Tanzania: Why Tanzania's Inflation Rate Has Remained Lowest in East Africa

By Josephine Christopher

Dar es Salaam — Tanzania recorded the lowest inflation rates among the East African nations last year, with analysts saying the trend signals stable prices in the country.

Tanzania's annual inflation averaged 3.6 percent compared to Kenya' 4.4 percent and Uganda's 4.3 percent, according to data from the National Bureau of Statistics (NBS).

Rwanda inflation stood at six percent.

Economic analysts say the trend indicated that the country's monetary policies were able to control the rate of price change of commodities compared to other countries. The single-digit inflation rate was below the government target of five percent.

The inflation reflects adequate supply of food and price stability in the economy, says Prof Honest Ngowi of Mzumbe University.

"This also shows that the Bank of Tanzania (BoT) has devised prudent monetary policies that have supported the stable and low inflation rate," he said.

According to the National Bureau of Statistics (NBS), for the past three years, Tanzania was able to subdue the level of inflation rate below the medium-term target of five percent.

In 2019, the country recorded an average of 3.4 percent while it recorded 3.5 percent in 2018. Prof Haji Semboja of the State University of Zanzibar said the subdued inflation rate can also be considered appropriate to influence investment in the country, and signals a good moment for the government to support local private sectors. "With price stability and a good economic growth level, the government should promote, nurture and facilitate the country's private sector especially the locals," he said.

Prof Semboja said having prudent monetary policies and institutions to support the private sector would also help sustain development of the country.

According to the central bank, the country's medium-term target of inflation is set at five percent, consistent with the EAC and Southern African Development Community (Sadc) convergence criteria of eight percent (set as maximum) and three to seven percent, respectively.

Although the Tanzanian inflation rate was lower compared to other countries, all countries in the EAC bloc maintained their inflation below the convergence criteria in 2020. A seasoned economist Prof Samuel Wangwe from the University of Dar es Salaam (UDSM) said all countries in the region showed ability to maintain their inflation at an appropriate level.