JUST as government celebrates the country’s victories on the inflation rate, prominent economist John Robertson says he expects annual inflation to reach 600% by year-end, casting doubt on hi
ghly optimistic forecasts elsewhere.
Robertson said he also expects the Zimbabwean dollar to go on a massive free-fall and end the year at a new record high of US$1: $18 000.
The expectations are in stark contrast to the highly optimistic figures that are being advanced by Reserve Bank of Zimbabwe governor Gideon Gono, ministers and some economists. Last year however Robertson predicted that Zimbabwe’s annual inflation rate would soar to 1 000%, shattering all previous records.
He said Gono’s prediction of 200% annual inflation by year-end was highly unrealistic given the numerous negative effects hovering over the country’s economic recovery.
“Inflation will pick up in the second half of this year. I believe the inflation rate will be at 600% at year-end,” Robertson said.
He has consistently pointed out that the monetary policy alone cannot change the country’s fortunes.
Robertson said inflation would be driven mainly by the plummeting value of the Zimbabwe dollar, government expenditure and an increase in wages.
He said the central bank’s recent move to award cheap funds to companies under the productive sector fund would also provide a kicker to inflation.
“The government is also borrowing billions to finance the productive sector fund. This money is extremely cheap but the point is that these are borrowed funds. This will also push the inflation rate,” said Robertson. He said the new estimates were also based on his anticipation that the country would experience serious food and foreign currency shortages. The impact of the recent wave of price increases of basic commodities is also likely to witness a surge in the inflation rate.