TIMES REPORTER

TANZANIA'S headline inflation rate has in recent times been officially reported to be falling steadily since December last year. However, a  contemporary study reveals that the figures purporting to indicate a falling inflation “are almost certainly fabricated.”

This rather startling assessment is given in a report published this week by Twaweza, a recently initiated citizen-centred NGO focusing on large-scale change in East Africa.

The Twaweza report provides a graphic representation of inflation, demonstrating as it does that food price hikes were pushing up inflation in other sectors.

“Tanzania’s somewhat problematic numbers raise questions whether the reported successes are real – particularly successes in relation to economic growth and the ability to contain inflation to single digit,” the report reads in part.

Some media reports have lately been crediting the Government in Dar with success in containing inflation, which stood at 9.4 per cent as of April this year, down from around 12 per cent a few months earlier.

In any case, the rate is still the highest in the East African  Community zone.

The National Bureau of Statistics (NBS) says Tanzania's inflation had fallen to 7.9 per cent by the end of May – a two-and-half-year low – attributing this to lower food prices after good harvests!

“For a while, there have been indications of something being ‘wrong’ with inflation in Tanzania,” says the Twaweza report.

NBS statistics show that the most recent lowest annual inflation rate for Tanzania, 4.1 per cent, was recorded in 2004 – before tripling to 12 per cent by the end of last year.

The highest average consumer price index (CPI) rate of 47 per cent was recorded in 1988 before economic liberalisation took hold in the country.

Twaweza says that, for ordinary citizens, price increases seem to have been much faster than what was reflected in figures given by the CPI.

The Household Budget Survey for 2007 reported a doubling in the cumulative increase in prices from the 2000/01 financial year to 2007. The figure, 93 per cent published by the bureau last year, was more than twice what is indicated by the CPI!

Earlier projections of inflation during the 2009/10 financial year projected inflation to fall below six per cent by June 2010. However, that projection was discarded in late 2007 following surges in the world market prices for petroleum and food grains.

Analysts caution that ongoing measures to bring down the rate of inflation could affect economic growth, saying that the Bank of Tanzania (BoT) should not tighten money supply in such a way that it affects the overall growth of the economy.

A different view holds that the Government should be very selective in implementing measures to curb inflation, insisting that it must seek to ensure that deliberate measures are put in place to stimulate growth.

Local experts say inflation has been slowing across East Africa in the past few months after good rains in the last farming season... Also, public investment in agriculture has boosted food production.

They, however, do not explain why Tanzania’s inflation rate was still perched at close to 8-9 per cent annually, the highest rate for the region.

Inflation in other EAC members has fallen below six per cent per annum, with Rwanda’s rate standing at 2.5 per cent per annum according to mid-year figures!

Twaweza says if the Government in Dar ladles out figures for the sake of assuaging public sentiment, this “would be a conscious mistake. It amounts to misreporting to the International Monetary Fund (IMF) – a serious breach in relations between the country and the Bretton Woods institution, the report further says.

Some observers, however, contend that routine inflation figures aren’t part of the consultations with the IMF relating to a member country's capital account status. In that case, only currency stability and balance-of-payments status are of interest to the IMF.

Twaweza says faulty figures aren’t just given with regard to inflation, but extend to other areas – including, for example, the 'high growth rates' which have regularly been reported by the Government, “but ordinary people do not appear to have benefited” from the 'growth!'

This is clear from the fact that poverty levels have adamantly refused to decline, shifting insignificantly from 35.7 per cent in 2000/1 to 33.6 per cent in 2007, on the basis of statistical bureau figures issued last year.

“This problem becomes especially acute as the Gini coefficient has remained unchanged (0.35 for both 2000/1 and 2007),” referring to the overall distribution of national income between the haves and the have-nots – which shows that the socio-economic situation hasn’t improved in the period under review.

Twaweza is an independent East African initiative which was setup last year by Rakesh Rajani, a veteran activist and founder of the HakiElimu NGO where he served as executive director up to late in 2007.

The initiative is backed by a consortium of five donors extending long-term support to the overall programme, namely Sida, DfID, the Hewlett Foundation, SNV and Hivos.