Zimbabwe inflation to drop by October

Zimbabwe inflation to drop by October
Published: 11 February 2019 (117 Views)
Zimbabwe's annual rate of inflation will drop drastically to single digit levels in October this year because the disparity between the baseline index for that month compared to the same period last year will be much lower, Finance and Economic Development Minister Professor Mthuli Ncube has said.

The country's annual rate of inflation rose sharply to a record 20,8 percent in October 2018 after it gained 15,46 percentage points on the September 2018 rate of 5,39 percent, the Zimbabwe National Statistical Agency reported then.

Inflation remained relatively high up to the month of December 2018 reaching 42,09 percent, as pass through effects of premiums of black market forex took toll on prices. Businesses and individuals who cannot get foreign currency under the central bank's priority list allocation framework resort to buying the hard currency on the black market.

While delivering a lecture to students of the National Defence Course-Intake 7 of 2018 at the Zimbabwe National Defence University in Mazowe on Thursday last week, Minister Ncube said annual inflation will subside in October.

The Treasury chief said the technical explanation to the expected development was that annualised inflation vaulted after September 2018 because of the big step up to higher index in October 2018 compared to the same period the prior year. As such, the magnitude of the baseline index for October 2018 and October 2019 will be much smaller, as they both will reflect already elevated prices, hence annualised inflation will be much lower, dropping to single digit from current levels.

"Our challenge remains inflation and here we have a technical phenomenon. You see, what happened in October last year, because of the separation of the FCA accounts, the market understood that to mean there is different valuations, that there is movement from 1 to 1;  but we have maintained that conversion (exchange) rate at 1 to 1.

"And what has redeveloped is a premium in the alternative market. Our position or policy as a Government, because we want to preserve value, we have maintained the 1 to 1 conversion rate to make sure we preserve value for the nation, for everyone.

"But nevertheless inflation took off because of speculative action in the market and the last figure that we saw was 42 percent (December 2018); but there is a technical phenomenon to this.

"When the CPI index shifts to a higher level, compared to last year, that already puts you at a higher land and you run with that right through the year. So you find that, for a good part of this year inflation remain high at double digit.

"And then come October, when inflation moved up in 2018, the base shifts, then you find that inflation drops sharp in October 2019, that is our expectation that it remains high technically and then shrinks in October," the Finance Minister said.

When the rate of inflation is too high, it is not good for the economy or individuals because inflation will always reduce the value of money or savings. And the higher inflation gets, the less chance there is that savers will see any real return on their money.

Prof Ncube said Treasury's inflation projection was that month on month inflation was projected to remain in the lower double-digit region.

"Month-on-month inflation is expected to further slowdown in January, while year-on-year figures are expected to remain relatively high due to the base effect and the pass through effects of the parallel exchange rate.

"The major driver of inflation during 2018 is the pass-through from the parallel exchange rate, which despite stabilising has been gradually feeding into the pricing of goods and services," he   said.

- the herald

 0

You May Like These Videos

Comments

There are no comments.

Latest stories

Dorothy Masuka (83) dies

by Staff reporter | 23 February 2019 | 53 Views

Activist released after month in prison

by Staff reporter | 23 February 2019 | 43 Views

Ginimbi tax evasion investigations complete

by Staff reporter | 23 February 2019 | 39 Views

Parties withdraw from Mnangagwa's National Dialogue?

by Staff reporter | 23 February 2019 | 51 Views

Callistus Ndlovu buried

by Staff reporter | 23 February 2019 | 43 Views

Grace Mugabe sister's fraud charges to be dropped

by Staff reporter | 23 February 2019 | 42 Views

Callistus Ndlovu's hero status angers Zapu

by Staff reporter | 23 February 2019 | 42 Views

Chiwenga's charter plane a specialist hospital in the sky

by ZimLive | 23 February 2019 | 50 Views

'Baba Jukwa' bailed $100

by newzimbabwe | 23 February 2019 | 43 Views

Mnangagwa warns militant MDC supporters

by newzimbabwe | 23 February 2019 | 48 Views

Zimbabwe lost $2 billion on 1:1 forex exchange rate

by Staff reporter | 22 February 2019 | 199 Views

MDC National Council Resolutions

by MDC | 22 February 2019 | 165 Views

'Propaganda' college for Chamisa's MDC

by Ndou Paul | 22 February 2019 | 176 Views

Mnagagwa is a habitual liar

by Don Chigumba | 22 February 2019 | 182 Views

Chiwenga aborts flight to Zimbabwe

by newzimbawe | 22 February 2019 | 213 Views

Grace Mugabe sister's fraud trial hits a snag?

by newzimbabwe | 22 February 2019 | 137 Views

Callistus Ndlovu's body arrives in Harare

by Staff reporter | 22 February 2019 | 120 Views

Baby mama threatens to bewitch ex's wife

by Staff reporter | 22 February 2019 | 123 Views

Dating scam exposed

by Staff reporter | 22 February 2019 | 162 Views

Cholera vaccine campaign begins in Harare

by Staff reporter | 22 February 2019 | 107 Views

American starlet trialing with Bosso

by Staff reporter | 22 February 2019 | 98 Views

Zimbabwe approves 37 mbanje investors

by Staff reporter | 22 February 2019 | 135 Views

'Technology changing face of epidemic'

by Staff reporter | 22 February 2019 | 99 Views

Bosso zero in on three for captaincy

by Staff reporter | 22 February 2019 | 99 Views

Two stabbed, axed in gold rush

by Staff reporter | 22 February 2019 | 115 Views

Bulawayo takes deliberate affirmative action policy

by Staff reporter | 22 February 2019 | 109 Views

Woman arrested for obscene message to lover's wife

by Staff reporter | 22 February 2019 | 114 Views

MDC Alliance members run away with ballot papers

by Staff reporter | 22 February 2019 | 115 Views

Zimbabwe/South Africa officials to meet ahead of Ramaphosa visit

by Staff reporter | 22 February 2019 | 78 Views

Mnangagwa courts Chinese

by Staff reporter | 22 February 2019 | 46 Views

Caps United avert player strike over unpaid dues

by Staff reporter | 22 February 2019 | 48 Views

Fake news rocks Zimbabwe military

by Staff reporter | 22 February 2019 | 63 Views

Ginimbi to 'tour' Australia

by Staff reporter | 22 February 2019 | 57 Views

'Chamisa, Mnangagwa power-sharing not on the agenda'

by Staff reporter | 22 February 2019 | 109 Views

Chamisa cries as his political career ends

by Dr Masimba Mavaza | 22 February 2019 | 173 Views

Abusive Zanu-PF councillor sets wife alight

by Staff reporter | 22 February 2019 | 54 Views