanzanian shilling

In 2015, the Tanzanian shilling suffered a record fall while standing as east Africa’s fastest-growing economy. The growth of the nation ushered in a massive demand for United States dollars due to foreign companies investing in Tanzania. Its value steadied coming into 2017 but dropped again against the United States dollar in the first month of the year. Except for a blip in November 2017, the Tanzanian dollar has, overall, steadily declined in value against the United States dollar. The middle of 2018 marked a 1.47 per cent depreciation over the space of a year despite the Bank of Tanzania intervening multiple times to control volatility.

At the start of November 2018, the Tanzanian shilling saw its volatility subdue following a supply of United States dollar from corporate and development organisations, with the currency expected to remain stable for a while, unless a large demand for United States dollar entered into the Tanzanian market. But volatility in financial markets can be very unpredictable, unlike that of other real-money constructs which feature varying levels of volatility as a key feature. As shown in the world of online slot machines, each game has a set level of volatility, from low to medium to high, which dictates how often the game pays out; but in the world of currencies, changes in the market can greatly impact the volatility of a certain currency. When it comes to the Tanzanian shilling, the influx of United States dollar has proven to be a causal factor in the local currency’s volatility in the past.

Despite forecasting a somewhat tepid near future after a stable start to November 2018, the Tanzanian shilling once again became volatile in January 2019 but was expected to quell when tourism and export seasons commenced and brought in foreign exchange.


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Tanzanian Shilling