Tanzania grapples with power shortages

celebratory mood as it grapples with rising inflation, chronic power shortages and a row over a constitutional review process.
The year-on-year inflation rate in east Africa’s second-biggest economy rose for the 12th straight month in October to 17,9 percent.
The state-run power company is seeking an emergency 155 percent price rise from January 1 – the country has been experiencing a crippling power crisis for the past five years.
President Jakaya Kikwete wants a new constitution in place in 2014, a year before the next parliamentary and presidential elections.
But opposition leaders and activists have accused the government of trying to influence the review process unduly.
The Tanzanian leader has pledged to call a referendum on the constitution and has accused opposition leaders of trying to derail the process. Tanzania has been battered by relentless power rationing for the past year.
The IMF cut its 2011 growth forecast to 6 percent from 7,2 percent in March, saying frequent power outages would hurt output while food and fuel prices could push inflation higher.
The shilling has been falling since the start of 2010, making imports more expensive. Increased oil imports for power generation are driving strong demand for foreign currency.
What to watch:
l Central bank moves. The central bank has been taking measures to lower the inflation rate and halt the shilling’s depreciation.
l Emergency power measures. Tanzania plans to spend 1,2 trillion shillings by the end of next year on emergency power projects to reduce the cuts.
l Chinese influence. China has significantly expanded its footprint in Tanzania. Sichuan Hongda Co. Ltd. signed a US$3 billion deal with Tanzania to mine coal and iron ore. The two countries also signed a US$1 billion loan agreement to build a major natural gas pipeline.
l Mining talks. Mining firms are worried about the tax reform plan. Africa’s biggest gold miner AngloGold Ashanti is paying 30 percent corporate tax to the government this year for its Geita mine, but firms are resistant to higher royalties. The mining sector slumped in two consecutive quarters this year because of uncertainty over government policies, the energy crisis and infrastructure constraints.
Africa’s fourth-biggest gold producer plans to restructure the key sector after adopting a new mining policy in 2009 and subsequent legislation last year.
l National debt. Government borrowing is set to rise as the country seeks funds for power and infrastructure projects.
A debut US$500 million eurobond is still on track as the national debt rose to US$12,131 billion in the year to August from US$12,112 billion at the end of July.
The IMF warned last month that Tanzania’s overall recurrent spending had outpaced revenues and grant financing, contributing to growing fiscal deficits and a rising public debt stock, projected to reach close to 42 percent of GDP this year. – Reuters.