Tanzania moves to shield itself from Ukraine war fallout

Bank of Tanzania (BoT), Prof Florens Luoga. PHOTO | COURTESY

What you need to know:

  • BoT says Tanzania is closely monitoring the situation in Eastern Europe so that the country can take appropriate measures to cushion the economy against the impact of tensions in that part of the world

Dar es Salaam. Tanzania is keeping a close eye on developments in Eastern Europe so that the country can take appropriate measures to cushion its economy against the impact of tensions in that part of the world, the central bank has said.

A statement by the Monetary Policy Committee (MPC), which is chaired by the Bank of Tanzania (BoT) governor, offers new hope to consumers who have been bracing for a rise in prices of some imported commodities occasioned by the war between Russia and Ukraine.

“Given the ongoing geopolitical tensions in Eastern Europe and global supply chain disruptions, the MPC will continue to closely monitor developments in the economy and take appropriate measures when need arises,” the committee says in its latest update.

Crude oil prices crossed the $100 per barrel mark for the first time in seven years on February 24, just hours after Russia invaded Ukraine. Tanzania imports about 3.6 billion litres of refined petroleum products annually.

Tanzanians are also bracing for an increase in prices of newsprint and wheat, among other products, due to the ongoing tensions. Tanzania exports raw tobacco, seeds and coffee to Russia.

The Citizen has learnt that wheat prices have almost doubled from 2020 prices to more than $480 per tonne within a short span.

Agriculture minister Hussein Bashe said recently that the government had initiated talks with wheat importers to mitigate the possible impact of a surge in prices of wheat and wheat products.

Mr Bashe said Russia and Ukraine, along with the United States and Australia, are Tanzania’s key sources of imported wheat.

Analysts say the government should introduce a raft of measures to cushion the country’s economy from the impact of the war.

A senior economist and consultant, Prof Samuel Wangwe, said the government might need to find alternative import and export destinations.

He said by finding cheaper and convenient markets, the country could reduce costs and protect its economy.

“For those products with fewer alternative options, like fuel, the government may opt to implement relief policies such as cutting taxes and fees so as to reduce the burden of the cost of living on the people,” he said.

Prof Honest Ngowi of Mzumbe University commended the government for the short-term measures it was taking.

In response to the sustained rise in global fuel prices, the Energy ministry has removed Sh100 in various levies on every litre of petrol, diesel and kerosene for three months from this month.

However, Prof Ngowi said going forward, Tanzania should think of diversifying tourism markets, and developing domestic capability to produce agricultural products the country currently imports.

According to National Bureau of Statistics (NBS) figures, Russia and Ukraine are among Tanzania’s five leading sources of tourists arriving from Europe and North America, with the former leading by far with a total of 74,579 arrivals in the first six months of last year.

When it comes to wheat, official data shows that Ukraine and Russia together account for more than a quarter of the global trade involving the product.

“In the longer term, we need, if possible, to consider growing more wheat domestically to protect ourselves from external shocks,” recommended Prof Ngowi.

As fears of further increases in fuel prices grow, he also suggested that the country look into the possibility of substituting petrol with liquefied petroleum gas.

“This is important for us if we don’t want to catch a cold when countries that we depend on for imports sneeze,” said Prof Ngowi.

His sentiments were echoed by an economist and business expert, Dr Donath Olomi, who urged the government to look into the possibility of reducing the country’s reliance on petrol and diesel for transport, generating electricity, and running factories and machines.

“We need to promote alternative sources of energy if we are to lessen the impact of the war between Russia and Ukraine,” he said.

He added that the government should take immediate measures to prevent a food crisis.

The measures include purchasing enough food so that the country has enough reserves to be used in the future in case the situation worsens.

The government, Dr Olomi added, should also provide incentives to fertiliser manufacturers, and promote irrigation farming, and the growing of drought-resistant crops.

Russia also produces large quantities of potash and phosphate, which are key ingredients in the manufacture of fertiliser.

Bakhresa Group corporate affairs director Hussein Sufian said with Russia and Ukraine at war, Tanzania now purchases wheat from the US, Canada, Argentina, Germany, and Australia as alternative sources.

However, he told The Citizen last week that factoring in the distance and transportation costs, it was more expensive to purchase wheat from, say, the US and Australia than from Russia and Ukraine.