Like many low income countries, Tanzania is a structural importer of fuels and both an exporter
and an importer of agricultural products. A considerable literature exists that analyzes
development policy in the context of commodity price volatility (Deaton 1999; Cuddington
1992; Combes and Guillaumont 2002). The recent rise in world commodity prices, combined
with the proliferation of new tools for analysis that have come available since the commodity
booms of the 1970s and early 1990s, has also produced a broad literature. Ivanic and Martin
(2008) focused on food and concluded that poverty rates might rise substantially in low income
countries. Arndt et al. (2008) examined both fuel and food prices and highlighted the particularly
strong effect of world fuel price rises on economywide welfare and poverty in Mozambique, a
low income country that is a reasonable analog to Tanzania. They found that the price shocks of
2008 increased poverty rates by about four percentage points with more than 80 percent of the
increase in poverty attributable to the fuel price effect. Later work by Arndt et al. (2012)
illustrated that the stagnation in poverty rates observed in Mozambique between 2002-03 and
2008-09 could be mainly attributed to a combination of rising world fuel and food prices and
disappointing rates of technical advance in agriculture.