By Adonis Byemelwa
Fuel prices in Tanzania have surged in April 2024 compared to March 2024, affecting various regions across the country. In Dar es Salaam, the price of petrol has risen from Sh3,163 in March to Sh3,257 per liter, while diesel has increased from Sh3,126 to Sh3,210. Similar upward trends have been observed in key fuel distribution centers like Tanga and Mtwara. In Tanga, the price of petrol has climbed from Sh3,209 to Sh3,303 per liter.
The Energy and Water Utilities Regulatory Authority (EWURA) has attributed these price hikes to several factors. Firstly, the increase in refined oil prices (FOB) in the global market has directly impacted fuel prices domestically. Additionally, there has been a 3.19% increase in the exchange rate of foreign currencies, particularly the Euro, which is utilized for importing oil.
Recently, in a Scholars’ Debate on Clubhouse, discussions centered on strategies to combat inflation in Tanzania. Activist Buberwa Kaiza put forth a series of proposals aimed at addressing the escalating cost of living in the country. Kaiza emphasized the importance of government intervention to subsidize raw materials imported for the production of essential goods like fertilizer, fuel, wheat, and other necessities. Such subsidies, he argued, would help maintain stable prices for consumers.
Another key suggestion from Kaiza was the immediate transition to gas usage by vehicles and industries, particularly in regions like Mtwara and Lindi. Kaiza stressed the need for institutions like the Dar es Salaam Institute of Technology (DIT) and the Tanzania Petroleum Development Corporation (TPDC) to spearhead this initiative.
Furthermore, Kaiza urged the government to curb unnecessary expenditures, such as foreign trips by the President and extravagant convoys within the country, to optimize resource allocation.
In a bid to promote domestic industries, Kaiza proposed that the government oversee the local production of various goods, including clothing, shoes, sugar, beverages, and bakery products. Addressing the issue of indiscriminate food exports, Kaiza advocated for tighter regulations to ensure food security within the country. He also called for a professional and law-abiding approach in institutional structures governing the economy, emphasizing the need to avoid undue political influence.
Kaiza cautioned against statements from political leaders that could exacerbate inflationary pressures, stressing the importance of allowing the economy to function naturally. In the fight against corruption, Kaiza underscored the need for transparent and accountable systems, with active participation from NGOs and the media.
The development activist encouraged citizens to establish and manage Consumer Associations to monitor prices of goods and services, providing timely reports to the public.
In August last year, the ACT Wazalendo Party conducted a comprehensive analysis of factors contributing to the recent fuel price hikes in Tanzania. The analysis aimed to understand the various elements influencing the cost of petrol and diesel per liter up to the point of arrival at the Dar es Salaam port. The examination covered the actual costs of petrol, diesel, and kerosene in the global market (FOB); transportation costs (premium); government taxes and levies; as well as the costs and profits of traders.
One significant finding was that the government, through EWURA, misrepresented the increase in fuel costs in the global market. Contrary to official statements, the analysis revealed that the costs of fuel in the global market for May, June, and July were lower than reported, indicating a decrease rather than an increase.
Regarding the cost of importing fuel, the analysis showed that the expenses incurred over the past three months had not risen but instead had decreased. Tender information indicated that the cost of importing fuel in June was significantly lower than in previous months. Therefore, the contribution of import costs (premium) to the fuel price increase was negligible.
The analysis also highlighted the challenge of a shortage of US dollars in the country. This scarcity significantly affects the nation’s ability to import goods, including fuel, leading to economic strain. The trade deficit, which reached a record high of $4 billion in the 2022/23 fiscal year, exacerbates the situation, further weakening the Tanzanian shilling against the dollar.
Furthermore, the recent increase in fuel taxes imposed by the government has begun to burden citizens, compounding the economic challenges they face. Another concern is the government’s decision to remove fuel subsidies on petrol and diesel, further exacerbating the financial burden on consumers.
Moreover, the continued depreciation of the Tanzanian shilling against the dollar has dire consequences, as it increases the cost of importing goods, leading to inflationary pressures, particularly on essential commodities like fuel, fertilizer, and steel products.
The analysis also addressed localized fuel shortages experienced in some parts of the country. EWURA attributed these shortages to certain traders withholding fuel to manipulate prices, causing inconvenience to residents.
Given these findings, there is a pressing need for action. The government must urgently reduce foreign expenditure and prioritize the use of alternative energy sources, such as natural gas. Additionally, investment in local industries, such as iron production and fertilizer manufacturing, is crucial to reducing dependency on imports and conserving foreign exchange reserves. Tax reforms are also necessary, including the reinstatement of fuel subsidies and the removal of additional taxes imposed in the 2023/24 fiscal year.
To boost exports and alleviate foreign currency constraints, measures to enhance agricultural productivity and promote tourism and transit trade are essential. These developments highlight the vulnerability of developing countries to fluctuations in global fuel prices, which are exacerbated by the dollarization of currencies. As many developing nations rely heavily on imported fuel, any increase in global oil prices directly impacts domestic prices, leading to inflationary pressures and economic challenges.
The reliance on foreign currencies, particularly the US Dollar and Euro, for oil imports exposes Tanzania to currency exchange rate fluctuations. When the value of the domestic currency depreciates against these foreign currencies, the cost of imported fuel rises, further straining the economy and increasing the cost of living for citizens.
Moreover, the reliance on fossil fuels for energy production in developing countries makes them particularly susceptible to volatility in global oil markets. As a result, governments in these nations often struggle to mitigate the impact of fuel price hikes on their citizens, leading to social unrest and economic instability.
In essence, the recent fuel price hikes in Tanzania underline the challenges faced by developing countries in managing their energy needs amid volatile global oil markets and currency fluctuations. Without adequate measures to address these challenges, citizens in these nations will continue to bear the brunt of rising fuel costs, exacerbating poverty, and hindering economic development.
