An Analysis of Tanzania’s Foreign Exchange Cycle from 2008‐2013
Derek J. Langford Course #: ECO2500E An Analysis of Tanzania’s Foreign Exchange Cycle from 2008‐2013 As shockwaves tore through world markets in 2007‐2008, Tanzania, a
country hailed in the recent McKinsey Global Institute report, “Lions on the Move: The Progress and Potential of African Economies,” found itself at a crossroads.1 Market liberalization, structural reforms, and macroeconomic discipline that began in the 1980s, had noticeably borne fruit in Tanzania at the onset of the Global Financial Crisis (GFC). From 2001‐2007, Tanzania registered an impressive average of 7.0% annual economic growth.2 Compared to other Low Income Countries (LIC) the world over, Tanzania had become one of the destinations of choice for foreign investors, attracting capital flows into its mining, manufacturing, agriculture, and tourism sectors.3 Faced with the prospect of watching the involuntary erosion of hard‐won economic gains, Tanzania opted to employ a strategy of “macroprudential oversight” to stabilize the financial sector and guard against market volatility from the advanced economies of the Global North. On January 21, 2008, one U.S. dollar (USD) was equal to approximately 1,129
Tanzanian shillings (TZS). The data reveals that during the GFC the TZS witnessed a slight, gradual depreciation in value year by year. On the exact same date for five 1 McKinsey Global Institute, June 2010, “Lions on the Move: The Progress and Potential of African Economies.” 2 Global Finance, June 30, 2013, Tanzania Country Report. http://www.gfmag.com/gdp‐data‐country‐reports/164‐tanzania‐gdp‐country‐ report.html#axzz2XkwBnNvP. 3 International Monetary Fund, 2009, “Tanzania: A Story of an African Transition,” pg. 56. http://www.gfmag.com/gdp‐data‐country‐reports/164‐tanzania‐gdp‐
country hailed in the recent McKinsey Global Institute report, “Lions on the Move: The Progress and Potential of African Economies,” found itself at a crossroads.1 Market liberalization, structural reforms, and macroeconomic discipline that began in the 1980s, had noticeably borne fruit in Tanzania at the onset of the Global Financial Crisis (GFC). From 2001‐2007, Tanzania registered an impressive average of 7.0% annual economic growth.2 Compared to other Low Income Countries (LIC) the world over, Tanzania had become one of the destinations of choice for foreign investors, attracting capital flows into its mining, manufacturing, agriculture, and tourism sectors.3 Faced with the prospect of watching the involuntary erosion of hard‐won economic gains, Tanzania opted to employ a strategy of “macroprudential oversight” to stabilize the financial sector and guard against market volatility from the advanced economies of the Global North. On January 21, 2008, one U.S. dollar (USD) was equal to approximately 1,129
Tanzanian shillings (TZS). The data reveals that during the GFC the TZS witnessed a slight, gradual depreciation in value year by year. On the exact same date for five 1 McKinsey Global Institute, June 2010, “Lions on the Move: The Progress and Potential of African Economies.” 2 Global Finance, June 30, 2013, Tanzania Country Report. http://www.gfmag.com/gdp‐data‐country‐reports/164‐tanzania‐gdp‐country‐ report.html#axzz2XkwBnNvP. 3 International Monetary Fund, 2009, “Tanzania: A Story of an African Transition,” pg. 56. http://www.gfmag.com/gdp‐data‐country‐reports/164‐tanzania‐gdp‐