Tanzania Daily News (Dar es Salaam)

16 November 2012

Tanzania: Food Prices Slow Down Inflation

INFLATION rate slowed down to 12.9 per cent in October, which is 15 months low, thanks to a slower rise in food prices and energy costs, a statement issued by the National Bureau of Statistics (NBS) in Dar es Salaam disclosed.

The rate dropped from 13.5 of September to register a tenth straight month drop since January this year when inflation clocked 19.7 per cent. NBS statement attributed the slowing down to food and energy costs that have slightly jumped down to 15 per cent and 18.4 per cent from 15.8 per cent and 19.4 per cent on monthly basis respectively.

Also non food rate fell to 10.1 per cent from 10.5 per cent, while non food and non energy rate dropped to 8.6 per cent to 8.6 per cent, signifying further drop in the coming months. Economists have it that the inflation rate is expected to keep falling for the rest of the year to declining food prices, but was unlikely to fall to single-digit levels before next year.

When interviewed, Open University of Tanzania Senior Lecturer (Economics) Dr Hildebrand Shayo said the rate, despite going down was still too high to subdue costs of living. "Prices of commodities are still too high while productivity has gone down, Dr Shayo said, adding that level of money in circulation was high, while exports were not sufficing import bills.

However, he said, there is a need to make a through scientific analysis by regressing the economic variables to determine the actual impact of current level of inflation rate, which stands at a double-digit. Another Dar es Salaam-based economist, Mr Andrew Mushi, said reduction of less than 2 per cent does not create positive impact on consumers, unless a significant drop is registered.

"Drop in inflation by one or two per cent is only felt when in the basket, basic needs are affordable by majority especially in rural areas. The impact would not be felt by a common man, as cost of living is still high," said Mr Mushi, former Urafiki Textile Mills General Manager.

He gave an example of how some prices had recently gone up, including fuel, meat and maize flour prices, thus affecting the purchase power of ordinary citizen, whose daily income had remained unchanged. A cross-section of people interviewed said that despite the declining of inflation rate, the reality on the ground does not reflect the statistician's analysis as the costs of goods and services are still high.

"The reality on the ground is that commodity prices are still high and costs of living are going up," Mr Leonard Joseph, a Tabata resident, told the 'Daily News' in Dar es Salaam yesterday. He said the prices of sugar and rice, the main drivers of the inflation rate, remained high: "I beg to differ with statisticians."

Mid this year, the government reversed the single digit goal to mid next year saying the previous date was not realistic due to pressures from energy, food and fuel costs. The Bank of Tanzania and International Monetary Fund (IMF) previously projected that the inflation will hit a single-digit at the end of June this year before rescheduling it to December and then next June.

According to BoT's Monetary Policy Statement of June 2012, the target has been set to next June, expecting easing of pressures on global oil prices, stability of shilling and food supply improvement. "The projected general decline in global inflation is expected to be also reflected in domestic inflation trend... inflation is projected to continue with the downward trend in the near to medium term," the statement says.

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