Forodhani open air food market in Stone Town, Zanzibar. PHOTO | FILE | NATION MEDIA GROUP
The inflation rate in Zanzibar remains at below one per cent despite effects of the global pandemic on
the economy, according to the Bank of Tanzania's monthly economic review report for January.With low world oil prices and a stable exchange rate, the central bank forecasts the inflation rate to remain at single digit throughout the 2020/21 financial year.
BoT is forecasting Zanzibar’s economy to grow by five per cent in 2020/21, while its budget deficit, including grants, is estimated to range from three per cent to five per cent of GDP in 2020/21.
The central bank is optimistic that the economies of both Tanzania mainland and the Isles will grow, just at a slower pace than in previous years.
The annual headline inflation eased to 0.5 percent from 3.3 percent registered in the corresponding period last year. The drop was largely attributed to a slowdown in the prices of a number of food products, cement and transport.
Imported rice prices dropped by 3.4 percent, maize flour by 6.7 percent and Mbeya rice by 6.7 percent. The price of petroleum products — kerosene, diesel and petrol — also dropped by an average of 18.3 percent, cement by 17 percent and transport by 4.1 percent.
According to the Zanzibar’s Office of the Chief Statistician, as quoted in the BoT report, despite the improved year-on-year headline inflation, month on month inflation rose to 0.3 per cent in December 2020 compared with a deflation of 0.1 per cent in November 2020.
The health sector saw an increase of 11.3 percent, and recreation and culture prices went up by 3.5 percent month by month.
The low inflation rate notwithstanding, the pandemic increased Zanzibar’s budget needs to Tsh69.3 billion ($29.75 million) in December 2020, of which domestic revenue was Tsh67.9 billion ($29.15 million) equivalent to 72.4 per cent of the monthly target, while grants were Tsh1.4 billion ($601,086).
“Zanzibar’s budgetary performance was largely affected by the negative effects of Covid-19 pandemic on major tax sources,” says the President’s Office, Finance and Planning of Zanzibar, quoted by the BoT review.
Revenue collected from tax amounted to Tsh57.8 billion below target while non-tax revenue was Tsh 10.1 billion ($4.34 million), equivalent to 90.1 percent of the target.
Revenue from local VAT and excise duties amounted to Tsh11.9 billion ($5.11 million) which is slightly lower than Tsh15.5 billion ($6.65 million) collected in December 2019.
Government expenditure amounted to Tsh108.5 billion ($46.58 million), of which recurrent expenditure was Tsh66.1 billion ($28.37 million) and Tsh42.4 billion ($) was for development projects.
As BoT explained, local financing of development projects was only 29.4 percent of the target, about Tsh2.4 billion ($ 18.20 million), while foreign financing share accounted for 60.1 percent, amounted to Tsh39.9 billion ($ 17.13 million).
“Up to the end of last year, 2020, the deficit after grants and adjustment to cash and other items was Tsh66.7 billion ($ 28.64 million), financed by domestic borrowing and program loans,” reads BoT’s monthly economic review for January, 2021.
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