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Business Reporter
SUBDUED demand due to cash shortages has resulted in the annual rate of inflation for the month of July 2017, as measured by the all items Consumer Price Index, to retreat to 0,14 percent on the June rate of 0,31 percent, economists say. The economists, however, said the downward movement in the rate of inflation was not as “reflective realistically on the ground as costs of production remain high mainly caused by aggregate demand”.

The Zimbabwe National Statistics Agency said this means that prices as measured by the all items CPI increased by an average of 0.14 percentage points between July 2016 and July 2017.

The year-on-year inflation rate is given by the percentage change in the index of the relevant month of the current year compared with the index of the same month in the previous year.

Africa University economics lecturer Thomas Masese attributed the inflation slowdown to subdued demand due to cash shortages.

“We are basically experiencing demand pull inflation. Banks continue to reduce withdrawal limits. Though electronic money usage is increasing, it is largely expensive and the availability of POS machines is less widespread,” said Masese.

June inflation rate also shed 0,43 percent to close the month at 0,31 percent on the May rate of 0,75 percent. This means that prices as measured by the all items Consumer Price Index increased by an average of 0,31 percent points between June 2016 and June 2017.

Another economist Dr Abicia Ushewokunze said: “It has actually eased, looking at the trajectories upward drive, of what was focused on the year on year from 0,31 percent measure from last year.”

He said based on the index gas, fuels, water, housing especially sub-indexes declined by 2,4 percent year bonus year in July.

“Education sub index also eased off CPI inflation by 3,3 percent year on year in July compared to last years of 0,5 percent previously.

“Also year on year non-food inflation rate stood at -0,33 percent shedding 0,19 percent points on the June 2017 rate of -0,14 percent and also annual projected closing rate according to international statistics,” said Dr Ushewokunze.

“Regional parity comparisons pricing on commodities Zimbabwe remains high on prices. The South African Rand, US (dollar), international oil prices and also cash scarcity, has not helped the situation.”

In his Mid-term Monetary Policy Statement Reserve Bank of Zimbabwe governor Dr John Mangudya said inflation outturn in the remaining half of the year will be influenced mainly by domestic fiscal developments, foreign exchange availability, international oil prices and the US dollar/South African rand exchange.

The annual headline inflation rate, which had been in deflation since September 2014, moved into positive territory from -0,65 percent in January 2017 to 0,31 percent in June 2017 as a result of the expansionary fiscal policy stance which saw fiscal deficit rising to $1,4 billion in 2016.

Dr Ushewokunze said bond notes, released as an export incentive and to ease cash shortages should continuously be hedged against a reserved currency and there should strict monitoring of leakages and devaluation of the bond resulting from unscrupulous entities that have resorted to cross ratings.

“RBZ should constantly apply stringent measures to curb a further decline in projected high inflation rates in a futuristic manner, as the volume also in circulation should always remain within a certain limit and amounts within a controllable measure,” he said.