Rising CPI terror lingers on

ANALYSTS say Zimbabweans will continue to suffer under inflation unless the dysfunctions in the country’s monetary system are dealt with.
Last week, the Zimbabwe National Statistics Agency released figures showing that inflation for the month of December 2018 stood at 42,09 percent, gaining 11,08 percentage points on the November 2018 rate of 31,01 percent.
With the inflation rate for the period coming in at 16 percentage points above treasury’s projection of 26 percent, analysts have warned that prices of goods and services could continue to rise above the government’s expectations if the current monetary crisis is not dealt with.
The latest data shows that the average inflation in 2018 was 10,5 percent, up from 0,9 percent in 2017. In his 2019 budget statement, Finance minister Mthuli Ncube had projected an average inflation rate of 8,3 percent.
The minister sees inflation averaging 22,4 percent this year before closing the year at five percent.
The government’s notion that “inflation will fall, going forward” is based on the premise that measures put in place to address the situation, such as “moral suasion, temporary suspension of Statutory Instrument 122 of 2017 and efforts to direct foreign currency cover to essential areas”, will yield positive results.
Persistence Gwanyanya, an economic analyst, told The Financial Gazette that the recent inflation developments are “a monetary phenomenon”.
“Because inflation is itself a driver of inflation, we are likely to see the momentum continuing into 2019 but its sustenance will largely depend on how we are going to manage money supply growth.
“Whilst Mthuli Ncube might have done a commendable job in containing the fiscal deficit within target levels since assuming office, there is still high risk of inflation from calls for wage increases and need to expunge or service maturing Treasury Bills,” Gwanyanya said.
“As such the inflation target for 2019 is unlikely to be achieved. The distortions from the exchange rate parity are also likely to fuel inflation,” he added.
He said it is worrying that “we have continued to maintain the US dollar-RTGS-bond note rate at parity at a time when the so called essentials are now being unsustainably subsidised by this exchange rate, leading to excessive demand for the same, which is inflationary”.
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