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Zanu PF to review wages again as prices double every 21 days - back on hyperinflation roller-coaster

16 May 2019 at 16:17hrs | Views
"Government says it will award its workers another pay increase in June as prices of basic commodities continue to sky rocket, eroding the purchasing power of disposable incomes," reported Bulawayo24.

"Civil servants in March agreed to a salary increase of between 25% and 29% as part of a $400 million cost of living adjustment after months of haggling."

Here we go!

As of today, Zimbabwe's monthly inflation rate has soared to 158% and prices are going to double every 21 days and so the civil servants salary review is to be expected. Indeed, with inflation now growing exponentially, the review is long.

What is worrying is that the economy is not growing; if anything it is shrinking and will continue to do so given the drought, the savage power cut by ZESA, etc. So the only way government is going to finance the increased wage bill is by increasing supply of money regardless of the value of the national wealth. This is the recipe for hyperinflation!

"In the 1997-2007 period, living standards (as measured by real gross domestic product [GDP] per capita) fell by a stunning 38%," wrote Steve Hanke is Spotlight Zimbabwe.

"The episode, which peaked at an annual inflation rate of 89.7 sextillion percent - that is 89.7 followed by 20 zeros - in November of 2008, had robbed people of their savings and financial institutions of their capital through real (inflation-adjusted) interest rates that were actually negative.

"This form of theft occurred, in large part, due to laws and regulations governing financial institutions (pensions funds, insurance companies, building societies, and banks) that forced them to either purchase government treasury bills that yielded only a small fraction of the current inflation rate or make deposits at the Reserve Bank of Zimbabwe (RBZ) that paid no interest.

"So, what was the cause of this economic meltdown? The blame lay at the doorstep of the Zimbabwean government, whose policies forced the RBZ to print money. From January 2005 to May 2007, the RBZ issued currency at a rate that exceeded that of Germany's central bank from January 1921 to May 1923, the ramp-up phase of the great German hyperinflation."

The scrapping of the Z$ in 2008, the ending of price controls and other measures end the hyperinflation. Still, the Zimbabwe economy has never recovered from the hyperinflation of 1997 to 2008 nor has the standard of living and life expectancy.

Zanu PF has reintroduced the Z$ or be it by giving it a new name, first the Bond Note and now the RTGS$. The regime has now started increasing the supply of the RTGS$ to fuel its wage and other expenditure increases. We are well and truly back on the hyperinflation roller-coaster!

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