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Tanzania: Why Tanzania's Inflation Rate Has Remained Lowest in East Africa
Credit: Josephine ChristopherDar es Salaam — Tanzania recorded the lowest inflation rates among the East African nations last year, with analysts saying the trend signals stable prices in the country.
Tanzania's annual inflation averaged 3.6 percent compared to Kenya' 4.4 percent and Uganda's 4.3 percent, according to data from the National Bureau of Statistics (NBS). Rwanda inflation stood at six percent.
Economic analysts say the trend indicated that the country's monetary policies were able to control the rate of price change of commodities compared to other countries. The single-digit inflation rate was below the government target of five percent. The inflation reflects adequate supply of food and price stability in the economy, says Prof Honest Ngowi of Mzumbe University.
"This also shows that the Bank of Tanzania (BoT) has devised prudent monetary policies that have supported the stable and low inflation rate," he said.
According to the National Bureau of Statistics (NBS), for the past three years, Tanzania was able to subdue the level of inflation rate below the medium-term target of five percent. In 2019, the country recorded an average of 3.4 percent while it recorded 3.5 percent in 2018. Prof Haji Semboja of the State University of Zanzibar said the subdued inflation rate can also be considered appropriate to influence investment in the country, and signals a good moment for the government to support local private sectors. "With price stability and a good economic growth level, the government should promote, nurture and facilitate the country's private sector especially the locals," he said.
Prof Semboja said having prudent monetary policies and institutions to support the private sector would also help sustain development of the country.
According to the central bank, the country's medium-term target of inflation is set at five percent, consistent with the EAC and Southern African Development Community (Sadc) convergence criteria of eight percent (set as maximum) and three to seven percent, respectively.
Although the Tanzanian inflation rate was lower compared to other countries, all countries in the EAC bloc maintained their inflation below the convergence criteria in 2020. A seasoned economist Prof Samuel Wangwe from the University of Dar es Salaam (UDSM) said all countries in the region showed ability to maintain their inflation at an appropriate level.
Credit: Borrowing goes through the roof as EA amasses $73b in external debt - The East African
The International Debt Statistics 2021 report by the World Bank shows that between 2009 and 2019, countries in the region increased external borrowing by nearly four times, from $19.9 billion to $73.8 billion.
Countries in the region have seen increased borrowing over the past decade, amassing $73.8 billion in external debt.
The International Debt Statistics 2021 report by the World Bank shows that between 2009 and 2019, countries in the region increased external borrowing by nearly four times, from $19.9 billion to $73.8 billion.
During the period, Kenya was the biggest borrower raising the stock of external debt from $8.5 billion to $34.2 billion, followed by Tanzania, from $7.6 billion to $19.5 billion.
Uganda and Rwanda accumulated $13.9 billion and $6.2 billion in external debt over the decade, from $2.7 billion and $1.1 billion respectively.
Burundi, however, saw the stock of its external debt decline from $607.2 million in 2009 to $578.4 million in 2019.
SLOW GROWTH
“The overhang of debt may slow investment and growth for years to come, a burden on the poor that now needs to be addressed by creditors across the world taking prompt steps to permanently reduce unsustainable debt stocks for the poorest countries,” said David Malpass, the World Bank Group president.
In the region, the report shows that in 2019 Kenya spent $3 billion in principal repayments and $1.2 billion in interest repayments, while Tanzania spent $1.1 billion and $200 million respectively.
For Uganda, $166 million went into principal repayment and $115 million in interest repayment, with Rwanda spending $31.5 billion and $133.2 million respectively.
The report states that with almost half of all low-income countries either already in debt distress or at a high risk of it, the burden of debt is bound to worsen with countries borrowing more to tackle the Covid-19 pandemic.
Many countries applied for debt relief with the International Monetary Fund in October, which granted a six-month extension to 28 low income nations with Rwanda being among the beneficiaries.
Total external debt stocks of low-income countries eligible for debt service suspension rose by nine per cent in 2019 to $744 billion, equivalent on average to one-third of their combined gross national income.
“The risk is that too many poor countries will emerge from the Covid-19 crisis with a large debt overhang that could take years to manage,” said Mr Malpass.
He added that to build durable economic recoveries, countries will need to achieve long-term debt sustainability.
The report shows that the external debt stock of 120 low and middle income countries rose by 5.4 percent in 2019 to $8.1 trillion, a rate of accumulation almost identical to that in 2018, but close to half the 10.5 percent rise in external debt stock recorded in 2017.
The increase in external debt stocks in 2019 was the outcome of net debt inflows of $383 billion.
Countries in sub-Saharan Africa accounted for the largest share of net long-term inflows at 24 per cent, followed by the East Asia and Pacific region.
Credit: Tanzania's debt surging, but government says it’s still sustainable - The East African
Tanzania’s national debt, currently at Tsh71.4 trillion ($30.63 billion), is increasing, and the central bank says the dollar's depreciation against other currencies, in which the debt is denominated, is to blame, particularly the Special Drawing Rights (SDRs).
According to the latest Bank of Tanzania monthly economic review for December 2020, external debt stock was $23.8 billion at the end of November 2020, representing an increase of $145.5 million from October 2020 and $1,496.1 million from November 2019.
By the end of October 2020, external debt stood at $23.668 billion: In October 2019, debt from external borrowing was $22.317 billion.
Despite the increase, Ministry of Finance spokesperson Benny Mwaipaja told The EastAfrican that the debt is still sustainable and "indicatives show the present value of public debt-to-GDP ratio remains favourable”.