Gono blames forex crisis for inflation

Ngoni Chanakira

RESERVE Bank of Zimbabwe governor Gideon Gono says 30% of Zimbabwe’s inflation is directly propelled by exchange rate depreciation. During the week ending April 1, the Zimbabwe dollar depreci

ated by 0,8% against the United States dollar – the currency used by most exporters.


The Zimbabwe dollar also depreciated by between 1,2% and 3,2% against other major currencies such as the South African rand (-2,5%), British pound (-3,2%), Japanese yen (-2,8%), Botswana pula (-2%), Canadian dollar (-1,2%) and the euro (-2,9%).


In the last week of March however the Zimbabwe dollar depreciated by 0,9% against the US dollar.


It also depreciated by 0,5%, 0,8% and 1,8% against the rand, pula and yen, respectively. It however appreciated by between 0,1% and 1,5% against other major currencies.


Gono’s sentiments come amid conflicting analyses about the country’s inflation figures and the effects on the sagging economy.


Annual inflation for April stands at 505% while the month-on-month figure is said to have declined to 4,8%. Gono promised the nation that he would grapple inflation and ensure that falls to 200% by December.


“As monetary authorities we also attach great prominence to foreign exchange generation and mobilisation given the direct adverse implications foreign exchange shortages have on inflation, via the cost-push effects of exchange rate depreciation. Empirical assessments show that about 30% of Zimbabwe’s inflation is directly propelled by exchange rate depreciation,” Gono said.


Economists and bankers quoted elsewhere in businessdigest have thrown out the latest inflation figures, saying they do not represent the situation on the ground because prices are soaring. They contend that most of the items in the basket used to measure inflation are not available.