Double-digit inflation, disharmony stalk Zanzibar economy

23Jan 2016
Dickson Ng`hily
The Guardian
Double-digit inflation, disharmony stalk Zanzibar economy

Economic diversification and indeed Zanzibar’s prospects for implementation of its Vision 2020, ZPRP and other strategies rest on political stability, in which case the government ought to work hard to maintain political harmony, thus safeguarding Isles macroeconomic stability.

Bank of Tanzania (BoT).

The observation is made in a report on current economic trends in the Isles, where it is stated that while the current rate of inflation on Tanzania Mainland stands at around 6.5 per cent, inflation in Zanzibar has now scaled up to double-digit inflation.

It is a worrying sign for an economy because of it has adverse effect on Isles living standards and economic performance, says the current Monthly Economic Review (MER) issued by the Bank of Tanzania (BoT). It indicates that Isles headline inflation rose to 10.9 percent in the year ending November 2015 from 8.7 percent in October 2014.

This increase (by 25.3 percent) according to the report is mostly driven by food prices, while on a month-to-month basis, headline inflation also rose by 2.2 percent in November 2015 from negative 0.4 percent a month earlier.
Traditionally high inflation is considered to be damaging to an economy, as it creates uncertainty and can wipe away the value of savings. Economists advise governments to target an inflation rate of two percent, suggesting that low inflation has unquestioned advantages to an economy.

Then again, the BoT’s review indicates that Isles food inflation increased to 15.8 percent in November from 11.7 percent in the year ending October 2015. It has been noted that the increase was to a large extent accounted for by rising prices of rice, fish, sugar, banana and wheat flour.

Prices of consumer goods with large weights recorded significant increases in prices during the year. On a month-to-month basis food inflation rose by 3.9 percent in November 2015 compared to a negative 1.0 percent (deflation) in October 2015, with the increase explained in the same way.

Non-food inflation edged up to 5.5 percent in the year ending November 2015 from 5.2 percent in the year ending October 2015, mainly due to increase in prices of cement.

Inflation of consumer goods and services excluding food and energy proxy for core inflation stood at 12.9 percent in the year ending November 2015 from 9.9 percent in the year ending October 2015.

On a month-to-month basis, core inflation picked up by 2.5 percent in October 2015 from negative 0.6 percent in October 2015. Annual inflation for energy and fuels was negative 8.2 percent in November 2015 similar to the preceding month.

With everything going up, Mustafa Juma Duni, a petty trader at Darajani Market told this reporter despite not being an expert, to be hones; inflation hurts a lot. It cuts the power to purchase; one has to pay more for the same goods or services.”

The trouble is that while the buyer needs more money no increment in salary or other incomes up at the same time. “It is unfortunate because while prices for many goods are rising, or remain steady in some cases, the packaging frequently is smaller. The problem is that with the new look of packaging some units have been taken away, so you are not buying the same unit in actual fact as you have been used to.”