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The spectre of trifling revenue and roaring inflation rates
2006-05-10 08:27:02
By Mireny John
Government’s total revenue collection during the month of February dropped down by Tsh.5 billion, missing the set target of Tsh.163.1billion.
At the same time, the Bank of Tanzania’s Monthly Economic Review for the month of March, likewise indicates that the annual inflation rate heightened to 5.8 percent, down from 5.4 percent rate of January.
At the same time, as one would have expected, food shortages continued to hurt many parts of the country, especially in the remote rural areas.
The missed revenue projections can be explained by prolonged drought which in turn occasioned acute energy crisis for about six months.
Some factories had to close down operations because frequent power shedding brought in diseconomies of scale.
The manufacturing sector was hardest hit of all, and low industrial productivity for a revenue source which contributes about 40 percent of total government revenue entails disaster.
Similarly, stretched out drought caused pan-territorial food shortages and the underlying inflationary shock. The price of petroleum products which doubled since mid last year, has equally imported some inflationary pressures.
The paradox arises from the fact that relief food distributed by the government to places suffering food shortages is a subsidized one, while private food importers have enjoyed a range of tax clemencies in order to make foodstuff accessible to the poor.
Fears abound that substantial amount of relief food just landed into the normal market sheds, thus subduing the subsidy impact.
Otherwise, poverty-stricken rural populace failed even to buy the subsidized foodstuff and opted to subsist.
The ongoing rains bring hopes of bumper grain harvests this year, but unless our traditional and modern grain storage facilities are improved, 40 percent of the produce will be lost as food to pests.
Energy crisis of the magnitude of last year should not be allowed to recur again at any cost. All alternatives to electricity generation should be explored and developed when possible.
The struggling baby, the manufacturing sector, must be given room to grow and mature.
New industrial development efforts like special economic zones (SECs) and economic processing zones (EPZs) will end up in the dustbin unless energy supply becomes an assured aspect of running the economy.
One of the best ways for containing inflation is to increase national output and maintain money supply put.
Both fiscal and monetary policies need to converge somewhere in order to boost growth and fight inflation.
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