LIVINGSTONE MARUFU
The Reserve Bank of Zimbabwe (RBZ) is aiming to reduce month-on-month inflation to 5% by December 2020 as the monetary authorities move to stabilise forex rates which will have a ripple effect on prices of goods and commodities.
The development comes at a time when the cost of living has gone up to over ZWL$4,000 per month, a situation which makes it difficult for ordinary citizens to make ends meet. It also comes at a time when Finance Minister Mthuli Ncube has announced an expansionary 2020 National Budget which has an impact on money supply, and also limits the scope for the tightening of monetary policy as required under the RBZ’s disinflationary programme.
Kupukile Mlambo, RBZ deputy governor, told Business Times that the central bank aimed to remove various distortions in the economy by stabilising the interbank rate and consequently try to preserve value for the local currency.
“As the central bank we are targeting the month on month inflation to be at around 10% by year end and at around 5% by year-end 2020,” Mlambo said, adding that inflation had had two spikes this year in June when the country introduced the Zim dollar and outlawed the multi-currency regime, and in October when there was an increase in fuel and electricity prices.
Mlambo said the increase in money supply had pushed inflation up and the central bank was moving to print more money to ensure there was increased cash in the economy. Zimbabwe’s broad money supply increased to ZWL$19bn last month, from around ZWL$14bn in September, with the majority of the money being electronic.
Despite injecting ZWL$30m cash into the economy last month, much of that money has found its way into the hands of illegal forex dealers, leaving ordinary people with a cash problem as before. Economic analysts say banks and powerful figures have a hand in forex dealings which is preventing ordinary citizens from getting physical cash in their hands.
A report by the Consumer Council of Zimbabwe says an average Zimbabwean family of five now requires at least ZWL$4,192 a month, as of November this year, to meet its basic needs for it not to be deemed poor.
