The Bank of Tanzania has blamed high inflation on most of the country’s trade partners, and the high commodity prices for continued pressures on its domestic market.
“Because of this unpleasant external environment, combined with elevating domestic supply-side constraints, inflation continued to trend upward, reaching 4.8 percent in September 2022 in Tanzania mainland,” the central bank said in its economic bulletin for the third quarter of 2022 ending September published December 26.
It cited the same reasons for average inflation rising to 4.6 percent during the quarter compared to 4.1 percent in Quarter 2 of 2022 and 3.9 percent year-on-year from Quarter 3 of 2021.
Monetary policy tightening
The rising inflationary pressures due to persistent global shocks had “complicated the conduct of monetary policy by heightening the inflation-growth trade-off,” the central bank said.
It added: “In view of this, and given the inflationary pressures are driven by supply-side factors, the Bank has opted for lessening monetary policy accommodation rather than full-blown tightening,”
“This cautious policy stance aims at aligning liquidity with monetary targets set forth under the IMF Extended Credit Facility (ECF) programme and safeguarding growth of economic activities while containing inflationary pressures.”
BoT noted that similar rising patterns of inflation were experienced in the East African Community (EAC) and Southern African Development Community (SADC) regional blocs to which Tanzania belongs, and trades with most of the other member states.
But the central bank also underlined that despite edging up, inflation remained in line with the country’s 2022/2023 fiscal year target and both EAC and SADC convergence criteria.
The main drivers of rising inflation during the quarter were prices of food, transport and building materials, it reported.
The rise in headline inflation in Zanzibar was much worse, up to an average of 5.6 percent from 2.2 percent in the third quarter of 2021, also driven by rising food prices.
According to the BoT quarterly bulletin, Tanzania’s current account recorded a deficit of $1.7 billion compared with just $331.3 million in the corresponding quarter of 2021, saying this was “largely explained” by a higher imports bill.
“The external sector continued to be affected by the war in Ukraine and prolonged Covid-19 outbreaks and lockdowns in China that have led to disruptions of supply chains, causing high commodity prices.”
Government revenue and grants amounted to Tsh6.31 trillion ($2.7 billion) during the quarter against an expenditure of Tsh8.45 trillion ($3.6 billion).
National debt increased by almost $180 million to $38.44 billion at the end of September 2022 from $38.26 billion at the end of June 2022.