The country’s month–on–month and annual inflation cooled down in the month of January with food inflation accounting for the biggest drop, according to the Zimbabwe Statistics Agency (ZIMSTAT).
Month-on-month inflation rate in January 2023 was 1,1 percent shedding 1,3 percentage points on the December 2022 rate of 2,4 percent. This means that prices as measured by the all items Consumer Price Index (CPI) increased by an average rate of 1,1 percent from December 2022 to January 2023.
According to ZIMSTAT on a year to year basis, inflation slowed to 229,8 percent in January 2023 from 243,8 percent in December 2022 and 255 percent in November 2022.
This is the sixth consecutive month that the monthly inflation rate has been on a downward trend and Treasury projects it to continue being below the 3 percent mark for the rest of the year as it responds to Government policy interventions.
“The Food Poverty Line (FPL) represents the amount of money that an individual will require to afford the required daily minimum energy intake of 2 100 calories. The Food Poverty Line for one person in January 2023 was $22 385,00,” said ZIMSTAT.
The Total Consumption Poverty Line is derived by computing the non-food consumption expenditures of poor households whose consumption expenditures were just equal to the FPL.
According to the statistical agency, if the amount was added to the FPL, if an individual does not consume more than the TCPL, he or she is deemed poor Resultantly, the Total Consumption Poverty Line (TCPL) for one person stood at $29 500 in January 2023.
Economist, Mr Tinevimbo Shava said; “The review and enhancement by Government of its procurement processes and practices to ensure value for money have resulted in the stability of the exchange rate and a decline in inflationary pressures, so this is not a surprise.”
According to another economist, Mr Namatai Maeresera: “The country has been on a monetary policy tightening stance and these are the benefits of such activities, the gold coins, high interest rates and Government payment stance have led us to this point and all should be commended.”
Conversations and arguments have been brought up regarding the level of lending rates currently in the market as Treasury reaffirmed that the prevailing rates will pass through into the next year.
Bankers and industry have been calling for interest rate cuts, but economists have said, the industrialists were now used to cheap money which was also part of the problem the economy was facing.
The Reserve Bank of Zimbabwe raised interest rates from 80 percent to 200 percent in June as inflation soared. Large businesses have called for a cut on rates, but Minister of Finance and Economic Development, Prof Mthuli Ncube said these will remain until annual inflation slows down to acceptable levels and when there will be durable stability.
In support of the monetary policy stance, Minister Ncube is on record telling reporters that: “I think once we see that downtrend in month-on-month inflation being sustainable, maybe over a three-to four-month period, then we can begin to think about lowering interest rates. But for now, the tough monetary-regime stance and the tough fiscal stance also stands.
“That’s what it takes to bring stability and bring things under control.”
Economist, Dr Prosper Chitambara, said the interest rates are at the right level and Treasury is correct to say we need sustained period of stability until we think of a rate cut. He, however, acknowledges that it will come with its consequences such as failure to meet growth targets.
Dr Chitambara accepts that higher rates may push up non-performing loans (NPLs), but he insists, “it is also imperative to strike a balance and determine an optimum interest rate policy that complements the policy measures that have been put in place.”
Economist, Prof Tony Hawkins, argued that the interest rates were at optimal levels and the Treasury is holding the correct line. According to him lowering interest rates will see the parallel market running away again and more money searching value.
“In the end, this will perpetuate financial disintermediation and probable market bubbles on the stock market, as customers will look for alterative, non-bank based, investment options,” Prof Hawkins said. – The Herald
