By Alois Vinga
THE Reserve Bank of Zimbabwe (RBZ) has predicted a below 10 % inflation rate by year end on the back of sustained economic stability coupled with strict management policies.
Presenting the Monetary Policy Statement (MPS) Thursday, central bank governor, John Mangudya highlighted the current inflation rise was triggered by external factors.
He expressed economic growth optimism while calling on citizens to rally behind the efforts.
“The measures presented in this MPS will support the attainment of the envisaged economic growth of 7.4% in 2021 and to control inflation to below 10% by end of December 2021.
“The Bank’s focus on fostering price and financial system stability in the economy requires team effort by all Zimbabweans to enhance self-discipline and compliance, and to cherish economic progress,” he said.
Efforts which kept reserve money growth under check and the improved efficiency in the allocation of foreign currency through the foreign exchange auction system managed to contain both overall and blended inflation on a downward trajectory since the second half of 2020.
As a result, the headline Consumer Price Index (CPI) month-on-month inflation rate ended the past year at below 5 % as desired by monetary policy, resulting in annual inflation closing the year 2020 at 348.6%, slightly above the forecasted 300%.
However, a worrisome trend emerged again in January 2021 when month-on-month inflation increased to 5.4 %, up from 4.2 % in December 2020, prompting year-on-year inflation to rise moderately to 362.6%.
“The increase in inflation in January 2021 largely reflected the adjustments in administrative levies and charges that include electricity, municipal charges, rates and health charges, some of which are traditionally effected at the beginning of the year,” said the MPS.
The policy said inflation outturn was also influenced by the increase in international commodity prices for maize, wheat, fuel, crude soya oil, among others among other factors.
To that end, business member organisations have since submitted to government on the need to scrap multiple and repetitive licensing fees being charged by local authorities and other statutory bodies due to their adverse effects on business.
Despite the setbacks, the blended inflation, however, remained low at an average of 2 % since August 2020 and closed the year at 188.9 % compared to 250 % percent projected in the August 2020 MPS.