CZI jittery over monetary policy delay

THE Confederation of Zimbabwe Industries (CZI) has expressed concern over the delay in the announcement of the 2024 monetary policy statement (MPS) because it is heightening uncertainty to an operating environment characterised by high inflation.

The Reserve Bank of Zimbabwe governor, John Mangudya was expected to unveil the blueprint last month, but delayed the announcement to accommodate measures to “guarantee price stability and that of the exchange rate”.

According to him, the policy document will be hinged on a structured currency.

In its inflation and currency developments update, CZI, which represents the interests of big companies across all sectors, said the delay was hurting industry.

“The delay in the announcement of the 2024 MPS is not helping matters and adding uncertainty to the operating environment when inflation is already high encourages speculation as business tries to hedge against the unknown,” the CZI update read in part.

Monetary policy, according to the International Monetary Fund, is an important document which central banks use to manage economic fluctuations and achieve price stability, full employment, economic growth and balance of international payments.

Without this document, it is practically difficult for any country, business or industry to plan.

Blended month-on-month inflation declined from 6,6% registered in January 2024 to 5,4% in February 2024, shedding 1,2 percentage points.

Since August 2023, the blended month on month inflation has been increasing every month.

“Therefore, having the trend slightly declining in the month of February 2024 is a positive step as it helps anchor expectations favourably,” CZI noted.

“However, an increase of 5,4% per month in blended inflation is worrisome, as this is well above the policy target of 1 to 3% per month.”

The industry body said a look at the main avenues through which month-on-month inflationary pressures take place shows that it is largely food and non-alcoholic beverages that are responsible for high inflationary pressures.

Prices of food and non-alcoholic beverages increased by about 10% in February 2024, largely responding to the new revenue measures announced which largely targeted food and beverages products.

Communications costs also had high inflation rates at about 8,4%.

On an annual basis, CZI noted that the blended annual inflation, which is currently at 47,6%, is expected to continue to be high.

This is because the base effect means that the consumer price index any month in 2024 will always be higher compared to last year before the price adjustments induced by the 2024 national budget took place.

“This means that the main policy target should be to curtail any further inflation shocks which would drive month on month inflation further. However, the policy target of 1 to 3% month on month inflation now looks out of reach, hence the delayed Monetary Policy Statement is expected to revise the targets,” CZI added.-newsday