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`Govt is grappling with skyrocketing food, fuel prices`
2008-05-14 10:09:45
By Lusekelo Philemon
The Government has declared that it is keen on curbing skyrocketing food and fuel prices, which are hitting the poor most, State House spokesperson said yesterday.
Speaking at a news conference in Dar es Salaam, State House communications director Salva Rweyemamu said increasing prices of basic items like food and energy were now a global concern.
``The government is trying to put all necessary control measures in place to mitigate the adverse spillover effects of this problem at domestic level,`` he said, adding that there had been an outcry across the world over food prices.
Latest economic review released by the Bank of Tanzania (BoT) says inflation rate reached 8.9 per cent last March.
It cites increases in consumer prices for items such as drinks, tobacco, fuel, electricity, water and transportation as the chief cause for rising inflation.
The State House official said that under the liberalised market system, the government had a very minimal role to play in the control of commodity prices.
He however urged farmers to produce more food crops, saying the move would help the country out of catastrophic food crisis situation.
``We should not allow excessive importation of food,” he said.
Home currency is particularly susceptible to drought, which prompts importation of food inflation, coupled by increased costs related to oil imports from abroad.
Tanzania has suffered intermittent droughts since 2004 when inflation rate was 4.4 percent, then increased to 5.4 percent in 2005, and later decreased to 4.3 percent in 2006. It re-emerged last year to reach 5.9 percent.
He said farmers also should develop a culture of preserving harvested food crops.
Analysts are also worried that current rising inflation is also contributed by low international flow of capital, which in turn has been occasioned by global credit crunch, especially the crisis related to collapse of US the sub-prime mortgage sector.
There are also concerns that foreign direct investment flows are equally on the wane, as the administration looks leaned only to serious foreign investors.
The obtaining inflation rate is the highest since early 2000s when it had settled at 4.4 percent, propped up by a strong local currency and influx of huge FDIs, especially in the mining sector.
It had by then been reduced from about 30 percent in the early 1980s through tight monetary policy and deliberate boosting of manufacturing and exports.
BoT has said it would consolidate these measures even further.
The government`s statement comes in the wake of the International Monetary Fund (IMF)`s warning that global inflation had re-emerged as a major threat to the world`s economy.
John Lipsky, the IMF deputy managing director said inflation concerns had re-surfaced after years of quiescence due to soaring energy and food prices. He said growth was slowing but headline inflation was accelerating.
The IMF warning came as crude oil prices hit a record increase of almost USD124, up by 99 per cent over last 12 months, as customers scrambled to take out insurance against prices rising above USD200 a barrel.
Lipsky said the forces pushing prices up appeared to be fundamental in nature and these were being amplified by lower interest rates and the US dollar’s decline.
He was optimistic that there would not be a repeat of the early 1970s when increasing energy prices ushered in a period of rising inflation expectations and accelerating inflation. However, he said this risk could not be discarded out of hand.
Lipsky said policy makers must respond aggressively to any signs of rising inflation expectations, lest the impressive gains in global stability in recent years be sacrificed.
On the other hand, experts say the IMF has warned that food prices will remain high for the foreseeable future.
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