01/11/2007 (AllAfrican.com) - Tanzania is paying dearly for heavily relying on imports."We really import all the fuel used in the country," Confederation of Tanzania Industries (CTI) policy and research director Hussein Kamote told The Citizen by phone yesterday.

Such heavy imports exert enormous pressures on the Tanzanian currency, precipitating the shilling depreciation.Expensive imports amid poor earnings from mainly agricultural exports, tourism receipts and donor inflows are causing balance of payments problems.

Costly imports of fuel and components are fed into the economy to raise inflation rates.

" We import almost all the crude palm oil and wheat. With this in mind, I feel, there is no way we can run away from inflation in case prices of these products escalate at the world market," he said.

He exonerated the Government from the current rising inflation.However, he noted that the situation showed that some domestic problems were linked with external forces.

He said inflation rose after the Government reviewed the petroleum taxation in the current financial year.

Businessman and politician Mohammed Dewji said in Dare s Salaam yesterday that causes of rising inflation in Tanzania were mainly external.

Mr Dewiji, Singida Urban MP and Mohammed Enterprises Limited chief executive officer, blamed the Middle East political unrest for Tanzania's economic predicament.

"Among the reasons is the Iraq crisis, which has turned so badly that nobody sees any solution in sight. Turkey has now joined the battle to counter the Kurdish problem at home. This, alongside the Iran nuclear energy issue has made the middle East more volatile than ever before," he said.

He said rising crude oil prices were pushing international commodity prices up. increases in crude oil prices were raising transport costs.

He said the crisis triggered off a higher demand for agicultural produce such as maize, sugarcane and wheat to produce ethanol and other biofuels in the US and Europe.

He also said the wheat price rose from $281 a tonne to $460 in a year.

A tonne of palm oil has risen from $450 to $935 during the same period. A tonne of rice is sold for $450 compared with $250 while the price of a tonne of maize has increased to $235 a tonne from $124.

"Similarly, prices of palm-based products imported for manufacturing soap have gone up by over 100 per cent over the last 12 months. Though we are in the free-market economy, I believe the Government is doing a lot to contain the situation but that the current situation is beyond its means," he said.

Mr Dewji of the ruling Chama Cha Mapinduzi defended the Government policies on inflation, saying "it is inevitable since it is mostly imported inflation".

"The current rising inflation has nothing to do with Government policies," hei told journalists.

Headline inflation was 8.3 per cent in September this year, higher than was 7.8 per cent the previous month.