Economists applaud inflation-control measures

ECONOMISTS have praised the Government’s proactive monetary policy measures, highlighting these have resulted in decreasing inflation rates, economic stability, and heightened confidence in the local currency.

Prices for goods and services have relatively been stable following the introduction of Zimbabwe Gold (ZiG) in April 2024. Month-on-month ZiG inflation declined by -2,4 percent in May 2024, and averaged 0,0 percent in the second quarter of the year.

However, inflation pressures emerged in August to October 2024, attributable to a surge in parallel market foreign exchange activities, which worsened adverse inflation expectations.

Zimbabwe Gold

Consequently, the Monetary Policy Committee (MPC) implemented stabilisation measures that included increasing the bank policy rate and standardising statutory reserve requirements for deposits. The MPC also allowed greater exchange rate flexibility and reduced the limit on foreign exchange individuals can take out of the country.

The local currency depreciated to US$1:ZiG25 at the official rate with the parallel market on higher end, while the amount that can be taken out of the country was reduced from US$10 000 to US$2 000.

The monetary policy measures have begun to have a positive impact, as both the official and parallel exchange rates have stabilised.

“In 2025, ZiG inflation is expected to remain stable, with an average month-on-month inflation of below three percent, on the back of tight fiscal and monetary policies,” Finance, Economic Development and Investment Promotion Minister, Professor Mthuli Ncube, said in his national budget statement last week. According to the latest statistics from the Zimbabwe Statistics Agency (ZimStat), the Zimbabwe Gold (ZWG) month-on-month inflation rate was 11,7 percent in November 2024, a significant drop of 25,5 percentage points from the October 2024 rate of 37,2 percent.

Professor Mthuli Ncube

This means that prices, as measured by the all-items ZWG consumer price index (CPI), increased by an average of 11,7 percent between October 2024 and November 2024.

Commenting on the development, economist Mr George Nhepera said that as the nation approaches the festive season, there is a need to focus on supply-side economics, which is designed to offer incentives to industries to produce more goods and services.

He stated that this approach will help maintain the positive trajectory and effectively reduce unnecessary pressure to increase prices due to supply shortages.

“The reduction in month-to-month inflation is a positive signal to monetary authorities that their policies are working and this should be commendable. Some of the supply-side economics the Government could implement include deregulation of industries. This may take the form of relaxing or reducing Government regulations on key industries, including the banking and capital markets sectors,” said Mr Nhepera.

In April this year, the central bank unveiled the country’s new medium of exchange, the Zimbabwe Gold (ZWG), as part of several policy measures to address exchange rate volatility, curtail inflation, and restore durable macro-economic stability.

Experts believe this will go a long way in restoring confidence in the country’s economy.

Economist and institutional analyst Dr Shynet Chivasa attributed the drop in inflation to the strength of the local currency. She noted the ZWG gained from US$1:ZWG28,65 on October 30 to US$1:ZWG25,33 as of November 25, 2024.

“The strength of the currency means a reduction in prices for goods and services in local currency,” she said.

Dr Chivasa emphasised the need for the Government to ensure an adequate supply to avoid demand-pull inflation and enhance the availability of foreign currency to release pressure on the exchange rate.

Economist Dr Prosper Chitambara also highlighted that the decline in the inflation rate reflects the stability that the country has been experiencing in terms of exchange rates.

“To maintain the positive trend, we need to continue with the tight liquidity position from both the monetary point of view and the fiscal point of view,” said Dr Chitambara.

“Let’s continue to tighten up things in terms of the liquidity situation because once the liquidity situation is contained and stabilised, then it means we will be able to stabilise inflation. Inflation is a function of the liquidity situation, so a tight liquidity situation is critical, and what the Government has been doing in terms of tightening public spending is a positive development.”

Meanwhile, ZimStat reported the food poverty line (FPL) for one person in November 2024 was ZWG770,84. The food poverty line represents the amount of money that an individual requires to afford a daily minimum energy intake of 2 100 calories.-chroncile