Tanzania: Power outages worry central bank

THE high inflation rate will only be tamed once electricity generation has come to normal, the Bank of Tanzania (BoT) said in Dar es Salaam yesterday.

The BoT Economic Research and Policy Director, Dr Joe Massawe, said on Thursday that power rationing has hit hard the manufacturing sector, especially small and medium enterprises who were forced to use generators.

“If we manage to stabilize power, the inflation rate will be able to drop from the current double to single digit”, he said.


He said that there are other parameters which the central bank can not control directly like fuel and food prices which affect the economic growth.

He ruled out possibility for the inflation rate to return to single digit in the present quarter but was impressed with the government efforts to increase investments in power generation.

He gave an example of a swift decision by the government to generate electricity at full capacity at the Independent Power Tanzania Limited (IPTL) as well as long term power projects.

Inflation rate hit double digit in June for the first time since January last year, and analysts expect rising food and fuel prices to push the rate even higher in the coming months.

According to the National Bureau of Statistics (NBS), the country’s year-on-year inflation rate was up for the eighth successive month to 10.9 per cent in June from 9.7 per cent in May.

It is understood that rainfall has impacted negatively on inflation rates in East Africa, because the region relies on rain-fed agriculture. The NBS said food prices which carry a 47.8 per cent weighting in the Consumer Price Index -- increased by 12.3 per cent from a year earlier compared to an increase of 10.4 per cent in May.

Also prices of rice, pastry, maize, cassava flour, milk and vegetables went up during the month. On a monthly basis, consumer prices rose by 0.8 per cent in June from May, the NBS report said.

“The soaring inflation rate drags most low income earners into impoverished life,” said Mr Hussein Kamote, the Confederation of Tanzania Industries (CTI) Director of Policy and Research in a recent interview with the ‘Daily News’ in Dar es Salaam.

He said that poor families are also being forced to cut down expenditures on basic needs resulting into far reaching impacts on their living standards.

If the situation is left unchecked, Mr Kamote said there was danger of discouraging investors because slashing down expenditures would mean reduction of the market size.