18 December 2012

Tanzania: Inflation Drops Slightly to 12.1 Per Cent

HEADLINE inflation dropped to 12.1 per cent in November from 12.9 per cent in October largely due to decline in food prices and energy costs.

The National Bureau of Statistics (NBS), Director of Population and Social Statistics, Mr Ephraim Kwesigabo, said there were a number of variables attributed to slower fall of inflation rate compared to other East African countries.

"The slow pace in the fall of inflation rate can be attributed to various factors including exchange rate and monetary policy issues," he said. He added: "Our report assists policy makers to strategise actions to be taken but it does not mean the situation is bad as the country still have the lowest cereals prices in the region."

Inflation rate is expected to keep on falling due to declining food prices. However, the inflation rate, despite going down was still too high to subdue cost of living. He said prices of commodities were still too high while productivity has gone down; adding that level of money in circulation was high, while exports did not suffice import bills.

Drop in inflation by one or two per cent is only felt when in the basket, basic needs are affordable by the majority, especially those in rural areas. The impact would not be felt by a common man, as cost of living is still high.

Prices had recently gone up, including fuel, meat and maize flour prices, thus affecting the purchasing power of ordinary citizen, whose daily income had remained unchanged. Mid this year, the government reversed the single digit goal to mid next year saying the previous date was not realistic due to pressure from energy, food and fuel costs.

The BoT 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 the 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," reads the statement.

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