Tanzania’s Dwindling Official Reserves: Government must explain

Zitto Kabwe, MP

Zitto Kabwe, MP
Shadow Finance Minister

Yesterday I issued a statement on my blog on the inefficiency of the Bank of Tanzania (BoT) in regard to publishing economic statistics. See BoT’s list of publications here. http://www.bot tz.org/Publications/PublicationsAndStatistics.asp

Regardless of the ruling party’s outrageous response (put out by Mwigullu Nchemba & Nape Nauye), BoT did actually publish (after my blog post) on their website reports for the months of December (January report) and that of January (February report). In my statement from yesterday I did raise an alarm on the shocking decline of official reserves which I was earlier informed of by an insider.

Read my statement here in Kiswahili. http://zittokabwe.wordpress.com/2012/05/13/benki-kuu-hazina-ya-taifa-imekauka/. Find a comment to my statement in English at Swahili Street here. http://swahilistreet.wordpress.com/2012/05/13/ogp-tanzania-hows-that-working-out-central-bank-edition-with-an-update/

And reading December and January reports it does raise concerns. The December report is quoted hereunder:

    “Gross official reserves amounted to USD 3,761.2 million in 2011 compared to USD 3,921.3 million in 2010, partly reflecting valuation loss on reserves held in Euro and Pound Sterling, when these currencies depreciated against the Dollar. The reserves were sufficient to cover about 4 months of projected import of goods and services”

The January report reads as below:

    “Gross official reserves amounted to USD 3,565.5 million compared to USD 3,888.7 million in the year ending January 2011, and were enough to cover 3.2 months of projected import of goods and services”

Clearly reserves have been in steady decline since 2010 – they dropped from USD 3.92bn to USD 3.76bn between December 2010 and December 2011, sufficient to cover four months imports. The decline in reserves has been more dramatic this year. In January 2012 they were just USD 3.57bn. The five per cent decline in one month – December 2011 to January 2012 – has been greater than the decline over all of the previous year – a four per cent decline.

BoT did not publish the March Report (covering the month of February) and any analyst may expect a further drop. Tanzania deserves a proper explanation from the Minister for Finance and Economic Affairs.

What has happened? Is the alarming decline of our official reserves a result of BoT’s participation in the foreign exchange market to control our shilling free fall? How strong is our export performance bearing in mind raising prices of gold? Is there under invoicing of exports tantamount to illicit money transfer? Is there mispricing of oil imports for emergency power generation?

Ndugu William Mgimwa, Minister for Finance and Economic Affairs, Tanzania is waiting for answers.