The country’s year-on-year inflation is projected to fall to 9 per cent
by June this year as a result of expected drop in fuel prices and bumper
harvests that are likely to moderate food prices, the International Monetary
Fund (IMF) has said.
The country experienced inflation rate of 19.8 per cent last December,
the highest in 15 years, significantly reducing consumers’ purchasing power.
The IMF cited the tighter monetary and fiscal policies as the other factors
that would lower the inflation rate to single digit.
The Bretton Woods institution however cautioned in its Tanzania’s
country report that authorities should stand ready to tighten liquidity further
if inflationary pressures build.“The core rate of inflation and risks from the
exchange rate should be monitored closely.
If needed, policy tightening should be prompt to avoid a build up of
currency market pressure,” IMF said.
The shilling yesterday slightly gained
ground against the greenback to reach 1,603/- on the back of some inflows in
the interbank and corporate markets.
Money market reports show that the shilling is gaining ground since
last December. In October 2011 the shilling reached all time low of 1,870/- a
dollar, compelling the Bank of Tanzania to intervene to reduce money on circulation.
On international reserves cover, the IMF
shows concern as the level is continuing to decline gradually and is projected
to remain close to four months of imports.
“We encourage the authorities to maintain a level of international
reserves that would continue to provide a buffer against external shocks,” the
report indicates. On a bid to tame
budget deficit in raising inflation, the fiscal policy is being tightened for
2011/12 because of the deteriorating financing climate since mid-2011.
One of the measures is to eliminating non-priority recurrent spending
and delaying some development spending to next year. “This will reduce the projected overall
fiscal deficit for the current fiscal year from a budgeted 7.5 to 6.5 per cent
of GDP,” IMF team observed.
It added:
further tightening of fiscal policies will be needed in the 2012/13 budget to
further reduce the overall deficit and to keep net domestic financing at low
levels. The country GDP is around
60trn/-.
The economy growth in 2011/12 is projected to ease to 6 per cent under
the impact of power outages and softening world economy. For 2012/13, a gradual
growth recovery is projected, assuming that energy issues are addressed in the
absence of negative external shocks.
Source: The Daily News,www.dailynews.co.tz, reported by Abduel Elinaza
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