HARARE – Zimbabwe needs to adopt a non-inflationary business rescue stimulus package in order to contain inflation, the Confederation of Zimbabwe Industries (CZI) has said.
The southern African nation’s inflation was 837.53% year-on-year in July compared to 737.26% the previous month.
“The need to increase health expenditure to fight the pandemic and injecting a productive sector stimulus package in the economy in view of lack of external financing is likely to lead to money creation.”
Reserve Money has now gone down to below $7 billion. This comes at a time when people are rapidly abandoning the notes and coins in circulation as they prefer a more stable currency – US Dollar.
“The summer crop farming season is upon us and printing money for agricultural financing has been the major root cause of our macroeconomic instability,” CZI stated in its inflation and currency developments update for July.
“Printing money increases money supply, which results in the depreciation of the currency, which feeds into inflation,” CZI said.
This will further result in the depreciation of the exchange rate thereby fueling inflation, CZI added.