INFLATION DIGITS LIKELY TO BE ON THE RISE IN TANZANIA DUE TO FAILURE IN FOOD GRAIN PRODUCTION.
Economic Report By Leo Odera Omolo
TANZANIA is now forecasting low food production, far from previous projections, following crop destruction by heavy rains in 18 regions early this year.
The drop in food production could have a negative impact on inflation rate. It could affect the government’s effort to lower it to single-digit levels in the next fiscal year.
Tanzania was in the 2008/2009 season expected to harvest 11.3 million metric tones of maize, which would be an increase of 600,000 tones, from 10.9 million tones in 2008/2009 fiscal year. But late rains have diminished all hopes of reaching that target.
Most of the regions, including its grain producing regions classified as “Big Five” in the country, have also been experiencing floods. These have caused peasants crops in Morogoro and Dodoma and even several commercial farms to be wiped out.
The influential Nairobi weekly, the EASTAFRICAN last week quoted the country’s Director of Food Security in the Ministry of Agriculture, John Mgodo, as saying that it is too early to issue forecasts, but that the matter is being monitored closely.
But given the situation on the ground, with most of the major regions affected, a high number of people displaced and cut-off road communication, the production might go down by over 20 per cent. Food prices is the major component, which influences the calculations of the inflation rate to determine its down or upward trend.
Bank of Tanzania Governor, Prof. Bemo Ndulu, was also quoted as saying that food is the main culprit that increases the rate of inflation, accounting for over 8.0 per cent out of 12.2 per cent at last December rate.
Ndulu said that increasing food production is the only way to arrest the double-digit inflation figure, which is on the rise.
To do away with food prices “dominance when calculating inflation”, the National Bureau of Statistics {NBS} is set to revise its way of calculating the rate from arithmetic to geometric.
That way, the eight averages will be the change on base of prices, the casket of goods and services, and weight in general.
The director of Policy and Research Confederation of Tanzania Industries, Hussein Kamote, said in a recent interview that by using the geometric system, the inflation figure will decline.
The new method is expected to reduce the influence of high food prices and bring down inflation rates.
Food makes upto 55.9 per cent of the basket of goods and services used to measure inflation.
Grain reserve stocks under the National Food Reserve Agency as per last October amounted to 107,177 tones of maize, while sorghum represented a decrease of 22 per cent from 110,278 tones at the end of the proceeding month. It was 64 per cent lower than stocks of the previous October.
The decline in the stocks was on account of sale of grain to the government for distributions to regions and districts with food deficit.
Ends
leooderaomolo@yahoo.com