The value of the Tanzanian currency, the shilling, is determined by a free floating exchange rate system based on supply and demand in international foreign exchange markets. This means that if the shilling is in high demand in international exchange markets, its value will accordingly increase in relation to other currencies. The value of the shilling, like many other currencies, is normally expressed against the value of the U.S. dollar. Over
|Exchange rates: Tanzania|
|Tanzanian shillings (TSh) per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
the past several years, this value has steadily depreciated. In 1995, for example, the exchange rate was 574.76 shillings for 1 U.S. dollar. In January 2000, the exchange rate rose to 798.9 shillings for 1 U.S. dollar.
According to the Economist Intelligence Unit, one of the major factors behind the depreciation of the shilling relates to the decline in international commodity prices for the agricultural cash crops on which the export economy depends. The EIU forecasts a further depreciation of 5.1 percent in 2001, increasing to 12.4 percent in 2002. The poor will doubtlessly experience the ramifications of the depreciation process more than any other group, as a devalued shilling means that more money will be needed to purchase needed imports from abroad, such as food and other consumer products.