News / National
Inflation target likely to be missed
07 Feb 2022 at 21:19hrs | Views
FAILURE to implement tight monetary policy and a raft of confidence-building measures will see Zimbabwe missing its inflation target of 32.6% in 2022, a manufacturing sector lobby group has said in its economic forecast report.
Experts say money supply growth, adverse expectations, exchange rate premium, cost-push inflation, delays on the forex auction market and Statutory Instrument 127 of 2021, which led to a massive transfer of US dollar revenue from the formal to the informal sector, were the main drivers of inflation in 2021.
Official figures show that annual inflation ended the year 2021 at 60.74%, having gained 2.34 percentage points from the November inflation rate.
The 2022 National Budget has forecast an average inflation target of 32.6% and end period range of 15% to 20% in 2022. The Confederation of Zimbabwe Industries (CZI) in its latest outlook report released this month said taming inflation would be an uphill task for the authorities in the absence of reforms.
"These (targets) can only be achieved if there is a decisive turn on the manner in which the foreign exchange auction market is handled as well as a tighter monetary policy compared to the current regime. In addition, economic agents need confidence that the disinflation programmes in place will be able to tame inflation," the CZI said in the report titled 2021 Inflation and Currency Round Up.
"Given that these decisive measures have been acknowledged by policymakers abut are taking time to implement the likelihood that the 2022 inflation targets will be missed again remains a possibility."
Economists say by eroding disposable income and pushing more people into poverty, inflation works against the poverty alleviation.
The impact of inflation on poverty is reflected in both the Zimstat Food Poverty Line (FPL) per person and the Zimstat Total Consumption Poverty Line (TCPL). The FPL for December is ZWL$5 761, having increased from ZWL$5 424 in November 2021.
This means a family of five people with an income of ZWL$25 000 per month will not be able to afford the basic food requirements for all family members to stay out of poverty. The TCPL for December 2021 was ZW$8 009 per person in December 2021.
This implies that an individual should be able to set aside ZW$8 000 to purchase both non-food and food items so as not to be deemed poor.
Commenting on the currency developments, the CZI said the continued depreciation of the Zimdollar on the parallel market resulted in economic agents preferring to hold on to the more stable US dollar.
"The inefficiencies of the auction market have also created arbitrage opportunities which are undermining the government effort towards vision 2030," the report reads.
Official figures show that total allotments in year 2021 were US$1 971 446 836 compared to US$624 933 977 in 2020.
The increased allotment, the CZI says, can be attributed to increased production and easing of lockdown restrictions. On the auction market the Zimdollar depreciated by 32.9% in 2021 compared to 84.7% on the parallel market.
Experts say money supply growth, adverse expectations, exchange rate premium, cost-push inflation, delays on the forex auction market and Statutory Instrument 127 of 2021, which led to a massive transfer of US dollar revenue from the formal to the informal sector, were the main drivers of inflation in 2021.
Official figures show that annual inflation ended the year 2021 at 60.74%, having gained 2.34 percentage points from the November inflation rate.
The 2022 National Budget has forecast an average inflation target of 32.6% and end period range of 15% to 20% in 2022. The Confederation of Zimbabwe Industries (CZI) in its latest outlook report released this month said taming inflation would be an uphill task for the authorities in the absence of reforms.
"These (targets) can only be achieved if there is a decisive turn on the manner in which the foreign exchange auction market is handled as well as a tighter monetary policy compared to the current regime. In addition, economic agents need confidence that the disinflation programmes in place will be able to tame inflation," the CZI said in the report titled 2021 Inflation and Currency Round Up.
"Given that these decisive measures have been acknowledged by policymakers abut are taking time to implement the likelihood that the 2022 inflation targets will be missed again remains a possibility."
Economists say by eroding disposable income and pushing more people into poverty, inflation works against the poverty alleviation.
This means a family of five people with an income of ZWL$25 000 per month will not be able to afford the basic food requirements for all family members to stay out of poverty. The TCPL for December 2021 was ZW$8 009 per person in December 2021.
This implies that an individual should be able to set aside ZW$8 000 to purchase both non-food and food items so as not to be deemed poor.
Commenting on the currency developments, the CZI said the continued depreciation of the Zimdollar on the parallel market resulted in economic agents preferring to hold on to the more stable US dollar.
"The inefficiencies of the auction market have also created arbitrage opportunities which are undermining the government effort towards vision 2030," the report reads.
Official figures show that total allotments in year 2021 were US$1 971 446 836 compared to US$624 933 977 in 2020.
The increased allotment, the CZI says, can be attributed to increased production and easing of lockdown restrictions. On the auction market the Zimdollar depreciated by 32.9% in 2021 compared to 84.7% on the parallel market.
Source - thenewshawks
