Tanzania Daily News (Dar es Salaam)

22 January 2013

Tanzania: Dar es Salaam's Inflation Declines At Snail's Pace

LAST year's headline inflation declining tempo was termed as good but went down at snail's pace compared to the other four East African partner states that reached around five per cent.

Going by data face value and visualisation for the three East African states, it shows Dar es Salaam inflation for the last one year dropped by 7.6 per cent from 19.7 of last January to 12.1 per cent of last month, which is less than one per cent curbing rate per month.

On the other hand at the beginning of last year, Kenya's inflation rate was 18.9 per cent and Uganda 25.68 per cent, while Tanzania stood at 19.8 per cent but pronounced actions lowered the former rate faster than the latter. However, at the end of last December, Nairobi and Kampala reduced the inflation rates to 3.2 per cent and 5.5 per cent respectively compared to 12.1 per cent of Dar es Salaam.

The Mzumbe University's Dar es Salaam Business School Senior Lecturer (Economics), Dr Honest Ngowi, said the Dar es Salaam inflation for December is much higher for the other East African Community (EAC) partner states. "The decline is good but rather at a snail's pace," Dr Ngowi said adding, "(and) it is still much far from the policy goal of single digit of about 5 per cent."

The economist said: "I see it to be the same dream as that of 2012 when the single currency project could not see the light of the day. "If it is to be a reality this year, inflation in Tanzania has to decline very fast so as to reach the inflation macroeconomics convergence criteria of about 4 per cent, that is needed before embracing the single currency (in EAC bloc by December 2013)."

According to Dr Ngowi, the problem of the country's inflation is structural issues blended by monetary matters that hinder the fast curbing pace of bringing to equilibrium Consumer Price Index. "Much has to be done to address the structural issues as well as monetary issues that are responsible for the rather disturbing inflation movements in Tanzania," the lecturer said.

The IMF acknowledged on the last week Country Report that the inflation has gradually declined, though it has not yet reached the authorities' singledigit objective. "A slight reduction in the growth of monetary aggregates is expected to bring inflation below 10 per cent by end June, 2013," IMF said, "Nevertheless, inflation remains significantly higher than in Kenya and Uganda, where disinflation policies were more pronounced and undertaken earlier."

However, the government said it looked seriously on the inflation issues as the prices of staple foods are expected to continue declining in the coming months, following good harvest in June-August 2013. Other factors that ease inflationary pressure in the coming months are reduction in the production costs due to stability in power supply, continued stability in the world market oil prices and stabilization of the shilling against US dollar observed since last January.

According to the letter of intent to IMF sent last week and signed by Minister of Finance and BoT Governor: "Based on these factors, headline inflation is expected to continue easing, reaching a single digit level by June 2013." The University of Dar es Salaam Senior Lecturer (Economics), Dr Jehovanness Aikael, said the declining rate of less than one per cent is bona fide since the figure was very high at 19.7 at the beginning of last year.

"The dropping rate has no concern at all, actually is authentic É it could be a concern if the rate dropped like Kenya and Uganda that is too fast to be realistic," Dr Aikael told the 'Daily News' through phone. According to him, given the current falling rate, Tanzania would achieve a very remarkable single-digit rate in the next two to three months. The Minister for Finance and Economic Affairs, Dr William Mgimwa told journalists in Dar es Salaam that the inflation was projected to reach a single-digit coming this June, without giving figure.

However, Dr Ngowi said "talking to men and women in the streets, they do not see the decline felt in their lives. Faster decline in inflation is needed to reach the policy goals but most importantly to ease people's hard lives." The National Bureau of Statistics (NBS) released figure last week shows that the country headline inflation of last December stagnated at 12.1 per cent which was a similar rate recorded in November.

NBS, on the other hand, said the last month inflation figure "explains that the speed of price increase for commodities in December, 2012 has remained unchanged compared to the speed recorded in November, 2012." The Bureau said food and non-alcoholic beverages inflation rate has decreased to 13.1 per cent in December 2012 from 13.4 per cent recorded in November, 2012.

And annual inflation rate for food consumed at home and away from home has also declined to 13.3 per cent in December 2012 as compared to 13.7 per cent in November 2012. "On the other hand," NBS said, "the 12 month index change for non-food products has increased to 10.3 per cent in December 2012 from 10.1 per cent recorded in November 2012." While the annual inflation, which excludes food and energy for the month of December 2012 has increased to 8.9 per cent from 8.5 per cent recorded in November, 2012.

On the contrary, the annual inflation for energy has decreased to 17.8 per cent compared to 18.6 per cent recorded in November 2012. All in all, core inflation - excluding food and energy - rose gradually to a peak of 9.2 per cent in August 2012, before declining to 8.9 per cent in December 2012.

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