MONETARY policy authorities at the Bank of Tanzania (BoT) have indicated intention to pull back on money supply, citing pressure due to price rises.

It is reported that the shift was necessary to contain second-round inflationary effects arising from elevated global commodity prices filtering into domestic markets.

This was rather clear in expose but not in the circumstance, as it presents inflation as something new on world markets – which is wholly and solely the case. 

As a matter of fact, the economy was more resilient than anyone may have wished to admit, as regulators pushed up fuel prices by 30per cent when there was enough stock for up to two months. This obviously occasioned billions in revenues.

What this implies is that, outside the clever regulatory anticipatory price cap shift, there was no inflation being imported into the economy, as currency depreciation isn’t rapid but remains steady.

It would thus appear that it is for internal fiscal needs that money supply in the market is being reduced, as BoT is banker to the government – which would plausibly imply that a cap has to be placed on local borrowers should the government need plenty of cash.

And that, again by implication, would suggest the imposing of higher interest rates on Treasury bills and government bonds so that there are fewer takers.

This impression tallies with the idea that foreign exchange inflows will likely diminish for a variety of reasons, and the government wouldn’t wish to drain its stock of reserve money to back local lending as lending is noticeably used for foreign purchasing. 

This would likely prevent the economy from being awash with large amounts of local funds needing to be backed up by reserve money – just to keep industries humming and those providing new services with plenty of external input having to dig deeper to import them.;

It would not be because they cost more outside as the monetary regulators stated but higher inflation if too much local currency has to be changed for foreign currency, depleting reserves for a few thousand jobs.

It is possible for the monetary policy committee at the central bank to be reluctant to admit that foreign exchange is in short supply compared to needs due to lack of reform,.

It is possible for the structural overhauling of parastatals into shareholding firms, where those owed plenty of money liquidate the debts for shares, to work best.

Slightly over one-third of revenues is used to pay foreign debts, a burden we all would be glad to put aside and thus facilitate lower taxes and vast expansion of business to create millions of jobs.

But some policy makers may elect to see protection of the status quo as primary, thus curtailing local lending.

Industry stakeholders were far from impressed hearing that, in line with the macroeconomic outlook and risks, the monetary policy stance might be less accommodative.

It is that it would be geared towards containing the second-round inflationary effects of the pass-through of high global commodity prices on domestic inflation.

This sort of scenario risks making many people imagine that it needs higher degrees to decipher, while the reality is not far to seek – in real inflation figures.

Should it be that we relax on living the 4Rs, we might risk reaping stagflation, with the ensuing vast cash in government agencies crowding out job expansion, etc.