ECONOMISTS say Finance minister Herbert Murerwa is probably dreaming when he says inflation will stop at 700% before sliding next year. Inflation this week shot up to 525
,8% but economists predict it will continue soaring to 1 000% by year-end.
“The figure is highly unrealistic and government definitely will not achieve it,” economist John Robertson said yesterday. “If it is achieved it will be because of strong medicine that government cannot give the public.”
South Africa – Zimbabwe’s largest trading partner – has an inflation rate of 5,7%, while Zambia, Malawi, and Botswana have rates of 21,1%, 8,5%, and 8,3% respectively.
In his 2003 national budget Murerwa promised that inflation would reach 96% before gradually decreasing to “all-time lows”.
The minister told the same parliament in August, this year, when he presented his $672 billion supplementary budget that as Zimbabwe’s inflation escalates and economic performance worsened a growing proportion of the population was now living below the poverty datum line.
Yesterday the minister harped on about inflation again, this time saying it remained an enemy.
“Inflation remains our number one enemy whose containment requires total and unwavering commitment and collaboration of all stakeholders,” Murerwa said.
“In order to arrest rising inflation and reduce it initially to double-digit levels and ultimately to single digit figures, government will rigorously implement fiscal and monetary stabilisation measures. These will be complemented by structural measures to invoke an immediate positive supply response from the productive sectors of the economy.”
He said it was important that government policies “fight inflation”.
“Continued failure to do so threatens to destroy the very social fabric of the nation,” Murerwa told parliament in August.
Zimbabwe is facing hyperinflation that has resulted in the prices increasing almost on a daily basis causing hardships for citizens.
“Murerwa is probably dreaming and underestimating the current economic crisis we are facing,” Robertson said yesterday.
“He is probably thinking much will be done by the central bank when it introduces a new monetary policy with changes in interest rates.”
Murerwa said the Reserve Bank of Zimbabwe incoming governor Gideon Gono would announce a new monetary policy mid-December that would “invoke an immediate positive supply response from the productive sectors of the economy”.
He was however vague on how this would be done.
A Zimbabwe National Chamber of Commerce economist said inflation was already way off target.
“Is the minister surprised at the way things have gone or is it that he does not believe his own inflation assumptions in the first place?” he asked.
“Zimbabwe’s gross domestic product is set to decline by more than 12% this year.”
Zimbabwe’s year-on-year inflation rose sharply from 116,7% in January 2002 to 198,9% in December 2002 and 525,8% this week.
Bankers said because of inflation the purchasing power of the Zimbabwe dollar fell by nearly two-thirds during 2002, with a dollar in 2003 now worth less than one cent of its value in 1990.