Zimbabwe inflation seen dropping below 15% by December

The RESERVE Bank of Zimbabwe (RBZ) expects inflation to tumble significantly to less than 15% this December, indicating that threats of receding to hyperinflation were remote.

Last month, inflation was at 59,4% according to government statistics agency ZimStat, but United States economist Steve Hanke has put it at 198% as of March 23, 2019.

RBZ deputy director for economic research division Nebson Mupunga, unpacking the monetary policy to accountants yesterday, said inflation would tumble as the apex bank was geared to control money supply in the market.

"We will pin down inflation to go down 15% by year-end. We will ensure that we control money supply. Broad money supply growth peaked at 47,5% in July 2018 and decelerated to 23,7% by December 2018. If the decline in money supply growth is sustained, inflation will stabilise," he said.

Mupunga added the fact that both fiscal and monetary policies were in harmony was good for controlling inflationary pressures. "The fiscal consolidation and austerity measures being implemented by government create a conducive environment for monetary policy to focus on the core objective of price and financial stability, including a stable and predictable exchange rate. So this complementarity will make the economy move forward," he said.

Over the past few years, money supply has been accelerated by the issuance of Treasury Bills and recourse to the central bank to finance the budget deficit.

Consequently, excessive reliance on RBZ financing resulted in money creation through excess real time gross settlement balances, which had the effect of driving inflation
upwards.