Tanzania Daily News (Dar es Salaam)

8 November 2012

Tanzania: Fuel Bill Up 30 Percent in 12 Months

THE country's oil bill has increased by almost 30 per cent in the last 12 months, exerting pressure on the country's limited foreign reserve.

The increase of oil bill was attributed to world oil prices and thermal power generation in the last 12 months ending August this year. This was also blamed on depreciation of the shilling in the recent days crossing a 1,600/- mark, the highest in the last 10 months.

The Bank of Tanzania (BoT) said in total for the year ending August, the value of import of goods and services was 12.78 billion US dollars compared to 10.82 billion recorded in the previous year. "The increase was largely driven by oil imports, following a rise in oil prices in the world market coupled with an increase in domestic demand particularly for thermal power generation," BoT said in its September Monthly Economic Review.

Also, according to the central bank, service payment was 13 per cent higher during the period under review reaching 2.33 billion US dollars: "This was largely driven by an increase in payments of freight charges consistent with the increase in the import bill."

The high oil bill was to blame for pushing the shilling at the tipping edge as demand was not met by supply of the foreign exchange, especially at the end of last month when the economy experienced fuel shortages. This was also seconded by Tanzania Securities Chief Executive Officer, Mr Moremi Marwa, who said the major reason that made the shilling to lose ground is increased demand by importers.

"There are a number of reasons, but it has mainly been pushed up by oil importers demand for the dollars to cater for the current fuel instability in the market," Mr Marwa told the 'Daily News'. The shilling, according to the rule of thumb, gains grounds at the last week of a month as corporate demand the local currency for tax and salary obligations.

"We are out of traditional cash crop export and in the second quarter a mine (Geita Gold Mine) was temporarily closed for maintenance...this impacted negatively on the supply side of the foreign exchange," Mr Marwa said.

He also said there is increasing demand of fuel for normal vehicle consumption and energy generation, hence pushing the demand side of the US dollar in the forex markets. Standard Chartered Bank said that dollar/shilling pair maintained its current levels as the market experienced relatively matched flows.

"We expect a similar trend to continue today as demand from the oil and gas sector is anticipated to match the dollar flows. The market will remain slightly volatile," the bank said on its daily market report of yesterday. The oil bill is higher compared to combined machinery and other consumer goods at 1.91billion US dollars and 1.67 billion US dollars respectively.

Oil cost is no match for total imports for transport equipment, building materials, raw materials, foodstuff and fertilizers put together at 1.04billion, 758.4 million, 816.5million, 657.5 million and 124.6 million all in US dollars respectively.

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