Monday, May 27, 2013

$500 million (about Sh800 billion) to rescue TANESCO


$500 million (about Sh800 billion) to rescue TANESCO

By Mbarouk Matata,

St.Augustine University o f Tanzania,

B.A. Economics 2013

The government has set aside $500 million (about Sh800 billion) to rescue the Tanzania Electric Supply Company Limited (TANESCO) from debt as well as improve its operations and services.

The minister for Energy and Minerals, Prof Sospeter Muhongo, told Parliament at the weekend that the government has big plans to revive the organisation to make it active in fulfilling national interests.

He said the organisation was performing poorly at the moment because of a big debt burden, poor infrastructure and lack of funds.

“We admit that the organisation is not performing well...but we have many plans to revive it and make it active again. We have already set aside $500 million to help the organisation to get to its feet again as well as implement its projects effectively,” said Prof Muhongo.

The minister was speaking during the winding-up of his ministry’s 2013/2014 budget estimates. The budget was tabled last week (May 22) but could not be endorsed after the outbreak of violence in Mtwara Region.

It was established that the violence started after the minister finished reading his ministry’s budget estimates in the House in which he insisted that the gas pipeline project linking Mtwara and Dar es Salaam would go ahead.

According to Prof Muhongo, it is not easy to revive Tanesco and improve the energy sector in the country since the process needs money and expertise.

He said his office has already requested for a $300 million (about Sh480 billion) loan from the World Bank and $200 million (about Sh320 billion) loan from the African Development Bank (AFDB).

“We have asked for this money with the aim of transforming Tanesco and change its face completely... we want the organisation to operate and provide high quality services,” said the minister.

He said the organisation’s board of directors would present its report to him in June, this year, that would explain how they want the power utility to look like as a part of the transformation.

“This process is participatory...we have involved various stakeholders. As I am speaking now, the Tanesco’s board of directors will present the report to me in June... I asked them to explain what they need and which changes should be made to transform the organisation,” said Professor Muhongo.

He said the organisation would change for the better and its services made reliable and of high quality.

 

Saturday, May 25, 2013

How Do I Calculate the Inflation Rate?

By Mbarouk Matata. 25 may, 2013

BA. Economics, St. Augustine University Of Tanzania 2013

The Formula for Calculating Inflation
The formula for calculating the Inflation Rate using the Consumer Price Index (CPI) is relatively simple. Every month the Bureau of Labor Statistics (BLS) surveys thousands of prices all over the country prices and generates the current Consumer Price Index (CPI)
 Assume for the sake of simplicity that the index consists of one item and that one item cost $1.00 in 1984. The BLS pegged the index in 1984 at 100* (see Footnote). In January of 2006 that same item would probably cost $1.98 and today it would cost even more. But let's calculate the price difference between 1984 and 2006
Step 1: Calculate How Much has the Consumer Price Index Increased?
By looking at the above example, common sense would tell us that the index increased (it went from 100 to 198).  The question is how much has it increased? To calculate the change we would take the second number (198) and subtract the first number (100). The result would be 98.  So we know that from 1984 until 2006 prices increased (Inflated) by 98 points.
But, what good does knowing that it moved 135 points do?
Well, we know that prices almost doubled in 22 years, since it was 100 and it is almost 200 but other than that we don't know much. We still need something to compare it to.
Step 2: Comparing the CPI Change to the Original CPI
Since we know the increase in the Consumer Price Index we still need to compare it to something, so we compare it to the price it started at (100). We do that by dividing the increase by the first price or 98/100. the result is (.98).
Step 3: Convert it to a Percent
This number is still not very useful so we convert it into a percent. To do that we multiply by 100 and add a % symbol.  .98 x 100= 98
So the result is a 98% increase in prices since 1984. That is interesting but (other than being the date of George Orwell's famous novel) to most people today 1984 is not particularly significant.

 Calculating the Inflation Rate Over a Specific Time Period
Normally, we want to know how much prices have increased since last year, or since we bought our house, or perhaps how much prices will increase by the time we retire or our kids go to college.
Fortunately, The method of calculating Inflation is the same, no matter what time period we desire. We just substitute a different value for the first one. So if we want to know how much prices have increased over the last 12 months (the commonly published inflation rate number) we would subtract last year's Consumer Price Index from the current index and divide by last year's number and multiply the result by 100 and add a % sign. 
The formula for calculating the Inflation Rate looks like this:
 ((B - A)/A)*100
Where "A" is the Starting number and "B" is the ending number.
So if exactly one year ago the Consumer Price Index was 178 and today the CPI is 185, then the calculations would look like this:
 ((185-178)/178)*100
or
 (7/178)*100
or
 0.0393*100 
which equals 3.93% inflation over the sample year. (Not Actual Inflation Rates).
You can always find the current consumer price index in a box on our site that looks like this:
Current Consumer Price Index (CPI-U) 232.531
Current Inflation Rate
1.06%
Released May 16, 2013 for April 2013
Provided by
InflationData.com
Note that it contains two key numbers the Current CPI Index (in the top portion) and the Current Inflation rate in the bottom half.
To calculate the Current Inflation Rate it uses the most recently released CPI data and compares it to data from exactly 12 months prior using the above formula. 
To find the CPI index on more than the current date you can check the current Consumer Inflation Rate or Historical Inflation Rates in table format. 
Shortcut to Calculating Inflation:
If you don't care about the mechanics and just want the answer, use our CPI - Inflation Calculator.  
Or if you believe a picture is worth a thousand words you may prefer just to look at the Annual Inflation Rate plotted in Chart format or Average Annual Inflation Rates by Decade.
What happens if prices Go down?
If prices go down and we experienced Price Deflation then "A" would be larger than "B" and we would end up with a negative number. So if last year the Consumer Price Index (CPI) was 189 and this year the CPI is 185 then the formula would look like this:
((185-189)/189)*100
or
 (-4/189)*100
or
-0.0211*100 
which equals negative inflation over the sample year of -2.11%. Of course negative inflation is called deflation.
  (Not Actual CPI numbers).
Calculating Inflation When it is Over 100%
 In April of 2006 the CPI index crossed the 200 mark so inflation was now over 100% so calculating it became a bit more confusing (but the formula is still the same).
Typically when the index crosses over 100% the BLS just sets a new base year making some arbitrary date now equal to 100 and adjusting all the previous dates accordingly. But so far they haven't done that yet.
 In September of 2012 the CPI index was 231.407 so if we wanted to calculate the amount of inflation from 1984 until September of 2012, we would take (231.407 - 100)/100 = 1.31407 or 131.407%. So prices inflated by 131% in that time period. The calculations are the same but we have to remember that the 131% increase is on top of the original price. 100% inflation means prices doubled. 200% inflation means prices tripled, etc. Somehow it just seems less confusing when total inflation is less than 100%.