Tanzania's plan to mitigate rising cost of living

Dar es Salaam. The government of Tanzania has said that it will take several short and long-term measures in an effort to bring down the spiralling cost of living.

The measures, detailed by Finance and Planning minister, Dr Mwigulu Nchemba and his Investment, Industry and Trade counterpart, Dr Ashatu Kijaji, include ensuring that government institutions entrusted with checking product prices continue with their regulatory mechanism of trends in the market.

Special focus, said Dr Kijaji, would be on products that are manufactured locally by using domestic raw materials. “The government sees no reason why prices of such products should rise,” she said.

The government, through the Ministry of Investment, Industries and Trade, will sit down with manufacturers and come up with ways of dealing with domestic shocks and propose joint measures of dealing with external ones.

It (the government) has also come up with a system that shows the availability and prices of various products in the market on daily basis.

“We are also coming up with a call centre whereby citizens will make phone calls whenever they see price changes so that the government can work on them accordingly instead of depending on trade officers alone,” said Dr Kijaji.

Special incentives will be issued to importers of sunflower cooking oil while performance agreements will also be issued to those who will be availed with licenses to process palm oil in the country.

Sunflower farmers will receive modern seeds. In an effort to raise sunflower production and boost cooking oil availability in the country, the government will raise the volume of modern seeds distributed to farmers from 2,000 tonnes this year to 5,000 tonnes in the coming year.

“The long-term strategy remains that of creating a conducive environment for investors to come and invest in the local production of most of Tanzania’s imports,” she said, detailing how the available measures would see Tanzania raising its sugar production to meet domestic demand.

“Adopting a market-led economy, does not mean that the government should do away with its role of promoting fair competition in the market,” she said.

Expounding on the measures, Dr Nchemba said in its short term measures, the government intends to reduce import duty on sugar from within member states of the East African Community to levels that are less than 10 percent.

“We will then monitor the trend for up to two months,” he said, noting that further measures would be taken during the presentation of the 2022/23 budget in Parliament in June.

He said the government has already directed the Tanzania Revenue Authority (TRA) to also look for short-term measures in an effort to reduce the spiralling prices of cooking oil within one month from now, hinting that new import rates could be introduced in the coming few weeks.

The government will review regulatory fees and levies charged on petroleum products with a view to reducing them to levels that will bring some relief to Tanzanians.

“Here, we are talking of costs that involve us in government, including regulatory bodies, institutions and departments…We believe we can reduce some from these areas in order to reduce the burden on a Tanzanian consumer. Our team of experts will sit down within one week and deliberate on this,” he said.

He however said there was no way that the government could remove the entire road fund levy as charged on every litre of petroleum products. “If we do that, we will be damaging our roads and that will also result in an increase in transport costs. We want to work on this issue without causing other unintended negative outcomes,” he said.

The government will also look into ways of reducing costs associated with the importation of transport equipment, including trailers and others. “The idea is that when we reduce costs of fuel and transport equipment, fares will go down and benefit Tanzanians. If this is done and production improves, we will have reduced the costs of living effectively,” he said, asking Tanzanians to understand that a number of factors leading to the rise in the cost of living were not domestic but rather, imported, hence the need to remain vigilant and work overtime in their productive undertakings.

In their joint press conference, the two ministers blamed the rising costs of living in Tanzania on the global Covid-19 pandemic and the ongoing war between Russia and Ukraine.

“The Covid-19 pandemic, which resulted into lockdowns, disrupted the supply chain. It also raised the demand while supply remained limited. Traders also faced a challenge of a rise in shipping containers which resulted into the scarcity of some imported products locally,” said Dr Kijaji.

The war between Russia and Ukraine also contributed to the challenge, said Dr Kijaji.

Tanzania, she said, imports 800,000 tonnes out of its 900,000 tonnes annual demand for the product.

Most of the wheat is imported from Russia and a small percentage of it from Ukraine.

Similarly, before the Covid-19 pandemic, cooking oil prices were sold at about $700/tonne but after the lockdowns, prices rose to $1,760/tonnes. After the war, the price has gone up further to $1,980/tonne. “This is imported inflation,” she said.

Tanzania’s cooking oil demand currently stands at 650,000 tonnes per year while the country produces only about 270,000 tonnes. “This should show you how much we depend on imports to get moving as a country. This also brings us imported inflation,” she said.

On fertiliser, said Dr Kijaji, prices have skyrocketed due to the Covid-19 pandemic and the war. In 2019 before the pandemic, one needed $396 to get a tonne of DAP and $249 to get a tonne for Urea.