RBZ insists inflation will close year at 3%

Published: 28 September 2017

RESERVE Bank of Zimbabwe governor, John Mangudya, says year-on-year inflation will continue on an upward trajectory, but end the year at three percent.

Price increases have intensified over the past few weeks, mainly driven by an acute foreign currency shortage, which has triggered fears of a return to hyperinflation. The International Monetary Fund (IMF) has forecast a year-end inflation of seven percent.

Zimbabwe is one of a handful of countries to experience hyperinflation in the 21ST Century, with a peak rate of 500 billion percent in December 2008, according to IMF data. The current wave of price increases has evoked memories of the crisis 10 years ago.

Mangudya said resurgent inflation, which broke from a deflationary spell between October 2014 and January 2017, after turning positive in February 2017, was testimony of a growing economy.

Inflation burst from negative territory to 0,06 percent in February as a result of an expansionary fiscal policy stance which saw the fiscal deficit hitting $1,4 billion or 10 percent of gross domestic product last year.

The deficit was financed from domestic sources, which included bank borrowings, issuance of Treasury bills and reliance on a central bank overdraft facility.

"We have tried to make it clear that inflation will end the year at three percent in line with the Southern African Development Community benchmark of between three and seven percent. This inflation rate is good for the economy because it is within the benchmark," said Mangudya.

Zimbabwe's official statistics agency measured the annualised August inflation at 0,31 percent .

"Most prices have remained constant since 2009. Talk about your bread, among other products. I do not understand why Zimbabweans are panicking over this positive inflation," Mangudya said.

Independent analysts have forecast a growth in inflation towards the 2018 elections as spending is expected to grow in correspondence to speculative buying of properties and stocks, among other assets.

"Now that we are out of deflation, we need to manage the inflation by putting measures to deal with excessive demand for cash," said Mangudya.
- fingaz