An economist has raised fears that gains made by authorities in decelerating inflation in Zimbabwe may be reversed if the auction system by the Reserve Bank of Zimbabwe (RBZ) is to regress and the parallel market exchange rate continues drifting.
Economist Joseph Mverecha during a symposium today argued that inflation is resurging using the January month on month inflation figures which reflect a 5.43% increase.
Economist Joseph Mverecha today said, “My concern is we may actually witness a reversal of this inflation deceleration which was gaining momentum.”
Authorities had managed to decelerate inflation from a peak of 834% in July 2020 to 448.5% in December and 321.7% in February this year.
Mverecha, however, said that such a reversal can be avoided by having a reserve money control system, effective convergence path programming. the economist also said the government needs to lead on utility prices and the social contract.
He said, “We also need government to lead us on utility prices and on the social contract. We cannot have ZESA, ZINWA, ZINARA and other local authorities just increasing prices by 140%, 50%, 30%, each doing as they wish. It undermines the great work that monetary authorities and fiscal authorities are doing to get the economy back on track.”
“The same with social contract. We really face significant intractable dispute on wage adjustment in the economy. Again it requires government to lead us in terms of what kind of social contract we can on the round table. Let’s bring everyone on the round table”
RBZ governor John Mangudya however dismissed Mverecha’s argument as a cautionary presentation that shows fear.
“Zimbabwe’s inflation is mainly about business sentiment, the overall attitude of investors towards the economic development in this country. That’s what is driving inflation much more,” Mangudya said.
It’s about inflation being expectations as opposed to being the past. Now you (Mverecha) are using the past experience to try to define the future.”