adminannual inflation, which currently stands at 3,3 percent, has gone up in the past two months by a 0,4 percentage rate on both occasions, which has begun to raise fears that inflation could hit another free reign.
Inflation is a rise in the general level of goods and services in an economy over a period of time, that is, when the general price level rises, each unit of currency buys fewer goods and services.
Economist Mr Brains Muchemwa said although the rise in prices due to the review on import duty on some foodstuffs was as expected, the recent rise in inflation should not cause alarm.
“Moderate inflation is good for our economy, and the recent increases should not be cause for concern to policymakers and the public. Food constitutes 31,9 percent of the Consumer Price Index basket in Zimbabwe.
Therefore, it is logical that the imposition of duty on selected foodstuffs will definitely see some upward pressure on inflation, the extent of which will be determined by how far the retailers and wholesalers will pass on the cost to consumers,” he said.
Moderate inflation may be attributed to fluctuations in real demand for goods and services, or changes in available supplies such as during scarcities as well as to growth in the money supply.
Such a level of inflation as Zimbabwe’s at the moment may reduce the severity of economic recessions by enabling the labour market to adjust more quickly in a downturn.
Uncontrollable inflation is a major concern in this country, especially in view of the hyperinflationary past, and the fact that the country’s monetary tools have been undermined as a result of dollarisation.
University of Zimbabwe Professor of Economics Tony Hawkins has said one major effect of the move to dollarisation is that the Government can no longer use monetary or exchange rate policy to offset
inflation.
This year’s inflation risks are posed by four major threats, including increasing food prices, increasing wages, rising fuel prices and higher utility tariffs.
Mr Muchemwa, however, said the local market poses limited threats as inflation drivers.
“Because we are dollarised, the monetary authorities are mere spectators and have no way of tweaking any of their interventionist tools to manage the course of inflation. However, a very close look at the goods market structure in Zimbabwe reveals a very competitive market that is kept sane by the influx of imports. The chances of witnessing massive price hikes from local producers just on account
of taking advantage of the recent duty increases are far-fetched,” he said. The Government has set an annual inflation target of 4,5 percent by year-end.
Online Reporter