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INFLATION RATE RISE TO 16.8 PERCENT 

THE inflation rate has risen to 16.8 per cent as prices of food and energy hit the ceiling increasing financial strain and making life even harder.

 According to data released by the National Bureau of Statistics (NBS) on Monday, the rate has risen sharply from 14.1 per cent in August which is an increase of 2.7 per cent in a single month.

 
NBS also says that inflation on food and non-alcoholic beverages increased to 22.5 per cent from 18.6 in August. The energy index -- fuel, gas and electricity -- rose to 21.7 per cent in September, from 19.2 in August.

 The Bank of Tanzania's (BoT) Director of policy and research, Dr Joe Masawe, told the 'Daily News' that the situation has reached a critical point and that tight monetary policies are expected to be announced before the end of this week.

 "We are very concerned... there are factors we cannot control, but liquidity level in the economy is something we can contain... tight liquidity measures are coming," Dr Masawe said in a telephone interview yesterday.

 He named prices of oil in international markets and those of imports as factors leading to the current inflation but refused to reveal measures to remedy the situation to avoid preempting the governor.

 The director, however, said one of the measures to control excess liquidity was increasing short term government securities. The interest rates of the one year Treasury Bills (T-Bills) went up to 11 per cent in last week's auction.

 "We have to accept (the T-Bills) high interest rates, after all, these are temporary measures as the situation on the ground is not sound," he said.

 However, he said, the measures will be implemented jointly by East African Community (EAC) member states as controlling at individual country level would jeopardize its sustainability due to economic integration.

 "The Central Bank governors in the EAC countries met in Nairobi last week and agreed to tighten cash flow jointly to make them sustainable," Dr Masawe said.

 Uganda has the highest inflation rate at 28.3 per cent followed by Kenya (17.23 per cent) while Rwanda's is the lowest in the region ( 8.8 per cent).

 The exchange and inflation rate regimes had a negative impact on the economy as the BoT, in a span of three months, cancelled the auction of a 5-year bond twice after bidders tendered at a low rate fearing to lose their investments.

 This compelled the Central Bank to increase the one-year T-Bills yield rate to 11.2 per cent up from 9.87 in last Wednesday's auction. The move resulted in oversubscription of the security.

 The 182 days (six-month) bill rate was also elevated to 10 per cent up from 6.77, the 91 days (three-month) one was also hiked to 8.82 up from 5.52 and the 35 days bill remained unchanged at 3.87.

 The Standard Chartered Bank said in its daily commentary: "The results serve to show BoT's changed stance on interest rate towards fighting inflation and the extreme depreciation of the local unit."

 However, due to low yield rate, which is below the inflation rate, the 91 and 182 days bills were undersubscribed by almost 5bn/- each. The central bank wanted 30bn/- for each. The 35 days one was not tendered.

 The Standard Chartered Bank warns: "Demand for the shilling is getting closer to an inevitable clash with decreasing market liquidity that will put upward pressure on the curve."

 SOURCE DAILY NEWS