Mangudya's tough inflation choices

HARARE - Reserve Bank of Zimbabwe (RBZ) governor John Mangudya has vowed to keep the country’s inflation below four percent this year.

However, the veteran banker has a tough job ahead of him as inflation topped 3,46 percent by end of December last year, with some market experts predicting that Zimbabwe’s year-on-year inflation is already in double digits.

Mangudya noted that in the outlook period, the risk of inflation would be mitigated by the positive domestic and international goodwill, following the new economic and political dispensation in the country, which is already having some dampening effects on speculative tendencies, as well as on adverse inflationary expectations.

“On the other hand, external factors such as further strengthening of the South African rand, the United States dollar, high demand for imported goods and services, and surge in oil prices, may continue to put pressure on domestic prices.

“The Bank will, therefore continue to closely monitor price movements, and take pre-emptive and corrective measures to contain inflation to the Sadc target of between 3,7 percent by year end,” he said, adding that anticipated reduction in food imports and food prices, following the bumper harvest in the 2016/17 agricultural season, and the average 2017/18 cropping season, will dampen prices and moderate inflation this year.

Since climbing out of deflation in February 2017, Zimbabwe’s annual headline inflation has continued to rise spurred by foreign currency shortages in the country resulting in businesses purchasing the scarce commodity on the parallel market at a premium.

Mangudya, however, believes that the positive rate of inflation, as reflected in increases in prices of most commodities, was on the back of speculative and profiteering tendencies, pass-through effects of parallel market premiums on foreign exchange, shortages of some imported basic commodities; as well as some external factors such as firming South African rand and strengthening oil prices.

Food inflation surged from -0,30 percent in January 2017 to 5,65 percent in November 2017, before accelerating further to 6,60 percent in December 2017.

The increase in food inflation was largely driven by prices of meat, vegetables, and fish.

The decline in the prices of bread and cereals, responding to the 2016/17 bumper harvest, however, partially offset the price increases in other categories.

“The increase in food inflation was partly due to supply factors, particularly in relation to meat, poultry and fish, while the sourcing of foreign exchange on alternative markets escalated the production costs.

“Reduced livestock slaughters due to improved pastures and the impact of the avian flu on poultry production, negatively affected the supply of beef, pork and chicken,” the central bank chief said.

Annual non-food inflation also accelerated from -0,82 percent in January 2017 to close the year at 2,0 percent, largely driven by increases in the furniture and household equipment, recreation and culture, and clothing and footwear subcategories.

“Increases in non-food prices were largely induced by the parallel market premiums on foreign exchange,” Mangudya added.

 

Comments (1)

Governor is an idiot along with the Finance Minister. These 2 retards have played and miss managed and Governor deceived and stole the country blind. The governor is not a banker nor does he has a real Phd. Chinamasa as we all know does not have a clue about finances as he is an attorney his whole career but is allow to do nothing but beg the country over the last four years into deeper debt. The president needs to make a immediate change if not. These policies created by the Governor will further put the country in deeper debt.

Neter - 12 February 2018

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