Sehra Aggarwal, Grade 12
UWCEA Arusha Campus
Since February 2022, global oil prices have been the most volatile than they have been in the past decade. As a result of the ongoing tensions between Ukraine and Russia, many nations around the world are experiencing record-high petroleum and diesel prices, with Russia being the world’s second-largest crude oil exporter following Saudi Arabia. This has taken a toll on many nations around the globe, disrupting supply chains, hindering logistics, and increasing inflation. Personally, this has been extremely evident in Tanzania.
According to the world bank, Tanzania is considered a middle-income country, with the GDP per capita measuring a little over 1000 USD and an average minimum wage of 200,000 Tanzanian shillings per month which is equivalent to about $80. From the perspective of someone who has lived in this nation for my whole life, stratification is real and it is only getting worse with the global crises that are occurring. This is further reinforced by the surge in oil prices. Although Tanzania is over 6,000 kilometres from the crisis, it is one of many African countries that is experiencing exponential price increases for everyday commodities, especially petroleum and diesel. Despite government subsidies, the condition of the oil market is not looking promising to the average citizen. In January of 2022, the price for one litre of petroleum was 2,790 Tanzanian shillings ($1.20) but after just six months the price skyrocketed to 3,223 shillings ($1.38) making it the highest price ever recorded by the local market. Numerically, it is a difference of 433 shillings but empirically that figure represents nearly 25% of an individual’s income assuming they receive the monthly minimum wage.
Furthermore, from a business perspective, the increase in petroleum and diesel prices has disrupted supply chains and increased logistical delays. In Tanzania, higher oil prices have resulted in lags in manufacturing due to a lack of raw materials such as crude. This has been evident in the tertiary sector, specifically with transportation. In addition to this, the cost of importation and bringing in cargo from overseas has risen greatly which for many industries has caused delays in their production and may even result in extreme forms of economic protectionism. These two factors have led to a .5% increase in the national inflation rate which has reduced consumer purchasing power as well as business confidence. With less confidence in the currency, some citizens fear that the currency will continue to lose its value and are decreasing their commercial/private investment. It has also affected food prices, which has increased insecurity within Tanzania.
As aforementioned, the Tanzanian government has also been implementing subsidies to alleviate some of the market stresses on oil but this has had no effect on the prices. Additionally, due to the nature of the Tanzanian economy, the government has had to take many loans from the World Bank and the International Monetary Fund (IMF) to limit the negative economic impacts of the increasing oil prices which have caused a social uproar within Tanzanian society. The previous president, John Pombe Magufuli (now deceased) advocated for full economic independence and during his time in office, he even declined loans. He was popular among the working-class citizens, thus many of them are enraged by the current president’s actions.
At this point, it is difficult to determine whether or not the current policies are the most beneficial way the government can address this crisis. However, given the circumstances, I believe that the government is doing what it can to represent the interests of businesses as they are the driving force behind the Tanzanian economy. Although they are not popular amongst a large majority of the population, I believe that in the long run, the acceptance of the loans will be helpful as they will help to alleviate some of the current issues such as food insecurity.
According to the world bank, Tanzania is considered a middle-income country, with the GDP per capita measuring a little over 1000 USD and an average minimum wage of 200,000 Tanzanian shillings per month which is equivalent to about $80. From the perspective of someone who has lived in this nation for my whole life, stratification is real and it is only getting worse with the global crises that are occurring. This is further reinforced by the surge in oil prices. Although Tanzania is over 6,000 kilometres from the crisis, it is one of many African countries that is experiencing exponential price increases for everyday commodities, especially petroleum and diesel. Despite government subsidies, the condition of the oil market is not looking promising to the average citizen. In January of 2022, the price for one litre of petroleum was 2,790 Tanzanian shillings ($1.20) but after just six months the price skyrocketed to 3,223 shillings ($1.38) making it the highest price ever recorded by the local market. Numerically, it is a difference of 433 shillings but empirically that figure represents nearly 25% of an individual’s income assuming they receive the monthly minimum wage.
Furthermore, from a business perspective, the increase in petroleum and diesel prices has disrupted supply chains and increased logistical delays. In Tanzania, higher oil prices have resulted in lags in manufacturing due to a lack of raw materials such as crude. This has been evident in the tertiary sector, specifically with transportation. In addition to this, the cost of importation and bringing in cargo from overseas has risen greatly which for many industries has caused delays in their production and may even result in extreme forms of economic protectionism. These two factors have led to a .5% increase in the national inflation rate which has reduced consumer purchasing power as well as business confidence. With less confidence in the currency, some citizens fear that the currency will continue to lose its value and are decreasing their commercial/private investment. It has also affected food prices, which has increased insecurity within Tanzania.
As aforementioned, the Tanzanian government has also been implementing subsidies to alleviate some of the market stresses on oil but this has had no effect on the prices. Additionally, due to the nature of the Tanzanian economy, the government has had to take many loans from the World Bank and the International Monetary Fund (IMF) to limit the negative economic impacts of the increasing oil prices which have caused a social uproar within Tanzanian society. The previous president, John Pombe Magufuli (now deceased) advocated for full economic independence and during his time in office, he even declined loans. He was popular among the working-class citizens, thus many of them are enraged by the current president’s actions.
At this point, it is difficult to determine whether or not the current policies are the most beneficial way the government can address this crisis. However, given the circumstances, I believe that the government is doing what it can to represent the interests of businesses as they are the driving force behind the Tanzanian economy. Although they are not popular amongst a large majority of the population, I believe that in the long run, the acceptance of the loans will be helpful as they will help to alleviate some of the current issues such as food insecurity.
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