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Inflation still choking economy

According to the National Bureau of Statistics (NBS), inflation dropped to 19.4 per cent in February from the upward of 19.7 per cent in January, indicating the rate of price increase for commodities had declined during the month under review compared to the previous month. However, the drop was still too small for meaning impact.

Spending is one of the significant instruments that may result in the overall increase in the production of goods and services in any economy.

The increase in economic activity can also lead to job creation and household incomes within the economy. However, the drop in February was somewhat smaller than was expected due to price pressure from food, oil and electricity, calling for the Bank of Tanzania (BoT) and the government to continue close monitoring of both monetary and fiscal policies.

The hiked electricity charges, food and oil prices and alcoholic beverages in recent months exerted pressure on inflation, contributing to increase in costs of living. Food and Non-alcoholic beverages Inflation Rate has decreased to 26.7 per cent in February this year from 27.8 per cent recorded in January 2012.

Food prices contribute greatly in fueling inflation to nearly 50 per cent. Likewise, the annual Inflation rate which excludes food and energy decreased to 8.6 per cent from 9 per cent of the previous month. But the annual Inflation Rate for energy increased to 33.5 per cent in February 2012 from 30.1 per cent in January. The increase was highly attributed to the increase in electric supply tariffs by 36.7 per cent.

However, the overall index went up to 127.05 in February 2012 from 106.41 recorded in the same period of the preceding period. Consumers cut back spending sharply as prices rise outpacing meagre salary increases. Likewise, spending cuts are also hurting household budgets. The lack of consumption is likely to drive a number of wellknown high street brands out of business, as well as forcing some retailers to turn to discounts to lure cash-strapped consumers.

The Confederation of Tanzania Industries (CTI) has expressed concern over the impact of rising food prices on the manufacturing sector because of the eroded consumer income. As household incomes are eroded by high food prices, demand for other goods and services may automatically fall,” noted Mr Hussein Kamote, the CTI Director of Policy and Advocacy in an interview in Dar es Salaam.

He said when a large portion of household earnings is spent on food, demand for non-food products like building materials, clothes, shoes, alcohol and soft drinks drops, thus impacting heavily on the returns of the manufacturing companies. Mr Kamote said investments in the agricultural sector should focus on local needs to ensure that the whole country is supplied with enough food, as this would help stabilise prices.

The infrastructure development could be a significant strategy in stabilising prices as well as harnessing market potentials in neighbouring countries. Food prices provide important insights into how household budgets and provision for the family’s nutrition and health are being squeezed. The events related to food crisis might cause serious impact on the well-being of lower-income households, which spend more than 70 per cent of their earnings for the purchase of basic needs.

A survey conducted at Tandale, Kisutu and Tandika markets in Dar es Salaam established that prices have continued to edge upwards since January. The Vice-Chairperson of the Tandika Market, Mr Athuman Jongo, said the retail price for rice has risen to 2,500/- from 1,800/- per kilo.

Beans have gone up to 2,000/- and 2,500/- per kilo from 1,200/- and 1,500/-. For Mr Samwel Nyamhongo, a dealer in assorted food products at the Kisutu market, the rising transport costs is the major reason behind skyrocketing food prices in the country.

THE importation of motorcycles and rickshaws has helped ...

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Author: SEBASTIAN MRINDOKO

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