Rising food, energy prices add misery on inflation trends

Higher food and energy prices may undermine the ongoing efforts to bring back inflation to single digit, experts have warned.

Headline inflation rate was going down since January, after reaching the highest point in 15 years in December 2011 at 19.7 per cent, but dropped to 10.4 as of last month. 

A Tanzania Securities research paper ‘Equity Research on Local Listed Banks Tanzania’ indicates that the inflation rate was expected to improve persistently in this year.

“There are some indications that inflation is now bottoming out,” the report says. “We are forecasting consumer price inflation to drop into the single digit in the first quarter for 2013.” 

“However, we expect inflation to return to double digits in the second quarter, averaging 12 per cent over the year, significantly above the average of 6.9 per cent over 2000-10”.

Food and fuel prices are the main factors to blame. Prices of maize flour and rice which are staple foods have gone up in many parts of the country. Fuel prices, especially of petrol and diesel are also on the steady rise.

The document attributed the trend to increases in food and energy prices which remain relatively contained as the persistently strong momentum in the all items minus food and energy category indicates more structural inflationary pressures.

The International Monetary Fund (IMF) has already said the rate was expected to climb down to below 10 per cent at the end of June, this year, on the back of ongoing structural reforms in the fiscal area that will play a crucial role toward medium term fiscal adjustment.

“(Thus) a slight reduction in the growth of monetary aggregates is expected to bring inflation below 10 per cent by end June 2013,” IMF said early this year when answering the country’s letter of intent.

“Though the institution acknowledged on its Country Report that inflation has gradually declined, but it has not yet ‘reached the authorities’ single-digit objective.”

The Mzumbe University’s Dar es Salaam Business School Senior Lecturer (economics), Dr Honest Ngowi, said “the decline is at snail’s pace (though) 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.”

Source: The Daily News, www.dailynews.co.tz, reported from Dar es Salaam

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