23 Oct 2008


By Samuel Kamndaya 

Annual inflation surged to a 10-year high point of 11.6 percent in September owing to soaring food prices, official data from the National Bureau of Statistics show. 

The inflation rate hit the double digit for the first time in a decade due to skyrocketing food prices in the Holy month of Ramadhan. 

In August this year, the inflation rate was 9.8 percent. The recent surge indicates a 1.8-point increase within a month. In February this year, inflation was 8.9 percent. 

Analysts say the Government would not be able to bring down the inflation rate to seven percent by the end of the current financial year. 

"The seven per cent goal is now unrealistic since, under the current system, Tanzania has nothing in place to control food and fuel prices, the two most dominant factors in the country's inflation basket," said Dr Honest Ngowi who lectures at Mzumbe University. 

He said since the inflationary spiral was mainly on food, fuel and other production factors, it would be very difficult for the country to control it in the short-term. 

"It could be easily contained if it was caused by excess money supply on the market. However, this is due to production factors," he said. 
He said this could worsen considering that the holiday season was just around the corner. 

Dr Semboja Haji of the University of Dar es Salaam's Economic Research Bureau (ERB) also said: "Inflation will now be fluctuating between 10 and 12 percent. It requires magic for the government to bring it back to seven per cent," he said. 

He criticised the government for having no mechanism in place to protect the country from the negative effects of economic developments outside. 

Food makes over 55 percent of Tanzania's inflation basket. But Dr Semboja suggested that the development was due to bad policies. 
"I find no reason why food prices in Tanzania should be going up while we have a capacity of producing enough to meet the local demand as well for exports," he said. 

He urged the government to have price mechanisms for sensitive products like food and fuel. 

He cited the Energy and Water Utilities Regulatory Authority (Ewura), saying it should understand that local companies were colluding to increase prices even when there was nothing to force them to increase the prices. 

In that respect, the don said, there was no reason to stick to the concept of market pricing while companies were conspiring among themselves to increase prices willy-nilly.


SOURCE: The Citizen

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