eBusiness Weekly
Oliver Kazunga
ZIMBABWE’S projected inflation rate of between 25 percent and 35 percent by year-end will not be achievable, weighed down largely by external shocks that the global economy is experiencing, analysts have said.
In the 2022 Monetary Policy Statement, the Reserve Bank of Zimbabwe (RBZ) projected that the country’s rate of annual inflation will end the year at between 25 percent and 35 percent.
This was on the back of improvement in locally-produced goods, fiscal and monetary support measures that the monetary authorities pursued.
However, Zimbabwe’s attendant annual rate of inflation has been on an upward trajectory, recording 131,7 percent last month from the April rate of 96,4 percent.
Of late, the global economy has largely been affected by the Russia-Ukraine War, which has a knock-on effect on the international prices of commodities such as fuel and cereal prices such as wheat and maize.
This is on account that the bulk of these commodities are supplied by Russia and Ukraine and as the war between the two Eastern European nations rages on, there has been a short supply of fuel and wheat.
On the domestic front, the rate of inflation has in recent months been stoked by the exchange rate volatility due to rampant parallel market activities where some unscrupulous individuals and businesses seek arbitrage opportunities.
In separate interviews, economic analysts said in light of the existing exogenous factors, RBZ now needs to revise the country’s annual inflation rate projections for the year.
The economic analysts concurred that earlier projections by the monetary authorities were no longer attainable given the prevailing situation in the global arena.
“The target is not achievable given the circumstances which are beyond anyone’s control looking at the pricing of fuel and food prices which is more of a global phenomenon.
“And given that despite us having vast resources at our disposal, we have failed to manage the food side in terms of security.
“In our case, looking at the fuel price which is going up every week, the net impact of that cascades to every sector in the economy. So, the targets by the Reserve Bank were very good ambitions but because of the external forces at play, its now difficult for us to achieve those targets,” said the Zimbabwe National Chamber of Commerce (ZNCC) immediate past national vice president, Golden Muoni, in a telephone interview from Bulawayo.
He said it was imperative for authorities to go back to the drawing board as quickly as possible, and establish strategies that promote local production targeting the agriculture sector and its value chains for the country to enhance food security.
“We have a working model in tobacco which should be replicated in wheat, soya beans, and maize because these are strategic crops that we require for us to say we are now food secure.
“Now everything is going out of hand, that value of our local currency is becoming useless now when you find a loaf of bread going for $600 and its not here (Zimbabwe) only, but even in South Africa as well.
“It’s not very easy for us to apprehend and control the inflationary pressures emanating from exogenous forces,” said Muoni.
“As it is now, the projected inflation rate of 25 and 35 percent by year end to me is not achievable and if we are not careful the inflation rate may close the year at between 200 percent and 300 percent.”
Muoni said the country could be losing millions of foreign currency through the RBZ auction platform where money was being allocated for non-productive purposes.
“You cannot allocate forex for services, some of which are not even existing. People (businesses) just create dubious invoices because they know that there is a loophole where no-one is going to ask for acquittals because you have given a service and they are using that to usurp the country’s forex,” he said.
Forex allocations, he said should be for productive purposes so that Zimbabwean companies are able to produce and consolidate the economy, which in turn would cascade to lowering the rate of inflation.
“Also, we need to engage industries because there are some things happening at the auction market which to me are very unusual. You cannot have a company buying raw materials or machinery on a monthly basis.
“It is out of speculation and nothing else, people taking advantage that there is cheaper money they speculate and hold on raw materials which they don’t use.”
Bulawayo-based economic analyst, Lindiwe Mpofu, echoed similar sentiments.
She added: “If we create a scenario where we are producing the way we are supposed to, then we will be able to control it (inflation), but this will be dependent on the productivity of the country.
“What holds inflation is production so, if you control your supply and demand inflation goes down, right now Zimbabwe has a problem that demand for foreign products is higher than what’s being supplied.”
Economic analyst, Morris Mpala, said the Russia-Ukraine war has increased food and fuel prices to unprecedented levels across the globe.
“Given the developments on the world arena, as a country we may need to revise our inflation rate projections. We also need to close other valves that feed into the inflationary pressures as well as we look at the runaway parallel market rates. That on its own put together we’ll not be able to achieve those projections announced by RBZ,” he said.
To control inflation arising from internal forces, Mpala said authorities need tight control on money supply growth as well as supporting the productive sector, which the Government has been doing.
“Authorities also need to make sure that we have got enough foreign currency so that the producers have an exchange rate which is a bit higher which now feeds into whatever the products they are producing.
“If we put our measures into place, the country will close the year with an annual inflation rate above 150 percent, but if we don’t, it could be way, way above that,” he said.
