East African Business Week

DAR ES SALAAM, TANZANIA - The inflation rate has surged to 8%  in March this year being the highest in 12 months. This comes amid worries from experts that the rate would backtrack recent economic growth.
 The rate climbed from 7.4% in the preceding month - February, attributed to high costs of mainly staple food, rising fuel prices and energy as the major contributors to the rising inflation.
 Dar es Salaam University Economics lecturer Dr Donath Olomi, says the direction of the inflation "is not pleasing" as any increment of the rate pushes the costs of living and production to the higher side.
 "This is not healthy for the economy, it derails investment as the cost of lending rises," Dr Olomi, adds, "The rate should be in the region of five or lower per cent. We should aim there."
 The problem of inflation brings hardship to consumers, especially employees, by reducing their purchasing power and eroding saving ability. In the end increasing lending costs.
 Employees, he noted, don't immediately means to increasing their salaries and therefore suffer the most.
 Producers, according to the lecturer, normally can cushion production inflation by increasing prices of goods to close the gap, but subject to elasticity of prices.
 Another economist, Dr Semboja says Tanzania economy faces two challenges of inflation - to cope with rising population and to be able to feed the extra-mouths and the producers' sides, experience high costs of intermediates industrial goods.
 "The key issue here is to raise productivity,"  Semboja says, adding, "The good thing is that the Government's Kilimo Kwanza initiative has started to payoff. This is a good sign" because it will lead  to food self sufficiency.
 "If only we could produce surplus for export, this could cushion the US dollar pressure on the Tanzania Shilling" and thus jump-start the economic growth, the economist says.
 Of all the exports, according to Bank of Tanzania (BoT) Economic Monthly Review March 2011 report, the most notable recovery was registered in manufactured goods which more than doubled to US$1.02 billion during the year to February 2011.
 Much of the increase was registered in plastic items, textiles, apparels and iron/steel and related products, to claim second position controlling 30% as against 48% of gold in total commodities exported in February.
 On other hand, the Director of Population Census and Social Statistics of the National Bureau of Statistics (NBS), Ephraim Kwesigabo, says the situation is not that bad compared to the previous months, as the country is approaching harvest season.
 "We anticipate the inflation to slow down and will not reach a double-digit, as we are approaching the harvesting season, because food cluster is heavy weighted on Consumer Price Index (CPI)," Kwesigabo said.