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Africa Moyo-Deputy News Editor

Inflation should continue cooling down next year while the Reserve Bank of Zimbabwe will further liberalise the foreign exchange market to enhance the willing-buyer, willing-seller mechanism in order to deepen economic stability, RBZ Governor Dr John Mangudya said yesterday.

In an interview, Dr Mangudya said stabilising inflation was critical to preserve investor funds and strengthen the Zimbabwe dollar.

“The cooling down of inflation in the last two quarters of 2022 is going to continue in 2023 and this is critical to preserve value for money, especially our local currency, the Zimbabwe dollar, and to ensure investors’ funds are deployed to grow the economy as we move towards Vision 2030,” said Dr Mangudya. 

“The Central Bank is therefore going to continue with the disinflationary measures into 2023 and it will further liberalise the foreign exchange market to enhance the operations of the willing-buyer willing-seller exchange rate mechanism.”

In response to domestic inflation dynamics, as well as the pass-through effects of increases in energy, food prices, and supply chain cost pressures on the economy, the Government tightened fiscal and monetary policies and the measures have contained the excessive depreciation of the local currency against the US dollar on the parallel market, which was a major driver of domestic inflation. 

This has resulted in the convergence of the auction exchange rate and the willing-buyer, willing-seller exchange rate and just a small premium for the black market rate on the interbank rate, roughly the same as the premium shopkeepers can charge at their tills when they take foreign currency, so seeing a switch of those with US dollars from the streets to just spending at the till.

Some of the measures introduced by the RBZ include issuance of gold coins, enforcement of value for money audits by Government in its procurement processes and effective monitoring, as well as enforcement of the global rules for anti-money laundering and the combating the financing of terrorism

This enforcement by the Financial Intelligence Unit of the Reserve Bank, has re-anchored inflation and exchange rate expectations. 

Consequently, month-on-month inflation declined from 30,7 percent in July to 3,5 percent in September, to 3,2 percent in October, to 1,8 percent in November with that sharp drop evened out by 2,4 percent this months. Annual inflation fell from 285,1 percent in August to 243,8 percent in December 2022 according to ZimStat, with the major drop reflecting the latest monthly figures only coming in the middle of next year when the spike of monthly figures around that time this year are removed from the calculations.

In the 2023 National Budget, Finance and Economic Development Minister Professor Mthuli Ncube said national annual average inflation is projected to continue slowing down to double digit levels next year underpinned by continued tight monetary and fiscal policy stance, a stable foreign exchange market, strengthened Government procurement processes, and implementation of measures to mop up excess liquidity such as the sale of gold coins. This would imply that at worst monthly inflation will average below 6 percent, the level when triple digit annual inflation is triggered.

Finance and Economic Development Minister Professor Mthuli Ncube

Other assumptions expected to see inflation cooling down are fairly stable global commodity prices, supportive monetary and fiscal policies, as well as coordinated interventions by the authorities has been central in sustaining the current inflation deceleration and exchange rate convergence path. Government has set a month-on-month inflation target range of between 1 percent to 3 percent, and a fiscal budget deficit of not more than 1,5 percent of Gross Domestic Product in 2023. The monthly targetted inflation gives annual inflation of between 13 and 43 percent, well below anything seen recently.

Dr Mangudya thanked Zimbabweans for the resilience that they continue to show in changed circumstances such as global inflation, the Covid-19 pandemic and currency reforms.

Economist Mr Eddie Cross called on the RBZ to “liberalise the exchange rate and go back to using our own currency”. 

“Until we do that the parallel market rate will continue to depreciate and inflation maintained at a high level,” said Mr Cross.

Pan-African Chamber of Commerce board member and economist, Dr Langton Mabhanga believes inflation will continue to stabilise next year while massive infrastructural developments would be recorded.

“I think the fundamentals are set. If you look at the monetary systems, the fundamentals are well established and the machine has been well-tuned to not just maintain stability, but also to control it,” said Dr Mabhanga. 

“More gold coins are going to be introduced to ensure that there is inclusion at every level of the economy. 

“The local currency will also get its rightful position as the main currency of the nation and I think development wise, GDP will continue to grow, infrastructure will continue to grow; roads, dams.”

Dr Mabhanga added that 2023 might turn out to be a busy year for President Mnangagwa, who will “commission lots of projects”.

“The President is going to be commissioning massive infrastructure in terms of roads, in terms of dams, in terms of solar projects. 

“I think the President will be all out there to ensure every promise he has made is delivered, installed, commissioned and functioning. I also think that his entire Cabinet will be working like clockwork to ensure that the 100-Day targets are well delivered and well executed. 

“We think we are going to have a very exciting year and I think we are going to see elections campaigned for in a different way, especially by the ruling party,” said Dr Mabhanga. 

Zanu PF’s campaign for the 2023 harmonised elections that are expected around mid-year, said Dr Mabhanga, would be anchored on ongoing projects and programmes, which will be a major shift “from mere rhetoric to real deliverables”. 

“I think we will see modernity in politics,” he said.

Dr Mabhanga called on Zimbabweans to be ethical, pragmatic and be hard working while demonstrating good workmanship to quicken the country’s attainment of an empowered and prosperous upper middle income society by 2030.