Supply-demand imbalances push commodities prices up

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Data by Bank of Tanzania (BOT) have says in April this year, commodity prices in the world market remained, crowding consumer spending, while affecting individual savings and investments.

According to the BOT report, the global supply chain is currently disrupted in a time when there is an increase in demand owing reopening of economies on post-Covid 19 pandemic.

Tanzanian consumers are also facing the same consequences as prices for both food and non- food commodities, as well as services have hit the roofs due to rising global fuel prices.

Domestic pump prices of petroleum products have been rising since June 2020, consistent with developments in the world market.

This was mostly prompted by limited supply owing to the war in Ukraine and sanctions on Russia.

In April 2022, domestic prices of diesel, petrol, and kerosene rose by 34.5 percent, 32.7 percent, and 31.2 percent, respectively, from the corresponding period in 2021, thus contributing to increase in inflation, according to BOT report.

These global effects spilled over to the economy, leading to increase in inflation to 3.8 percent from 3.6 percent in March 2022.

Despite the increase, it remained within the target of 3-5 percent and in line with EAC and SADC convergence criteria as much of the increase in inflation was driven by prices of transport, food and energy products.

Food inflation herein referred to as food and non- alcoholic beverages rose to 6.6 percent compared with 4.8 percent in April 2021 largely due to low food harvests from short rain season.

The inflation rate was also slightly higher compared with 6.5 percent in the preceding month, on account of increase in prices of cooking oil, wheat flour, soft drinks, maize (grains and flour), mineral water and cassava flour.

The ministry of trade, industry and investment data shows the whole price of maize increased to 62,542/- per 100 kilo gramme in April this year from 44,973/- recorded in April last year.

The price of rice, for the same quantity has also increased top 188,079/- from 143,055/- respectively, while the price of beans slightly increased to 185,343/- from 181,977/- respectively.

BOT has reported that core inflation was 2.8 percent compared with 3.5 percent in April in 2021, on account of a decrease in prices of recreation, sports and cultural activities, accommodation, garments and footwear2.

The inflation rate was slightly higher than 2.7 percent recorded in the preceding month, largely because of increase in prices of iron sheets and transport.

Energy, fuel, and utilities sub-group, whose weight in overall CPI basket is 5.7 percent, recorded inflation of 9.9 percent compared with 2.3 percent in the corresponding month in 2021 and 6.3 percent in the preceding month, mainly driven by the increase in prices of fuel, charcoal and firewood.

The recent increase in fuel prices is associated with the rise of oil prices in the world market.

Non-food inflation declined to 2.6 percent, slightly lower than 2.7 percent in April 2021, but is higher than 2.4 percent in the preceding month.

In the context of high price of consumer goods and second-round effects of oil and fertilizer prices, inflation is projected to increase, but remaining within the target of 3-5 percent by June 2022.