Sebastian Mrindoko The Citizen 2nd June, 2010 THE rising fuel prices has been attributed to the changes of prices in the world market and not the appreciation of dollar against the shilling, the Governor of the Bank of Tanzania (BoT) has stated. "There is no relationship between the rising fuel prices, dollar appreciation and deficiencies of foreign currencies in the national coffer as it is being portrayed," Prof Ndulu said. The Energy and Water Utility Regulatory Authority (EWURA) has already mentioned that the price differences have been caused by changes of prices in the world market and depreciation of the Tanzanian shilling compared to the US dollar (the currency in which purchases of products in the international oil market are made). He disapproved the public opinions which attributed the rising fuel prices to the appreciation of dollar against all other currencies in the world. The general public has expressed fear over rising prices of various commodities due to increased fuel prices. "It is a matter of fact that the dollar has appreciated against all currencies in the world but at varied degrees and percentages. For our case the dollar has appreciated in between five and six per cent," he said. He said the impact of dollar appreciation hit all major and weak currencies in the world, thus making it to be a global concern simply because dollar is considered to be the world 'reserve currency.' "At this situation it is difficult for the central bank to intervene immediately since the source of the effect is foreign, thus any effort to intervention would automatically increase twice as much the demand for dollars," he pointed out. "I want to assure the general public that there is no fear of rising inflation due to the rising fuel prices, but if there will be a need to make some slight interventions then the BoT will not hesitate," he said. Prof Ndulu insisted that the situation is short-lived and in fact the situation has started to improve with the shilling beginning to appreciate slowly since Thursday last week and it will continue to stabilize against the dollar. He said also that the hope for the stabilization of the shilling is contributed by continuous performances in the tourism sector and the exportation of some cash crops which altogether bring more foreign currencies. He warned speculators particularly those who are running into buying dollars at the expense of other currencies to watch out, because they may incur loss in a short period of time because the current changes will be short-lived. Recently, the Director of Policy and Advocacy at the Confederation of Tanzania Industries (CTI), Mr Hussein Kamote also expressed same fear of adverse situation in the economy if no measures are taken to curb the situation. "In a short period, if the situation persists, it means inflation will go up and thus affecting all the other sectors of the economy," Mr Kamote said. When inflation continues to go up, it may discourage investors and also economic plans set by the country might not be attained. He said some of the causes which might have contributed to the rise of fuel prices are the high demand of dollars, compared to the amount of dollars in the national coffer. Also that there is the possibility of 'speculation' where some business persons holding dollars in expectation of making super profit if the price goes up in the near future. Oil markets had become almost boring until recently. After years of breathtaking moves, prices seemed frozen between USD 70 and USD 80 a barrel. Producers and consumers, long at loggerheads, were at an uneasy peace. After touching 2010 highs in early May, the main crude oil benchmarks both sank below USD 70 a barrel on fears the euro zone debt crisis would spill into the broader economy. Some of the reasons mentioned for the rising prices included the fear that investors have for the oil exports due to attacks in Nigeria. The reports of the attacks are yet to be confirmed, but still helped increase the oil prices. Also the seizure of a Saudi Arabian oil tanker by pirates in the Gulf of Aden too worried the investors.