HomeBusiness DigestMurerwa fails yet again to rein in inflation

Murerwa fails yet again to rein in inflation

Thomas Mutswiti

INFLATION is set to continue rising after Finance minister Herbert Murerwa rolled out yet another rhetoric without detailing methods to rein it in.

a, Arial, Helvetica, sans-serif”>The year-on-year inflation rate for the month of July as measured by the all items Consumer Price Index stood at 254,8%, gaining 90,5 percentage points on the June rate of 164,3%.

Food and non-alcoholic beverages inflation, prone to transitory shocks, stood at 226% whilst non-food inflation stood at 273,9%. The month-on-month inflation rate in July was 47% gaining 28,9 percentage points on the June rate of 18,1%

This comes on the back of a budget statement that was devoid of strategies to tackle inflation. Continuous deficit financing by the government stifles supply side responses by crowding out the private sector which is the engine for growth.

Economist Tony Hawkins said that even though Murerwa might manage to contain the departmental spending by ministries, overall government spending is going to increase.

Hawkins lamented developments on the tax front.

“The increase in the basic rate of VAT from 15 to 17,5%, a reduction of tax exempt items, taxes on transport operators and the surtax of 22,5% on airtime will fuel inflation. These taxes simply translate into higher ticket fares, higher airtime costs which will set into motion cost-push inflation,” Hawkins said.

ZNCC president, Luxon Zembe, also noted the lack of bold measures to tackle government spending and cited the need for political redress to the situation.

He noted that in as much as there were calls for order on the farms, what mattered most was the practical implementation of strategies to ensure that there were no disturbances.

“The presentation had no strategies to put a ceiling on inflation. It appears Murerwa is now leaving everything to (Reserve Bank governor Gideon) Gono. After all, Murerwa also jostles for a place to go and listen to Gono’s harangues. Gono’s hopes that inflation will recede to around 80% by year-end can only be regarded as Utopian thinking for a governor hoping that moral suasion will influence the inflation rate,” said one business analyst.

Prior to the mid-term policy statement, inflation was being held down by maintaining an overvalued exchange rate and government subsidies to hold down prices.

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