HomeBusiness DigestYear-on-year inflation rises –– CSO

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YEAR-on-year inflation rose by 2,9 percentage points on the December rate of -7,7% to – 4,8% in January, the Central Statistical Office (CSO) said yesterday.

From January to December 2009, month-on-month inflation had been oscillating between -3,1% and 1 percent after government dollarised the economy.

“Year on year inflation rose for the month of January 2010 as measured by the all-items Consumer Price Index (CPI) stood at -4,8% gaining 2,9 percentage points on the December 2009 rate of -7,7%,” the CSO said.

The month-on-month rate in January was 1,81% gaining 0,3 percentage points in December 2009 at a rate of -0,68%.

“Non-food substances stood at 0,8%, shedding 0,09 percentage points on the December 2009 rate of 0,39%,”it added.

Economists however said the inflation outlook for 2010 was expected to remain stable within the single-digit levels, subject to resolute adherence to sound macro-economic management measures adding that robust policy reforms have to be implemented to rid the economy of any inflationary pressures.

Zimbabwe went into deflation last year when stable multiple currencies were introduced. This saw price stabilisation for much of the year.

With the introduction of multiple currencies in February, questions are being asked if government would be able to live within its means this time around.

Economist Brains Muchemwa said given the prevailing modus operandi (that is the dollarisation of the economy), government will be “forced to operate within budgetary allocations because of lack of control of money supply”.

Corporate lawyer and newspaper columnist Alex Magaisa said history had shown that government has generally failed to live within its means and Biti’s staggering task was to inculcate discipline in line ministries.

“The trouble is there is so much that needs to be done and all this requires resources but there is little by way of resources to do it,” Magaisa said. “At the moment as a country we are living like hunter-gatherers, living from hand to mouth and whilst this might permit survival, it does not provide the facility for development at all.”

Magaisa said too much of the government revenue was being expended on “survival needs” as opposed to “growth needs”.

Economic consultant Eric Bloch said not only was economic recovery critically dependent upon government living within its means, but government had no alternative, “for it neither has any borrowing powers in the current environment, nor the ability to print money”.

Bloch said government must therefore maximise its means, without resorting to overly-burdensome taxation (which would deter investment and undermine economic recovery). It could achieve that maximisation by a variety of means.

Kingdom Stock Brokers head Witness Chinyama said an improved agricultural season, increased output in the mining sector and better performance by the tourism sector would augur well for inflation.

“Our inflation outlook would be determined by increased production, mainly in the agricultural sector, increased production would heat up the economy and when it is heated we are likely to experience positive inflation,” said Chinyama.

 

Paul Nyakazeya

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