Emmerson Njanjamangezi, Group Features Editor 
FINANCE and investment advisory services group, Imara Holdings (Imara), says fresh concerns have arisen in the local market over potential US$ inflation at a time the ZWL$ has been stabilising.
In a recent note, Imara said inflation fears for global economies using greenbacks comes as the US has announced rapid money growth together with massive fiscal expansion to stimulate its economic recovery as the Covid-19 pandemic begins to slow down.
Broad money supply in the US rose by 26 percent in 2020 and expectations are that it will rise by at least 12 percent or more this year.
“Internationally, there is a growing school of thought that a rapid increase in money supply in the US will lead to much higher rates of inflation than analysts currently predict.
“This would have a negative impact on global inflation, as commodity prices rise. We are already witnessing this with fuel prices increasing in US$ terms together with soft commodity prices,” read part of the note.
Though the growth in US money supply will likely trigger a boom in commodity prices that may benefit Zimbabwe’s mining sector, Imara warned of the US$ inflationary pressure on the local market.
“Our expectations are that USD inflation will continue to rise, which itself will put additional pressure on ZWL inflation rates. ZWL inflation has closely tracked ZWL money growth. The RBZ has recently published its December monthly economic review.
“We note that broad money grew by nearly six times during 2020; stripping out foreign currency deposits from that number, local currency deposits rose by 351 percent in line with inflation which rose by 349 percent year-on-year in 2020.
“Our fear is that monetary growth in 2021 will maintain an upward trajectory which itself will keep ZWL inflation rates high over and above the pressure from external inflation rates,” further read the note.
The official statistics highlight the ZWL$ economy but with a mixture of the US$ informal market creeping into the data.
Government has a five-year de-dollarisation plan in place as fiscal authorities want to ensure that the country moves towards broader use of the local currency.
However, the government authorised the use of greenbacks since June last year among a slew of other measures to minimise Covid-19 impacts on business.
newsdesk@fingaz.co.zw
