Inflation holds steady for 2 years in a row

Dar es Salaam. The government was able to control the level of inflation rate at an average of 3.45 percent in the past two years, it has been revealed.

The National Bureau of Statistics (NBS) indicated through its December monthly National Consumer Price Index (NCPI) report that the annual average headline inflation rate in the year 2019 (from January to December) was 3.4 percent, down from 3.5 percent recorded in 2018.

Through both years, the country level of headline inflation remained below the country medium-term target of 5 percent, in accordance with the Bank of Tanzania (BoT) Monetary Policy Statement of June 2019.

The NBS reported yesterday that food and non-alcoholic beverages inflation rate for the month of December rose up to 6.3 per cent compared with 6.1 percent recorded in November and 5.1 percent in October last year.

Some of the food items that contributed to such an increase in the end of the year include, maize grains by (2.8 percent), maize flour (4.8 percent), wheat flour (1.2 percent), sorghum grain (4.2 percent), and sorghum flour (2.7 percent).

Other items which experienced the upward trend were meat (1.2 percent), vegetables by (2.2 percent), beans (2.3 percent) and cassava (2.8 percent).

On the other hand, some of the non-food items that contributed to such an increase include, footwear for women by 1.5 percent, maintenance and repairs of private saloon cars (3 percent), kitchen and domestic utensils (1.3 percent), personal care such as hair dressing for women (1.1 percent) and school bags (2.3 percent).

Through two years, the level of inflation was able to be restrained regardless of the increase in money supply and food prices, especially maize, rice, beans and other staples.

However, people who are familiar with the food industry have said the prices may ease starting from next month, as some of the areas are expecting new food crops harvests.

However, money supply grew by 11 per cent in October last year, and was the highest in two years, mostly driven by private sector credit growth, accommodative monetary policy, reduced lending risks and improved public confidence in the banking sector.

The highest inflation during the period of two years recorded in 2019 at 3.8 percent on the month of November and December.

The increase was attributed by the increase of price levels of the food and food products.

Traders and food retailers told The Citizen in a recent published article that the increase of food and other commodities were impacted by year-end holidays and supply shortages.

On Monday this week, the government planned to distribute 3,000 tonnes of maize, from the National Food Reserve Agency (NFRA) to ease supply shortages.

The market price for maize flour has increased to Sh1,600 currently, from Sh1,000 recorded mid last year due to shortages of supply as well as increased demands in exports markets to neighbouring countries.

Providing the economic perspective, an economist, Prof Humphrey Moshi of the University of Dar es Salaam, said the control on the inflation level will encourage people to save and thus facilitate investments.

“The maintenance of the inflation level will also give investors’ confidence that the business environment is improving,” he said.

For a developing country like Tanzania the low inflation level will also reduce the cost of external debts, the intellectual commented.

Prof Moshi said the level of food prices will eventually drop in future, as a result of recent rainfalls and implementation of the Agricultural Sector Development Program phase two (ASDP II). “The ASDP emphasizes more on the irrigation farming and agro-processing. The successful implementation of these projects, in addition to the favorable rains, will increase productivity and reduce the prices over time,” he said.

Prof Haji Semboja, economist from Zanzibar University, described that single digit rate is good for the economy but this cannot judge the performance based solely on that, but with considering how other economic indicators performed during the year.

He said, “It is a good sign of the performance of the economy, but we must also look at other economic indicators like employment levels and the balance of payments,”