Tanzania: Inflation climbs to 13pc on power woes

Dar es Salaam. Prices are continuing to escalate, hitting hard on consumers. The National Bureau of Statistics (NBS) has reported that the headline inflation rose to 13 per cent last month from 10.9 per cent in June.

Economists attribute the increase to surging fuel prices, chronic power outages and poor food production.  Some are advising the government to establish a committee to set indicative prices for essential items.

“With this trend, we are facing a difficult time,” warns a Sokoine University of Agriculture economics lecturer, Dr Damian Gabagambi. “If the situation prevails, it may cause riots as the majority of people will feel the pinch of economic difficulties.”
He urged the government to subsidise some of the basic commodities such as fuel, which plays a major role to pricing or by scrapping all levies related to oil to check the inflation.

According to NBS, the foodstuff inflation rates in homes and restaurants jumped to 14.8 per cent for the year ending July 2011 from 11.7 per cent for the year ending the previous month.The food and non-alcoholic beverages inflation rate climbed to 15.9 per cent for the year ending July 2011 from 12.3 per cent in the year  ending the previous month.

Food and non-alcoholic beverages account for 47.8 per cent of Tanzania’s ‘shopping basket’.Before the methodology of calculating inflation was changed last year, food and non-alcoholic beverages accounted for 55.9 per cent of the shopping basket.

Economists and financial gurus say since imports are increasingly outstripping exports, the shilling will continue to lose ground against currencies of Tanzania’s major trading partners. Such a situation will cause more problems in the balance of payments.

 “The fact that we import more than we export we are likely to see inflation rates going up as the shilling continues to depreciate,” a University of Dar es Salaam economics Prof Humphrey Moshi told The Citizen yesterday by telephone.

He suggested that the government change a policy for mining companies to keep at least 70 per cent of their revenues from gold exports in local banks. In so doing, the domestic market will have a high level of foreign currency reserves.Currently only 10 per cent of gold revenues are retained in the country. “These [mining] companies are importing everything, even simple items that could be found within the country. This is detrimental to our shilling.”

The inflation rate for non-food commodities increased to 10.8 per cent for the year ending July 2011 from 10 per cent for the year ending the previous month. High fuel and food prices have also contributed to the rising inflation rates this year in Kenya and Uganda.