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Business Reporter
The current trend of inflation slowdown, if sustained, could consolidate economic gains achieved so far and anchor the growth of the economy in the short to medium term, business leaders and analysts have said.
Following the announcement of a raft of measures by the Government to tame runaway inflation and exchange rate, the economy has in recent months witnessed stability while prices for most basic goods have dropped, at the same time the exchange rates are nearer to convergence.
According to the Zimbabwe National Statistics Agency, annual inflation slowed to 268,8 percent in October from 285 percent in September 2022, while month-on-month inflation has been on a downward spiral over the past four months to 3,2 percent in October.
Month-on-month inflation levels have come down from a peak of 30,7 percent in June 2022, the highest level reached on account of then rising parallel market exchange rate, which was driven by increases in the money supply.
Part of the Government’s intervention measures were aimed at instilling discipline and curbing speculative behaviour, targeting the exchange rate volatility and developments in the broader macroeconomy.
In addition, the central bank on its part hiked the bank policy rates from 80 percent to 200 percent in June this year, aimed at reducing speculative borrowing and stabilising the exchange rate.
Moreover, the central bank introduced gold coins as an alternative investment, helping to mop up excess liquidity in the market.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Mr Chris Mugaga said the downward spiral in inflation was a sign of stability in the economy.
“When inflation is going down, you can’t deny that it’s a sign of stabilisation, but obviously, you look at stabilisation from a medium to long-term perspective rather than short-term.
“If you look at the third quarter of the year, it has been characterised by a sustained decline in inflation, stability of the exchange rate and the 200 percent interest rate as defined through the bank rate by the central bank,” he said.
Mr Mugaga said the trend can be maintained into next year if authorities continue with measures to stabilise the economy.
Securities and Exchange Commission of Zimbabwe (SecZim) chief executive Mr Anymore Taruvinga said it was essential to highlight that the Government’s desire was to contain inflation and a runaway exchange rate.
“Therefore, on inflation, the desire is not to go back to 2008 levels at the same time maintain the exchange rate particularly on the parallel market
“So these are the two elements the government is trying to control. Despite the pressure, until inflation and exchange rate stabilizes, it will be difficult to move away from the measures,” he said.
Mr Taruvinga noted that the exchange rate has stabilized and the gap between the parallel and formal rate has dropped to between 20 to 30 percent, from the highs of 130 percent.
“So there has been some form of convergence and month on month has been going down, so in short those are the gains the economy has witnessed and should be maintained for the long run,” he said.
On his part, economist Mr Prosper Chitambara said that stability has provided sustainability to the economy by enhancing both consumer confidence as well as business confidence.
“As a result, business is in a better shape because of the stability and consumer confidence has been positive,” he said.
He said in the short to medium term, the gains are important for the sustainability of the economy as business confidence is critical to growing the economy.
“When inflation is increasing, it creates uncertainty in the economy and that affects business and consumers, therefore we need to sustain this for the long run,” said Mr Chitambara.
Conglomerate, Innscor Africa said in response to the unfolding inflationary pressures, several monetary policy interventions, particularly in respect of local currency interest rates and money-supply management, were introduced at the end of the financial year under review, and despite the resultant short-term softening of consumer demand, these interventions have, for now, achieved the desired result of stabilising the local trading environment.
The company said it encourages the authorities to “stay the course” and remove the remaining legal and practical distortions in the area of corporate taxation.
Zimbabwe’s economic growth is riding on the back of the National Development Strategy 1 (NDS1), which is a Government’s five-year economic management master plan through to year 2025, with focus on building, expanding and restoring infrastructure and implies the second phase of the road to Vision 2030, whose goal is to achieve accelerated inclusive, socio-economic growth through social transformation.
Online Reporter