‘Inflation to continue upward trend’

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ZIMBABWE’s inflation is likely to continue rising this year on the back of multi-pronged pressures on the economy, the Confederation of Zimbabwe Industries (CZI) has said.
In an analysis of the country’s year-on-year inflation figures announced by the Zimbabwe National Statistics (ZimsStat) on Monday, CZI said inflation pressure will emanate from increase in money supply growth and currency uncertainty.

“Persistent increase in money supply is contributing to the depreciation of the local currency. The financing of export retentions and gold incentives make it difficult to halt money creation,” said CZI.
CZI said quasi-fiscal activities will increase the current budget deficit estimated at ZWL$5 billion.
“Am increase in money supply results in the depreciation of the exchange rate. Therefore, if a lid is not put on … money supply the exchange rate will continue to depreciate thereby undermining price stability and the general wellbeing of the economy,” CZI said.
ZimStat said the country’s year-on-year inflation was 540,16 percent in February. On a month-on-month basis, prices were up 13,52 percent during the same period compared to 2,23 percent during the previous month.
The central bank forecasts the annual inflation rate to fall to 50 percent by the end of the year but analysts say price pressures will remain elevated due to a weak exchange rate and shortages of food following a drought.
The business member organisation said the interbank market was failing to meet industry requirements.
“Those that are accessing funds are only getting 10 percent of their total requirements. Most firms are sourcing foreign on the parallel market. The premium charged on the parallel market will be transferred to consumers through increased prices,” said CZI.
The organisation added that currency uncertainty and ambiguity had remained in the form of whether the economy is re-dollarising or de-dollarising as per official policy position.
“The cost structure for manufacturers is becoming more and more US dollar based with some reporting a 70 percent US dollar cost structure in their businesses based on imported raw materials, forex priced electricity, forex priced fuel and other inputs that are forex indexed in their pricing,” said CZI.
Meanwhile the Consumer Council of Zimbabwe (CCZ) said the cost of living for low income urban earners based on the requirements for a family of six rose by 7,10 percent from ZWL4 378,47 in January to ZWL4 688,47 at the end of February 2020.
CCZ attributed the increase in the total figure of their basket to the influence of parallel market exchange rates, fuel price increases and limited supply of some basic products in the market.
“Owing to the multi-tier pricing system obtaining in the economy, cash shortages remain a major constraint to consumer access to basic products,” said CCZ.
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