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Inflation to fall below 55%: RBZ

BY SHAME MAKOSHORI

THE Reserve Bank of Zimbabwe (RBZ) says it is targeting a slide in the  annual inflation to below 55% by July this year, underpinned by its disinflationary strategy that has been credited for calming market volatilities in the past year.

Annual inflation slowed to 194% last month from 240% in March, official data showed last week.

Authorities have failed to explain how the rate has been tapering off in the midst of a wave of price hikes and exchange volatilities that have continued on the parallel market since January.

But rocketing prices have compounded an already desperate situation, where de-industrialisation has precipitated massive job losses and complicated hard-pressed industries’ struggle to sustain operations under difficult conditions.

Yet even as price volatilities held back recovery efforts, the RBZ said on Tuesday that its monetary policy committee (MPC) was satisfied by the trajectory the economy was taking.

“The committee noted with great satisfaction the reduction in inflation, which has further fallen from 240,1% in March 2021 to 194% in April 2021,” central bank governor John Mangudya said, referring to the MPC’s position after its April 30 meeting.

“The committee reaffirmed its commitment to sustaining the disinflationary path to the end of the year and expects year on year inflation to go down to below 55% by July 2021,” the central bank chief noted.

The RBZ has projected annual inflation to fall below 10% by December, which is far below a 136% target announced by government last year.

To consolidate the disinflationary strategy, the MPC maintained the policy rate at 40% and kept the medium term lending rate to productive sectors at 30%.

But it is this calm and assuring sentiment that could help cool the mayhem triggered by a string of missteps made in the past year, including policy flip flops.

The MPC also approved a $500 million facility for micro, small and medium enterprises (MSMES) to stimulate economic growth.

Mangudya said the facility would be accessed through various financial institutions.

“(The RBZ) approved a facility of $500 million for term finance for micro, small and medium enterprises which the MSMEs will access from banks and micro-finance institutions at 30% per annum for purposes of enhancing production and productivity across all the sectors of the economy; and reaffirmed its position to support bureaux de change with foreign exchange requirements to support MSMEs which need foreign currency for their various productive requirements,” he added.

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