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Zimbabwe's high inflation forecast to plunge to 3%?

by Staff reporter
20 Sep 2022 at 06:02hrs | Views
ZIMBABWE's month-on-month inflation rate is expected to fall to three percent by year-end while the annual rate is seen dropping below 100 percent on the back of monetary and fiscal interventions the Government is implementing.

Official data from the Zimbabwe National Statistics Agency (Zimstat), shows that month-on-month inflation was 12,38 percent in August while annual inflation rate stood at 285 percent.

This was said by Finance and Economic Development Minister Professor Mthuli Ncube while responding to questions from the media during a Press conference on value for money process and payments for ongoing Government contracts.

"Our expectation is that over the next few months you will see month on month inflation drop and should end up at single digit by year end.

"But of course year-on-year inflation will remain high over the next two months but that's just a statistical effect.

"It's a base effect, last year we had a low base when you calculate the index in the low base which is last year to this year, suddenly we have a high year-on-year inflation.

"In reality, month-on month inflation is falling. Our prediction for December is three percent month-on-month inflation," he said.

"Year-on-year inflation next year will drop below 100 percent and we can give you specific figures as we move towards year-end because we keep fine-tuning these."

A few months ago, monetary authorities introduced a raft of measures to tame depreciation of the Zimbabwe dollar, arbitrage activities and speculative  tendencies in the economy as well as rein in a resurgent inflationary environment.

"I have already announced that we expect economic growth this year to come down from the projected 5,5 percent down to 4,6 percent. We have taken into account the recent volatility and taken into account the economic measures we have taken to deal with this volatility and engender stability," said.

For example, he said the increase in the central bank policy rate from 80 percent to 200 percent in line with annual inflation will reduce growth among other measures.

"The action we are taking in insisting on the value for money process for instance, is likely to cause contraction in terms of aggregate demand as driven by the Government.

"Government is a big driver in terms of aggregate demand in the economy, so that alone again will slow down demand and will result in lower growth.

"But it's good growth.

"We do not want growth that is driven by froth, driven by an economy that is overheating, an economy that is unstable or an economy that is out of control. This is indeed good growth and discipline growth will have eliminated the froth," he said.

Minister Ncube said a good rainy season, strong mining performance and fast recovering tourism would support the projected growth despite the negative impact of external factors that include global inflation and the war in Ukraine.

On measures taken to improve the pricing framework for goods and services supplied to the Government ministries and agencies, Prof Ncube said the Treasury was now very strict in enforcing measures to enhance economic stability.

"The value for money process will now result in punitive measures being taken against any Government officials found to be complicit to overpricing and procurement malpractices while suppliers will be blacklisted and excluded from future supply contracts.

"All existing contracts are now being subject to a value for money audit before payments are made."

In light of the above, he said the Government started enforcing measures to enhance economic stability by suspending all inflated payments and ordering an audit exercise to revalidate all running contracts and renegotiate prices with various suppliers.

"As expected there has been resistance to this exercise but we have seen accounting officers and progressive suppliers have seen the merit of this exercise and there is now a reasonably high level of compliance," he said.

A total of $184 billion to Government contractors has been paid by Treasury in the last six weeks when supply contracts have been undergoing a validation exercise to foster the value for money policy.

Source - The Herald