Zim will not plunge into hyper-inflation again: RBZ

LIVINGSTONE MARUFU

Zimbabwe’s central bank governor Dr John Mangudya has said that the continued increase in money supply will not plunge the country into a hyperinflation as was witnessed in 2008, as the bulk of the money is held by institutions which include pension funds and banks.

This comes as broad money supply increased to just over $9 billion in June from $6,49 billion last year, an increase of 40,81% stoking fears of a continued rise in inflationary pressures. Money supply according to Mangudya, has since risen to $9,5 billion as at August 31, 2018.

The governor’s statement comes at a time the country’s basic commodities prices have increased by at least 20 cents in the past two weeks due to disequilibrium on the black market foreign exchange rates whose rates peaked above 90 percent over the past two days.

In an interview, governor Mangudya told Business Times that there was no way that Zimbabwe can slide back into that inflationary scenario given the multi-currency system, surge in exports and increased production in various sectors.

“The moderate price increases are attributable to fiscal imbalances that continue to put pressure on the economy.

“The country will not go into hyper-inflationary environment of 2008 as the quantity of money in circulation in Zimbabwe is at levels that do not cause the inflation phenomenon,” Mangudya said.

“The bulk of our total bank deposits of $9,5 billion belong  to institutional investors that include pension funds which do not require forex.”

Of the $9,5 billion banking sector deposits only $2,1 billion is believed to be individual accounts and is not sufficient enough to affect the economy.

Mangudya said the country had successfully negotiated various fresh credit lines of close to $900 million to deal with the disequilibrium in the foreign exchange supply.

RBZ said it is arranging more lines of credit and providing export incentives to boost exports and deal with the mismatch in the forex market, which is manifested through money-changers.

The country needs to increase exports and foreign exchange to keep the parallel market under control.

Credit lines are expected to meet critical obligations such as external payments for raw materials or key industrial equipment and machinery, as well as fuel and medicines among others.

Mangudya’s assurance comes at a time the country’s largest industry representative, the Confederation of Zimbabwe Industries (CZI) has said Zimbabwe will not experience food shortages as the manufacturing sector has enough resources to feed the nation.

CZI president Sifelani Jabangwe said the prevailing economic environment could not be equated to 2008 as the two periods were different and incomparable.

“We have always assured the country that we have enough basic commodities in the country and we will continue having them as the manufacturing sector continues to produce despite foreign currency shortages.

“The central bank is doing the best it can to provide foreign allocations to producing companies and is even increase finance to oil producers and fuel suppliers.

“Given these interventions people will not suffer like 2008 no matter what, we will survive the storm,” said Jabangwe.

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