Bloomberg News

Tanzania Inflation May Drop to 9% by June, Bank Official Says

October 10, 2011

Oct. 10 (Bloomberg) -- Inflation in Tanzania is set to decelerate as a slowdown in global growth reduces crude prices, curbing the cost of fuel imports for east Africa’s second- biggest economy, a Bank of Tanzania official said.

“We expect to return to single-digit inflation, around 9 percent by June,” Joseph Masawe, director of economic research and policy at the bank, said in a phone interview Oct. 7 from Dar es Salaam, the commercial capital. “We would at least reduce imported inflation” as oil falls, he said.

Inflation accelerated for a 10th month in August, reaching 14.1 percent as energy and food costs surged, the National Bureau of Statistics said Sept. 15. Oil prices have increased 22 percent since the start of 2009. The cost of Tanzania’s oil imports surged 65 percent in the three months through June compared with the previous quarter, and comprised 34 percent of total imports, according to central bank data.

The International Monetary Fund on Sept. 20 said it cut its forecast for global growth to 4 percent this year and next, compared with June forecasts of 4.3 percent in 2011 and 4.5 percent in 2012. Gross domestic product in sub-Saharan Africa may increase 5.2 percent this year, less than the 5.5 percent estimated in April, the IMF said.

Tanzania’s shilling has depreciated 13 percent this year against the dollar, reaching 1,714.5 on Oct. 7, the weakest level on record.

Shilling Drop ‘Benefit’

The central bank does “not mind benefiting” from depreciation of the shilling, which “will help our exporters gain more from selling their produce,” Masawe said. The weaker currency “will also control appetite for imports, and we need that given a wide current-account deficit.”

During the year through June 2011, Tanzania’s current- account gap widened to $2.7 billion compared to $2.5 billion the previous year, the central Bank said in an e-mailed statement Sept. 22.

The central bank won’t increase supply of dollars from a monthly average of $100 million to strengthen the shilling, Masawe said. “We supply dollars for the monetary purpose of controlling liquidity not the foreign-exchange rate,” he said.

--Editors: Ana Monteiro, Ben Holland

-0- Oct/10/2011 07:11 GMT

To contact the reporter on this story: David Malingha Doya in Dar es Salaam via Nairobi at pmrichardson@bloomberg.net

To contact the editor responsible for this story: Antony Sguazzin at asguazzin@bloomberg.net


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