Price Control in the Management of an Economic Crisis: The National Price Commission in Tanzania

Extract

The system of comprehensive price controls in Tanzania was established under the Regulation of Prices Act of 1973. Prior to that, price controls applied to a few urban consumer staples including beer, matches, sugar, beans, rice, wheat and maize flour, bread, grey sheeting and khanga, a popular dressing material. By May, 1973, four hundred items had been put on the price control list. The timing of the act was due to several possible influences. As a result of the Arusha Declaration in 1967, the early 1970s had seen an increasing regulation of the economy with the nationalization of rental housing, the enactment of a drastically progressive income tax, and the nucleation of the rural population in villages. In 1967 the government adopted a wages, incomes and prices policy which placed restraints on the growth of wages. The control of prices was, therefore, a logical consequence of this policy. On the economic front, there had been drastic price increases in late 1972 and early 1973 partly arising from a worldwide spurt in inflation.

In the subsequent period, starting mid-1970s, inflation increased even faster. Using 1976/77 as the base year, the National Consumer Price Index (hereafter, NCPI) increased from 42.4 in 1970 to 52.8 in 1973, 156.7 in 1980 and 775.2 in 1986. The minimum wage earners' price index in the principal city of Dar es Salaam which was 33.4 in 1970, rose to 41.7 in 1973, 165.2 in 1980 and hit 787.9 in 1986. For the same sub periods, the middle-grade civil servants' price indices were 42.3, 50.7, 176.6, and 911.5. Increasingly, the response of the government to these developments was to resort to price controls for the management of inflation.