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Martin Kadzere and Golden Sibanda

Zimbabwe’s annual rate of inflation declined to double digit level for the first time in nearly two years this month, hitting 56,37 percent, with President Mnangagwa noting the fall marked yet another key milestone in the turnaround of the economy and the opening of economic growth.

The year-on-year inflation rate fell to 56,37 percent for July 2021 from 106,64 percent last month, statistics from the Zimbabwe National Statistics Agency (Zimstat) show. The fall had been predicted as month-on-month rates have been low since September last year, and the almost halving in the annual rate in just one month was a direct result of the record July monthly jump last year no longer being part of the calculations for the annual rate.

Monthly rates are continuing to fall. Month-on-month inflation retreated this month to a very low 2,56 percent from last month’s rate of 3,88 percent.

Writing on his microblogging platform, Twitter, President Mnangagwa said: “More good news for Zimbabwe. Inflation dropping, exports rising 9,5 percent since April, biggest harvest in 20 years. Zimbabweans, we are on the cusp of greatness.” 

Both RBZ Governor Dr John Mangudya and Finance and Economic Development Minister Professor Mthuli Ncube, have repeatedly indicated that the foreign currency auction system had largely eliminated cost-push inflation by stabilising exchange rates, with the annual rate falling all the time to reflect that, and that the bumper harvest this year will lead to steady food prices, which will anchor the inflation decline.

Commenting on the latest inflation decline during an interview last night, Dr Mangudya said: “We are pleased with the inflation out-turn which is in line with our projections. 

“The auction system which started in June last year has brought stability to inflation and that trend is expected to continue going forward on account of the continuation of the auction system, increase in capacity utilisation, higher agriculture output, Diaspora remittances and the firming of global commodity prices.

“Most of the fundamentals are right and this should see us achieving a 7,4 percent economic growth.”

Dr Mangudya said recently roughly 65-75 percent of goods now sold in local supermarkets were being manufactured in the country. The Reserve Bank would continue to ensure industry could access its foreign currency requirements through the auction system, so entrenching stability and spurring growth. 

Economic analysts say the fall in the annual inflation, which confirms the trend of the falling monthly inflation figures over the last year, denotes price increases at a significantly decelerated pace, is testimony of the success of Government’s policies, chiefly the auction system, plus the monetary and fiscal discipline of the Second Republic.

The Reserve Bank had already projected annual inflation for July 2021 would drop to roughly the figure it had reached and is almost certain to fall further next month as the August monthly rate last year was transitional between the growing monthly rates of the first seven months and the falling monthly rates of the last four months.

Annual inflation rocketed to 837 percent in July last year as the economic reforms brought the whole mess from the years of indiscipline to the surface, largely the massive increase in money supply before the start of the Second Republic, and has been falling steadily since then as the reforms brought the required stability.

The auction system has succeeded because the economic reforms and the growth in real production pressed by the Second Republic ensured that there were adequate flows of foreign currency that could be sold at the auctions, so importers of priority goods and services were able to bid at stable levels and were still assured of buying their requirements.

“I projected that last year during the African Economic Development Strategies third quarter economic outlook in October that improved production, particularly from the agricultural sector would guarantee the viability of the foreign currency auction system as import substitution helped to sustain to sustain the auction market,” economist Professor Gift Mugano said in an interview yesterday.

“That (good farm yields) have guaranteed improvement in availability and preservation of foreign currency and going forward, this will sustain the auction system.

“With this direction, this also gives us assurance that the auction system, notwithstanding challenges related to it, will remain a viable alternative market going forward until we get to a point that the banks take over the management of the forex market.”

The auction system has cumulatively allotted almost US$1,5 billion to key economic sectors for importation of key imports including fuel, raw materials and equipment.

Last month, the International Monetary Fund projected Zimbabwe’s economy would grow 6 percent this year, on the back of higher agriculture and industrial output. Its projection was higher than the 3,4 percent of the World Bank. But the main point is that the agencies are arguing how much Zimbabwe’s economy will grow, with total agreement that it is now growing.