Tanzania: Central Bank Wants Govt to Subsidize Energy Prices

ACUTE food shortage caused by prolonged droughts in some neighbouring countries will drive up prices for commodities hence fuelling inflation increase. The Bank of Tanzania (BoT) Director of Director of Policy and Research Dr Joe Massawe said in an interview last weekend while commenting on the soaring inflation rate that reached 14.1per cent last August.
"Unless the food situation in the neighbouring countries improves, the country's inflation rate would continue to soar, making the economic targets unrealizable," Dr Massawe said.


Although the Bank is playing its role to contain the situation to curb the rising inflation rate, the BoT Director said, government intervention is of significance particularly in areas of energy which is one of key drivers of the economy.
Dr Massawe observed further that BoT has no control of the skyrocketing global fuel prices at the world market and that there is no hope for commodity prices to drop in the near future due to politico and economic turbulence.
One of the interventions which might ease the escalating fuel prices as well as costs of electricity is for the government to subsidize them until when the situation stabilizes.
According to the central bank's Economic Bulletin for the Quarter ending June this year, the average annual headline inflation rose to 9.8 per cent, from 7.3 per cent recorded in the preceding quarter.
The increase was mainly attributed to the rise in both food and energy prices. The National Bureau of Statistics (NBS)'s Consumer Price Index for August this year shows that the price increase for rice ( 2.8), bread (3.6 ), maize grains ( 3.4), wheat flour (4 ), cassava flour ( 5.3), pork meat (2.6 ), chicken (2.9) and fish (3 )in a single month.

Other foodstuffs that went up during the month under review are fresh cassava (5.9), sugar (6.7), potatoes (5.4) and fruits (4.6). The inflation has weakened the purchasing power of 100/-, dropping to 84/04 in the last twelve months.

Some of the neighbouring countries experiencing severe food shortages are Kenya, Uganda, Somalia and South Sudan. The country's inflation according to the NBS, is still the lowest in the region compared to Uganda and Kenya which documented 21.4 16.7 per cents respectively.

Experts have warned that trend of the double digit inflation rate was forecasting a bleak future for the nation to reach the targets of the economic growth. They said with the soaring inflation rate, the cost of raw materials as well as borrowing rates would definitely go up.