1. Do Rice prices drive inflation?
December 18th, 2012

2.  Introduction
 Study objectives
 Methodology
 Findings
 Conclusions
 Recommendations

3.  Zanzibar out-sources about 41% of its annual food
requirements with major imports being rice, sugar,
maize and wheat flour (MALE, 2006)
 Rice imports accounted for 83.3 % (FBS, 2011).
 Food accounted for the highest weight of 57.4 %
(2008) in CPI basket
 Out of this, imported rice accounted for 20.8 %
(BOT, 2009).
 From 2007-12, Rice prices went up by 112%.

4. -
10,000
20,000
30,000
40,000
50,000
60,000
70,000
2,002 2,003 2,004 2,005 2,006 2,007 2,008 2,009 2,010 2,011
MT
Years
Figure 1: Zanzibar Rice Imports and Production (MT), 2003-
2011
Imports(MT) Production(MT)

5.  Volatile and relatively high food inflation
 Households spend about 60 % of their budgets
on food purchases(HBS 2009/10)
 High Protein-Energy Malnutrition levels in
Zanzibar (DHS 2010)
◦ 26% undernourished
◦ Stunting (30%), Wasting(12%), underweight (19.9%)
◦ 13% below food needs poverty line (HBS 2009/10)
◦ 45% below basic needs poverty line (HBS 2009/10)

6. -
200
400
600
800
1,000
1,200
1,400
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Tshs
Figure 2: Domestic retail Prices and Thailand FOB
Prices(Tshs), 2006-2012
Rice Retail Prices Thai FOB

7.  To analyze the effect of rice prices on inflation in
Zanzibar, 2007-2012
 To examine the relationship between international
rice prices and domestic rice prices in
zanzibar,2007-2012

8.  Reviewed existing secondary sources
 Collected monthly prices of Thailand Rice locally
known as Mapembe and inflation for the period,
2006-2012
 Conducted econometric analysis and estimation

9. Table 1: Summary Output/Regression Statistics
Headline Non-Food
Inflation
Food Inflation
Multiple R 0.787651527 0.683106 0.776144377
R Square 0.620394928 0.466634 0.602400093
Adjusted R
Square 0.61436945 0.458168 0.596088984
Standard Error 3.70253037 4.287694 4.644363492
Observations 65 65 65

10. Table 2: Regression Results , January 2007-June 2012
Coeffici
ents
Standard
Error t Stat
P-
value
Lower
95%
Upper
95%
Intercept 8.972 0.597 15.032 0.000 7.779 10.165
Rice
Prices 0.201 0.020 10.147 0.000 0.162 0.241

11. (40)
(20)
-
20
40
60
80
100
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Jan-12
Mar-12
May-12
Figure 3: Headline Inflation and retail Rice Prices (12
months % change)
Zanzibar Rice Retail Prices(Tsh.) Headline

12. Table 3: Regression Results , January 2007-June 2012
Coefficie
nts
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Intercept 6.925 0.691 10.019 0.000 5.544 8.306
Rice
Prices 0.171 0.023 7.424 0.000 0.125 0.216

13. (40)
(20)
-
20
40
60
80
100
Jan-07
May-07
Sep-07
Jan-08
May-08
Sep-08
Jan-09
May-09
Sep-09
Jan-10
May-10
Sep-10
Jan-11
May-11
Sep-11
Jan-12
May-12
Sep-12
%changeover12months
Figure 4: Non-food Inflation and Zanzibar Rice Prices (12
months % change)
Non-Food Zanzibar Rice Retail Prices(Tsh.)

14. Table 4: Regression Results , January 2007-June 2012
Coefficie
nts
Standard
Error t Stat P-value
Lower
95%
Upper
95%
Intercept 10.310 0.749 13.771 0.000 8.814 11.806
Rice
Prices 0.243 0.025 9.770 0.000 0.193 0.293

15. (40)
(20)
-
20
40
60
80
100
%changeover12monts
Figure 5: Food Inflation and Retail Rice Prices (12month %
change)
Food Inflation Zanzibar Rice Retail Prices(Tsh.)

16. A comparison of Zanzibar and Thailand Rice Prices
Rice importers
usually take one-
two months to
respond to the
changes in
Thailand import
prices
-
100
200
300
400
500
600
700
800
900
1,000
-
200
400
600
800
1,000
1,200
1,400
1,600
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Jan-12
Apr-12
ThailandRiceImportPrices(US/Ton)
ZanzibarRiceRetailPrices(Tsh/Kg)
Figure 6: Zanzibar Rice Prices (lagged one
month) and Thai Import prices ,2007-2012
Zanzibar Rice Retail Prices Thai FOB ($/ton) Thai FOB

17. -
200
400
600
800
1,000
1,200
1,400
Jan-06
Mar-06
May-06
Jul-06
Sep-06
Nov-06
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Mar-08
May-08
Jul-08
Sep-08
Nov-08
Jan-09
Mar-09
May-09
Jul-09
Sep-09
Nov-09
Jan-10
Mar-10
May-10
Jul-10
Sep-10
Nov-10
Jan-11
Mar-11
May-11
Jul-11
Sep-11
Nov-11
Figure 7:Zanzibar Retail Rice Prices and Thai FOB Prices
(Tshs/Kg), 2006-2012

18. (100)
(50)
-
50
100
150
200
Figure 8: Zanzibar Rice Retail Prices Vs Thai (FOB), (12
months % change)
Zanzibar Rice Retail Prices(Tsh.) Thai FOB ($/ton)

19.  Zanzibar rice prices have been less volatile than
Thai export prices and have generally followed
Thai export prices
 Thai import prices increased significantly from
January-April 2008
◦ Global financial crisis, world recession and petroleum oil
crises
◦ Subsequent export restrictions by rice producing
countries
 Accordingly, domestic prices responded to a
decline in world market prices (BOT, 2009).

20. 0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
Jan-09
Apr-09
Jul-09
Oct-09
Jan-10
Apr-10
Jul-10
Oct-10
Jan-11
Apr-11
Jul-11
Oct-11
Figure 9: % changes in Thai FOB and Zanzibar retail rice
prices relative to 2006 (Price Index=100)
Retail
Thai FOB

21.  A one percent increase in monthly Rice prices drove
upwards monthly Headline, Non-food and food inflation
by 0.201, 0.171 and 0.243 percent respectively .
 Retail prices of Thailand Rice in Zanzibar did not cause
significant additional price inflation far beyond their weight
in the CPI basket of 20.8 percent for either food or non-
food Items as had been earlier anticipated.
 Zanzibar Retail Rice prices do closely follow Thai Import
Prices
 For some periods, the 12 months % change in Zanzibar
Retail Prices was relatively higher than Thai Import prices

22.  Continue with investments in domestic rice
production to drive down the relatively high and
increasing prices of rice.
 Eliminate barriers of entry into the current rice
import trade-It is oligopolistic with few importers
(BOT,2009).
 Reduce/Lift rice import duties mainly during
periods of food crises.

23.  Support competition in food import to
stabilize/reduce prices at local markets
 Traders be encouraged to expand the range of
rice import countries.
 Initiate targeted social protection policies for low
income and food insecure households
 Identify and address other factors driving high
(double digit) food inflation