Monthly inflation drops to 16,5pc

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ZIMBABWE’S month-on-month inflation rate shed 0,91 percentage points in December to 16,55 percent from 17,46 percent in November, latest figures show.
According to the Zimbabwe National Statistics Agency (Zimstat), month-on-month food and non alcoholic beverages inflation rate stood at 15,75 percent in December 2019, shedding 6,88 percentage points on the November 2019 rate of 22,63 percent.
“The month-on-month non-food inflation rate stood at 17,14 percent, gaining 3,20 percentage points on the November 2019 rate of 13,94 percent,” Zimstat added.
The southern African country banned the publication of annual inflation when it reached 176 percent in June last year.
This resulted in the International Monetary Fund, which puts the country’s inflation at over 700 percent, challenging the Reserve Bank of Zimbabwe governor John Mangudya to come up with an effective monetary policy to arrest Zimbabwe’s surging inflation and stabilise the economy.
The Consumer Council of Zimbabwe (CCZ) last month said the country’s implied annual inflation rate surged from 444,2 percent in October 2019 to an implied rate of 481 percent in November 2019.
“Although the 2020 National Budget announced a budget deficit of $5 billion, which is 1,5 percent of gross domestic product, the fragility of the economy causes any increases in money supply to have a disproportionate impact on the exchange rate, which subsequently feeds into prices,” said CCZ.
The consumer watchdog added that growth in money supply was looming as the government may resort to borrowing from banks to fund the budget deficit.
CCZ also indicated that government needs money to pay for maturities of US dollar denominated treasury bills, which may be converted to the Zimbabwe dollar at the going exchange rate and servicing of legacy debt, which was assumed by the RBZ at an exchange rate of 1:1.
Currently, the exchange rate is at 17 to the US dollar on the interbank rate
“Government also needs money for increased employment costs for the public service given that they are calling for higher wages due to inflation and a high subsidy bill for basic commodities considering that the country is faced with another imminent drought in 2019/20 agricultural season,” CCZ said.
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