Tanzania’s inflation to remain low till the end of year on improved food supply

Tanzania’s inflation will remain low during the remainder of this year based on expected further decline in food and energy prices in the global market, complemented by less accommodative monetary policy and favourable weather that will improve food supply according to the latest Monetary Policy Committee Statement released by the Central Bank.

The Monetary Policy Committee (MPC) held its 226^th Ordinary Meeting on 22nd May 2023, to assess the conduct of monetary policy in March and April 2023, review the performance and outlook of the domestic and global economy, and agree on monetary policy measures for May and June 2023.

 “The MPC noted with satisfaction the sustained implementation of a less accommodative monetary policy that succeeded in containing inflation within the target while ensuring an adequate supply of liquidity in the banking system in support of credit intermediation and recovery of various economic activities.,” the MPC statement

In addition, the policy stance supported the attainment of agreed benchmarks under the IMF Extended Credit Facility (ECF) arrangement for the quarter ending March 2023, laying the foundation for achieving the performance criteria for June 2023.

While discussing recent economic trends, the MPC observed that global economic activity remained weak in 2022 and the outlook is uncertain, reflecting the adverse effects of war in Ukraine, monetary policy tightening and climate-related constraints.

“Global inflation has been easing since the last quarter of 2022, driven by a decline in energy prices, but remained above the central banks’ targets in many countries. Commodity prices in the global market have been declining, though remained above the levels recorded before the war in Ukraine. Going forward, inflation is expected to continue declining, driven by the lagged effect of monetary policy tightening and expected further decrease in commodity prices,” the statement said.

On the domestic economy, the MPC noted that growth is broadly on track supported by improving business conditions, sustained public and private investment, recovery in tourism, and strong growth of credit to the private sector.

“In Mainland Tanzania, growth in the first three quarters of 2022 was 5.2 percent, and high frequency economic indicators support for strong growth of around 5 percent for the entire year 2022 and about 5.2 percent for 2023,” the statement said.

Zanzibar economy is estimated to have grown by 6.8 percent in 2022, much faster than 5.1 percent in 2021. In 2023, Zanzibar economy isprojected to grow at 7.1 percent.

Inflation in Mainland Tanzania eased for the third month in a row to 4.3 percent in April 2023, remaining below the target of 5.4 percent for 2022/23.

 In Zanzibar, inflation rose to 7.5 percent in April 2023 from 7.1 percent in March 2023, remaining above the medium-term target of 5 percent, largely due to an increase in the prices of food.

The MPC noted that money supply growth was consistent with the monetary policy stance, with a year-on-year growth of 17.2 percent in April 2023, against the target of 10.3 percent for 2022/23.

“This outturn was on account of sustained strong growth of credit to the private sector of around 23 per cent, above the target of 10.7 percent for 2022/23,” the statement said.

Tanzania’s inflation will remain low during the remainder of this year based on expected further decline in food and energy prices in the global market, complemented by less accommodative monetary policy and favourable weather that will improve food supply according to the latest Monetary Policy Committee Statement released by the Central Bank.

The Monetary Policy Committee (MPC) held its 226^th Ordinary Meeting on 22nd May 2023, to assess the conduct of monetary policy in March and April 2023, review the performance and outlook of the domestic and global economy, and agree on monetary policy measures for May and June 2023.

 “The MPC noted with satisfaction the sustained implementation of a less accommodative monetary policy that succeeded in containing inflation within the target while ensuring an adequate supply of liquidity in the banking system in support of credit intermediation and recovery of various economic activities.,” the MPC statement

In addition, the policy stance supported the attainment of agreed benchmarks under the IMF Extended Credit Facility (ECF) arrangement for the quarter ending March 2023, laying the foundation for achieving the performance criteria for June 2023.

While discussing recent economic trends, the MPC observed that global economic activity remained weak in 2022 and the outlook is uncertain, reflecting the adverse effects of war in Ukraine, monetary policy tightening and climate-related constraints.

“Global inflation has been easing since the last quarter of 2022, driven by a decline in energy prices, but remained above the central banks’ targets in many countries. Commodity prices in the global market have been declining, though remained above the levels recorded before the war in Ukraine. Going forward, inflation is expected to continue declining, driven by the lagged effect of monetary policy tightening and expected further decrease in commodity prices,” the statement said.

On the domestic economy, the MPC noted that growth is broadly on track supported by improving business conditions, sustained public and private investment, recovery in tourism, and strong growth of credit to the private sector.

“In Mainland Tanzania, growth in the first three quarters of 2022 was 5.2 percent, and high frequency economic indicators support for strong growth of around 5 percent for the entire year 2022 and about 5.2 percent for 2023,” the statement said.

Zanzibar economy is estimated to have grown by 6.8 percent in 2022, much faster than 5.1 percent in 2021. In 2023, Zanzibar economy isprojected to grow at 7.1 percent.

Inflation in Mainland Tanzania eased for the third month in a row to 4.3 percent in April 2023, remaining below the target of 5.4 percent for 2022/23.

 In Zanzibar, inflation rose to 7.5 percent in April 2023 from 7.1 percent in March 2023, remaining above the medium-term target of 5 percent, largely due to an increase in the prices of food.

The MPC noted that money supply growth was consistent with the monetary policy stance, with a year-on-year growth of 17.2 percent in April 2023, against the target of 10.3 percent for 2022/23.

“This outturn was on account of sustained strong growth of credit to the private sector of around 23 per cent, above the target of 10.7 percent for 2022/23,” the statement said.