FINANCE and Economic Development minister Mthuli Ncube increased annual inflation targets to between 35% and 46% at the weekend, saying pressures from rocketing international food and oil prices were beginning to seep into the domestic market.
Government had previously projected the figure at between 25% and 35%. Panicky authorities have been reshuffling targets in the past few months in response to volatilities that have shaken the economy, including an extensive battering of the domestic unit.
Presenting a paper to legislators during a pre-budget seminar in Victoria Falls, Ncube said a robustly growing parallel market had tipped the scales against earlier projections.
“Recently the economy is witnessing inflationary pressures emanating from benchmarking or indexation of prices of goods and services at parallel market exchange rates,” Ncube said.
“In addition, the increase in international food and oil prices as well as global inflation continue to exert additional inflation pressures on the domestic economy.
“In the outlook, due to recent developments, annual inflation is likely to end the year between 35% to 46%, up from the revised targets of between 25% and 35%,”
the minister added.
“Inflation has been generally declining since August 2020, underpinned by both tight fiscal and monetary stances. Year-on-year inflation for the month of September decreased to 51,6% from 362,6% recorded in January 2021,” he said.
Global inflation rates have gained traction after the International Monetary Fund injected US$650 billion into member States to help them fend off COVID–19 induced headwinds.
At the end of September, the Reserve Bank of Zimbabwe revised annual inflation targets upwards before lining up a sea of fresh policy proposals to government, as it raced to stem a “worrisome” surge in parallel market rates.
“Worrisomely, developments on the parallel market for foreign exchange are likely to exert further inflationary pressures on the economy,”
central bank chief John Mangudya said.
“The country recently witnessed further depreciation of the parallel market exchange rate from about $130 per US dollar to about $160 per US dollar, implying a parallel market premium of above 70%.”
“In view of recent developments, annual inflation is likely to end the year between 35% to 53%, up from the revised end targets of between 25% and 35%.
“In addition, the increase in international food and oil prices as well as global inflation continues to exert additional inflationary pressures on the domestic economy.”