Understanding Currency: Appreciation, Stability, and Depreciation of the Tanzanian Shilling

The Tanzanian shilling (TSh) is more than just money; it is a reflection of our economy’s strength, confidence, and direction. Every time its value rises or falls against other currencies, it tells a story about Tanzania’s trade, production, and financial stability.

Yet, for many people, terms like “currency depreciation”, “appreciation”, or “stability” sound technical and confusing. This article breaks them down simply, using real Tanzanian examples, so you can understand what these changes mean and why they matter in daily life.

What Is a Currency?

A currency is the system of money used by a country. It acts as a medium of exchange, store of value, and unit of account, allowing people to trade goods and services easily.

For Tanzania, the national currency is the Tanzanian Shilling (TZS), managed by the Bank of Tanzania (BoT). Its value compared to other currencies like the US dollar, euro, or Kenyan shilling is called the exchange rate.

Currency Appreciation

This happens when the Shilling Gains Strength.

Currency appreciation means the Tanzanian shilling becomes stronger compared to other currencies. For example, if 1 US dollar was equal to 2,600 TSh last year and today it equals 2,400 TSh, the shilling has appreciated. You now need fewer shillings to buy one dollar.

Why Does Appreciation Happen?

• High export earnings: When Tanzania sells more goods abroad, foreign buyers demand shillings to pay local exporters.
• Strong foreign reserves: When the central bank (BoT) has enough dollars, it can stabilize the exchange rate.
• Increased investor confidence: More foreign investors bring dollars, raising demand for the shilling.
• Low inflation and political stability: These build market confidence in the currency’s long-term value.

Impact of Appreciation

• Imports (like fuel, machinery, and electronics) become cheaper.
• Exporters, however, earn fewer shillings when they convert dollars, so their profits can shrink.
• Consumers benefit through lower prices on imported goods.

Currency Depreciation

This happens when the Shilling Loses Value

Currency depreciation happens when the Tanzanian shilling becomes weaker compared to other currencies. For instance, if 1 US dollar now equals 2,700 TSh instead of 2,400 TSh, it means the shilling has depreciated. You now need more shillings to buy one dollar.

🔍 Why Does Depreciation Happen?

• High import demand: When Tanzania imports more than it export, more dollars leave the country.
• Rising inflation: Prices of goods increase, reducing purchasing power.
• External shocks: Global oil price increases or economic crises can reduce foreign exchange inflows.
• Limited foreign reserves: If the BoT has fewer dollars, it cannot intervene effectively to stabilize the shilling.

Impact of Depreciation

• Imported goods become more expensive, fuel, vehicles, and electronics rise in price.
• Exporters benefit because they earn more shillings per dollar received.
• Inflation can rise as import costs affect food and transport prices.

Currency Stability

This happens when there is Ideal Middle Ground

Currency stability means the value of the Tanzanian shilling remains relatively constant over time. It does not fluctuate sharply against major currencies.

This is the most desirable state because it creates predictability in trade, investment, and budgeting. Businesses can plan, importers can price products fairly, and citizens can maintain confidence in their savings.

How Stability Is Achieved

• Sound monetary policy: The Bank of Tanzania uses tools like interest rates, foreign exchange reserves, and money supply control.
• Diversified exports: Selling a variety of goods (gold, coffee, manufactured goods) ensures consistent dollar inflows.
• Good governance and political stability: These attract foreign investment and strengthen confidence in the shilling.

The Tanzanian Shilling in Context

Over the years, the Tanzanian shilling has faced both appreciation and depreciation periods, mostly influenced by global commodity prices, import levels, and foreign exchange reserves.

For example:

• When gold and tourism earnings rise, the shilling tends to stabilize or appreciate.
• When fuel import costs rise, the shilling can weaken due to higher dollar demand.

The Bank of Tanzania works actively to maintain balance by adjusting policies and supporting the local market with enough foreign currency to prevent excessive volatility.

Why Currency Education Matters

Understanding how currency behaves helps citizens make informed financial decisions. It enables:

• Entrepreneurs to plan better when importing or exporting goods.
• Investors to understand risks in foreign-denominated assets.
• Ordinary citizens to see how global changes affect local prices and the cost of living.

Financial awareness builds a stronger economy because people understand how their money value connects to production, trade, and national stability.

Conclusion

The value of the Tanzanian shilling is more than a number; it’s a signal of our collective economic health. Whether it appreciates, stays stable, or depreciates, each movement reflects the strength of Tanzania’s production, exports, and governance.

When we, as citizens, understand currency behaviour, we become active participants in economic growth, not just observers. A strong, stable shilling depends on strong economic fundamentals, smart policies, and an informed public.