THE Reserve Bank of Zimbabwe (RBZ) has come out strongly after a long time, saying government needs to control soaring inflation if it is to restore macro-economic stability
Inflation has risen from 15,5% in 1990 to 364,5% in June this year.
Analysts however predict the figure will continue rising to reach 500% by year-end.
Neighbours Botswana, Malawi, South Africa and Zambia have inflation rates of 11,1%, 16,7%, 11,3% and 21,9% respectively while another major trading partner, the United Kingdom has an inflation rate of 2,8%, down from 2,9% in May this year.
The surge in inflation has been blamed for the current serious cash crisis facing Zimbabwe and the decision by the RBZ to introduce the $1 000 note in October.
The RBZ said it would rebrand the $500 note in a bid to force customers to send money through the financial system, which is currently cash-strapped.
Inflation has also resulted in citizens carrying around large amounts of money just in case they come across scarce goods available on the parallel market at exorbitant prices.
The RBZ said national economies prosper on increased domestic investment, which required a sacrifice on current consumption, among other bold measures.
It said against the background of declining savings and deteriorating balance of payments in the economy, it was clear that Zimbabwe needs to reduce the current levels of consumption, so as to free resources for investment.
“There is also need for concerted efforts towards fighting inflation, which has fuelled consumption spending and, discouraged saving,” the RBZ said in a report.
“Low inflation is also critical for enhanced savings mobilisation and increased investment – preconditions for economic growth and development.”
Zimbabwe’s balance of payments position remained weak last year propelled largely by the continued decline in export receipts and the absence of offshore lines of credit and multilateral and bilateral support.
The current account suffered from protracted shrinkage in export volumes.
Annual merchandise exports in 2002 were estimated to have nose-dived by 10,8% from US$1,57 billion in 2001 to US$1,4 billion in 2002.
Major declines were in gold (25%), tobacco (17,1%) and pure manufacturers (8,7%).
The tourism sector, which is one of the country’s sectors with high potential to earn foreign currency, remained subdued in 2002 registering inflows of US$42,6 million over the nine months to September 2002 compared with US$59,3 million over the same period in 2001.