Reserve Bank of Zimbabwe (RBZ) Deputy Director for Economic Research Division, Dr Nebson Mupunga has said that the inflation Zimbabwe is experiencing is “just a temporary phenomenon” and expected remain relatively high until October during the Employers Confederation of Zimbabwe (EMCOZ) Breakfast Meeting in Harare today.
Zimbabwe’s year on year inflation rose 20,85 per cent after the government’s introduction of 2 cents per dollar tax.
“So we are going to be witnessing that higher inflation up to October 2019, but that does not necessarily mean that the prices are increasing,” Mupunga said.
The Deputy Director said the RBZ is using the month on month inflation as a measure going onward to October.
The Economic Research Division Director revealed that money supply is affecting the inflation Zimbabwe is facing. Money supply is the total value of monetary assets available in an economy at a specific time.
“In July, money supply growth was… around 47.5 per cent and by December it had gone down to around 23.7% and using our internal audits we estimated that money supply affects inflation with a slump of between 15 to 18 months, Mupunga said.
“So the inflation that we have been witnessing is actually in response to money supply that was created six months ago.” (sic)
“But now what we are witnessing, we are witnessing a significant deceleration in monetary supply growth and if you look at on month on month money supply, in December it was 0.7% and we hope that we are going to maintain that trend where the money supply is decelerating. In the next six months, we will witness a significant decline in inflation.” (sic)
However, an economist Dr G. Kanyenze questioned the inflation dropping by October and said what Mupunga pronounced is a lot of assumption based on all things being equal while it is known that they are no longer equal. The government argues that the bond note is at 1:1 parity with the US dollar something that has become a myth in the parallel market.
“When Dr Mupunga talks about inflation coming down in October, I am saying what is gonna be left of us by October when it’s 56.7 % now and what assurance have we got that it will come down,” Kanyenze said.
“I don’t agree that there is discipline in government in terms of expenditure that they will spend the same money they spent last year.”
Inflation is also being driven by fiscal deficit from government spending.
The EMCOZ Breakfast meeting was going under the theme: State of the Economy and its Implications on Business and Investment.
“My take is that the inflation we are witnessing now is just a temporary phenomenon,” Mupunga said.