Tanzania Daily News (Dar es Salaam)

20 February 2013

Tanzania: Increased Food Production to Sustain Stable Inflation

ENHANCING capacity for food production and distribution are some of the deliberate measures that will sustain low and stable inflation over the medium term.

Annual headline inflation continued to ease, reaching 10.9 per cent for the year ending January this year, down from a peak of 19.8 per cent recorded in the corresponding period last year.

The market survey conducted by the Bank of Tanzania (BoT) in October last year shows that the improved food supply in the Eastern Africa region, tight monetary policy, fiscal consolidation and stability in the nominal exchange rate contributed to the decline.

The BoT's Monetary Policy Statement (MPS) added that the management of strategic food reserves and importation of food to cover any shortfall were also some of the measures which help to contain inflation to single digit.

However, the upside risks to inflation remain associated with arbitrage from the existing price differences in the Eastern Africa region particularly on rice, sugar, and maize which are lowest in Tanzania.

In addition, balance of payment pressures arising from large payments in foreign exchange for non-traded services, particularly power purchase from Independent Power Producers (IPPs) and road contractors, may put pressure on the exchange rate and in turn increase the prices of imported goods.

In an interview last week, the Economic and Social Research Foundation (ESRF) Executive Director Dr Bohela Lunogelo said export ban imposed some years ago is to be blamed for the limited supply of cereals, leading to high prices.

"Most farmers of maize abandoned production in the subsequent seasons basically due to the export ban that plunged them into heavy losses...they instead opted for production of other seed oils that assured them of markets," he said. He said supply of food products would continue to be insufficient for most part of the season unless farmers are given assurance of reliable markets.

The situation will pull up prices unless there is close control by the National Food Reserve Authority (NFRA) to ensure sufficient supply in the market. The BoT monthly report for the year ending January this year underscored that the average wholesale prices for major food crops increased, with sorghum registering the highest increase followed by maize and rice.

Similarly, on a year-on-year basis, prices for the crops increased with maize registering the highest increase. For example, the price for a 100kg bag of maize rose to 72,496.6/- in December last year compared to 42,970.1/- recorded in the corresponding period in 2011, which is equivalent to 68.7 per cent change. On monthly basis, prices changed by 11 per cent to 72,496.6/- in December, from 65,340.6/- registered in November 2012.

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