By ETimes

Zimbabwe’s annual inflation is likely to end the year between 52% and 58%, up from the revised target of between 25% and 35%, Finance and Economic Development Minister Mthuli Ncube said in a 2022 budget statement on Thursday, as exchange rate volatility continues to be a threat to the economy.

With the November inflation coming in at 58% it means December month on month inflation is supposed to come in negative and it is highly unlikely.

The market witnessed price increases owing to high fuel costs, transportation shortages, and poor road conditions in parts of the country leading to high transportation costs.

Annual inflation continued to decline during the greater part of 2021 to register 54.5% by October 2021 compared to 471.3% recorded during the same period last year.

Presenting the 2020 budget statement, Ncube said the disinflationary path was underpinned by both tight fiscal and monetary policies.

“Conservative reserve money targeting and the introduction of the foreign exchange auction system brought stability in the foreign exchange market and consequently inflation,” he said.

There has been marginal increases in official exchange rates, while parallel market exchange rates are expected to be more than double the official exchange rates, driving much of the price increases on the markets in ZWL terms.

“However, the widening of the parallel market premiums to over 50% beginning in August 2021, threatens to reverse the gains made on the inflation front. The widening gap is partly attributed to general indiscipline by market players.”

At the time of writing, the Zimbabwean dollar was trading at ZWL$190 to the US dollar on the black market.

The increase in international food and energy prices, as well as global inflation continue to exert additional inflationary pressures on the domestic economy, according to the minister.

“Government is, however, implementing the necessary policy measures to ensure that inflation is back on the single digit desired path and this includes a review of the current foreign currency auction system, further tightening of monetary policy and curbing malpractices in the financial sector,” he said.

He said maintenance of price and exchange rate stability over the medium to long term is central in fostering business medium term planning and investment for the achievement of NDS1 objectives.

“In this regard, both fiscal and monetary measures seek to achieve an average inflation target of 32.6% and end period range of 15% to 20% in 2022, consistent with the macro-fiscal framework anchoring the Budget,” he added.

Zimbabwe’s month on month inflation has been on a steady increase since August, but advisory firm IH Securities warned that if current trend continues annual inflation will end the year around 55-65% – Harare

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