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 By Al-amani Mutarubukwa,
The Citizen Reporter
Dar es Salaam. Tanzania’s inflation rate fell by less than one percentage point to 19.7 per cent in January from 19.8 per cent recorded a month earlier, indicating that relief in the country’s gloomy economic outlook still remains elusive.The National Bureau of Statists (NBS) that released the update yesterday, attributed the more-or-less stagnant figure to the decrease in internal and external inflationary pressure in the recent past.
The NBS explained, however, that the 0.1 drop, was partly an outcome of the measures the government took at the end of last year, to save the free fall of the shilling.
This has seen the local currency stabilise slightly against the US dollar for some weeks now, the bureau explained further, citing other factors as improving conditions of the Eurozone economic situation, restored power supply and fairly stable fuel prices at the world market.
“The released data shows that most of the factors pushing the inflation up, either remained constant or they are starting to fall,” said Prof Haji Semboja of the University of Dar es Salaam’s economics department.
However, he was of the view that, unless the government puts concrete measures to ensure that the country produces enough food through irrigation schemes, it could be hard to bring inflation to single digit rates since Tanzanian agriculture is susceptible to drought. According to the NBS report, the annual inflation rate for energy decreased to 30.1 per cent in January from 41.0 per cent in December.
“The noted decrease is highly attributed to the decrease of prices for charcoal by 0.7 per cent and kerosene by 2.3 per cent,” the statistics body said in its statement. According to the agency, a small change in prices for charcoal has a big impact on the compiled index for energy and fuels because charcoal accounts for more than half (2.5 per cent) of the total expenditure (4.7 per cent) for energy and fuels.
Food and non-alcoholic beverage inflation rate, which carry 47.8 per cent weight in the consumer price index, rose to 27.8 per cent year-on-year in January compared with a 27.1 per cent rise in December, NBS reports further. The Consumer Price Index rose 2.3 per cent in January from a month earlier, it said.The power utility firm, Tanesco, raised electricity tariffs by 40 per cent last month, but they didn’t feature in the January inflation update because they became applicable this month.
Prior predictions by economists were that the January inflation rate could exceed 20 per cent due to prevailing conditions that had seen prices for most consumer goods skyrocketing beyond the reach of most households.
“The production costs are still very high and the government move to increase electricity tariffs will automatically raise the inflation rate in the country,” Prof Elisante ole Gabriel, a lecturer at Mzumbe University had told The Citizen last month.
Recently, President Jakaya Kikwete remarked that the government would make sure that the inflation rate slowed to a single digit come next June. But analysts dismiss this as impossible on the grounds that the government has not taken any concrete measures to ensure enough food production.
Kenya and Uganda have managed to slow down their inflation rates due to improved food production. Kenya’s inflation rate decreased from 18.93 per cent in December 2011 to 18.31 per cent in January 2012.
Uganda’s inflation rate continued to drop in January to 25.7 per cent, down from 27 per cent recorded in December last year.
“Tanzania has all it takes to have a strong economy. It is high time it enabled its farmers to go commercial by producing adequate food ...the country should take total ownership and effectively manage the revenue coming from natural resources to stabilise its shilling,” added Dr Semboja. From single digit of 5.6 per cent in December 2010, the inflation rate reached 13 per cent in July, 2011 and hit a record high of 19.8 per cent in December last year.
The increase in inflation rates was partly caused by the persistent increase in fuel prices at the world market, according to the ministry of Finance’s state of the economy report.
The fuel prices went up by an average of $104 per barrel as the year ended November 2011 compared to the average of $76 per barrel in the same period in the previous year.
The report also says, among measures the government took to try and put things under control, included allocation of Sh220 billion for the emergency power plan, which saw an addition of 342MW to seal the 572MW power gap in the national grid; ensuring there was enough food reserve, which stood at 192,779 tonnes in 2011, up by 28.5 per cent of the target of 150,000; and it ensured that food imports were tax exempted.
The central bank also introduced fiscal policy measures such as reducing core capital of foreign exchange dealers from 20 per cent to 10 per cent so as to release more forex into the market to strengthen the shilling.
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