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Gono revises inflation targets

Roadwin Chirara

RESERVE Bank of Zimbabwe governor Gideon Gono yesterday revised his year-end inflation targets to 280-300% from the previous estimate of 50-80%. In his monetary policy statement, Gono set a n

ew target of 50-80% by December 2006.

“The upward trend is, however, expected to slow down during the last quarter of the year with annual inflation expected to reach levels of 280-300% by December this year and of between 50-80% by December 2006,” Gono said.

The latest revision comes against a backdrop of massive price increases which have pushed up the month-on-month inflation to 359,8% for September from 265,6%.

Gono also blamed the current surge in inflation on the errant behaviour of some sectors of the economy.

“These targets will be achievable if we all play our part and do not cause some “tsunamis” in our daily behaviours, our policy pronouncement (and) spending patterns.

“Do not continue to play the parallel market, destroy productive infrastructure and desist from smuggling out gold and other precious metals; avoid all actions which will diminish foreign currency inflows,” said Gono.

“Avoid actions that will diminish productivity efforts and thus adversely affect our fight against inflation,” Gono said.

He said the central bank was putting in place a tight liquidity management programme to reduce money supply growth as part of efforts to fight inflation.

“Excessive growth in money supply remains a major factor underlining the resurgence in inflation in the economy and as a firm response to this, the Reserve Bank has put in place a tight management programme supported by positive real interest rates to curtail any further inflationary monetary growth,” said Gono.

He said continued increases in prices of basic foodstuffs had been identified as a major driver of the country’s inflation.

“Accounting for 32% of the country’s total consumer price index (CPI), the food component is a major driver which deserves the focal attention of every Zimbabwean if the inflation scourge is to be tamed,” Gono said.

Analysts however warned that the central bank was unlikely to meet its revised inflation targets due to the worsening economic situation.

Annual inflation ended last year at 132,7% against a revised target of 150%-150%, which Gono had set.

In his monetary policy in October the same year, the governor declared that inflation was going to slow down to between 30-50% by December this year.

Sensing that he was conquering it, in January this year Gono then revised the figure to close the year at 20-35%.

On May 19, he was forced to revise the figures again saying it would end the year at between 50-80%.

He blamed drought for failure to meet the target.

A recent International Monetary Fund (IMF) report forecast Zimbabwe’s inflation to end the year at 320%. The damning report by the fund accused the central bank of stroking the figures by printing more money.

It noted that government’s expenditure, the Reserve Bank’s quasi-fiscal activities and Operation Murambatsvina were the major contributors to runaway inflation.

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