ECONOMIC analysts this week said central bank governor Gideon Gono was unlikely to rein-in inflation in the absence of complementary efforts by government
They said Gono’s economic recovery projects were unlikely to succeed during the tenor of President Robert Mugabe’s government which has demonstrated an unyielding penchant for profligate spending.
The analysts pointed out that with a weak export sector, a decline in production and foreign currency shortages and the absence of support from the international community, no economic reform programme would be effective.
Economic commentator, Eric Bloch, told businessdigest that it was becoming evident that Gono, who has remained silent on inflation targets set out when he became governor in December 2003, was losing the battle against inflation.
Bloch said Gono, who had intended to bring inflation to single digit figures by last year, had obviously overlooked key economic fundamentals when he made the announcements.
Inflation reached an all-time high of 1 204,6 year-on-year for August but eased to 1 023,3 in September.
Gono has however made no reference to his targets in monetary policy reviews made this year, although he has indicated he continues to fight inflation through monetary policy.
Independent economist John Robertson said the governor’s monetary policy had been weakened by poor export performance, an active parallel market and isolation from the international community.
“You only set inflation targets when the export market is performing and when the parallel market is not dictating prices of basic commodities,” said Robertson.
Last year Gono said the Reserve Bank would contain inflation to between 50-80% by December this year.
“The recent monetary policy was more of a threat to the financial sector after the bank realised that attempts to arrest the high inflation had failed due to lack of political backing for his policies,” Robertson said.
One analyst said Zimbabwe’s economy needed measures that would significantly boost industrial and agricultural output to win the war against inflation, which he said was a factor of market shortages.
In his memorandum to financial institutions dubbed “Fine Tuning of Monetary Policy”, Gono said he was reviewing his mid-term monetary policy “with inflation reduction as the overriding objective”.
“With inflation reduction remaining the overriding objective of the central bank, it has become necessary that the additional measures be implemented, so as to stabilise the economy in the medium-term,” Gono said.
A critic told businessdigest: “Even if he fine tunes his monetary policies monthly, the formula to win the inflation battle is boosting exports and production as well as generating more foreign currency”.
Zimbabwe’s soaring inflation is seen as a major stumbling block to pulling the country out of a six-year recession marked by persistent shortages of foreign currency, fuel and food and a high unemployment rate.