Gono admits failure

ZIMBABWE’S central bank admitted on Monday it was losing the battle against spiralling inflation due to political and other factors outside its control.


President Robert Mugabe’s government has branded inflation &#82

12; which slowed to 1 023% in September but remains the world’s highest — its number one enemy.


Reserve Bank of Zimbabwe governor Gideon Gono said there were several factors that were outside the central bank’s control, which made it difficult to rein in inflation.


“Some of those factors are within the governor’s control and influence while others such as politics, sanctions, droughts, under-utilisation of farms, disruptions at those farms, rampant corruption, indiscipline, law and order are factors outside the governor’s control,” he said in an interview with the official Herald newspaper.


Zimbabwe’s inflation is seen as a major stumbling block to pulling the country out of a recession marked by a jobless rate above 70% and persistent shortages of foreign currency, fuel and food.


The government is battling to put a lid on prices and is this week expected to agree with producers the price of the staple maize-meal, flour and bread, which have been in short supply over pricing.


“As monetary authorities, we are concerned as every other Zimbabwean, at the limited pace of disinflation,” Gono said.


Analysts have warned of renewed price pressures as manufacturers hike prices, arguing that they are sourcing scarce foreign currency for raw materials on a thriving black market.


The local unit is trading at $250 against the US dollar on the official market but up to six-times that rate on the black market.


“We are seeing cross sector increases in the price of commodities and services, even by municipalities, which will feed into inflation and the result is that we will continue in this inflation spiral,” James Jowa, an economist with a Harare financial services firm told Reuters.


Shunned by Western financial donors, Mugabe’s government has increasingly relied on the local bank sector for money to plug holes in the national budget, and to import food and farming inputs.


Analysts say this has resulted in excessive government spending, with the central bank admitting to printing money, while domestic debt has nearly doubled to $121,4 billion (US$484 million) between June and September this year.


Gono said he had secured US$900 million in foreign lines of credit since taking his job in 2003, saving the country from collapse.


“This innovative intervention has gone to augment export receipts directly, thereby mitigating against sharp loss of value of the local currency,” he said. “Things could have gone terribly worse. Let us not forget this.”


Gono said Zimbabwe had to boost industrial and agricultural production, partly knocked by the seizure of white-owned commercial farms for landless blacks, to generate much needed foreign currency and stabilise prices. —  Reuter.

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