The Reserve Bank of Zimbabwe (RBZ) has come under scrutiny over its inflation projections, with the apex bank insisting the monthly inflation rate, which soared to 37,2 percent in October from 5,8 percent the previous month, will soon cool down.
This comes after the central bank last month devalued the domestic currency by about 43 percent, adding inflationary pressures to prices.
But the central bank expects monthly inflation to close the year around its original forecast of 5 percent.
Despite consumer prices soaring in the wake of ZiG devaluation, RBZ Governor Dr John Mushayavanhu is still clinging to the bank’s original inflation estimates, predicting that month-on-month (MoM) inflation will stabilise and fall to within target by year-end.
The devaluation on September 27, 2024, which reduced the ZiG’s value by 43 percent against the dollar, exacerbated price pressures, according to the Zimbabwe National Statistics Agency.
This marks the third consecutive month of rising prices since the ZiG was introduced in April.
Dr Mushayavanhu’s claims that inflation will soon cool down, however, has sparked debate, with some economists questioning the basis of the bank’s optimism in light of persistent economic challenges and mounting inflationary pressures.
The governor emphasised that the initial inflation surge following the currency drop, particularly the month-on-month rise recorded last month, was an expected reaction to the devaluation, not an indication of sustained inflationary pressures.
“The depreciation of the exchange rate on 27 September 2024 and the concomitant increase in prices happened after the collection of prices by ZimStat for September 2024,” Dr Mushayavanhu explained.
“The associated increase in inflation was, therefore, captured in the October 2024 inflation numbers.”
He further added that the bank expected this price volatility to be transitory, foreseeing a return to the original inflation path by December as the exchange rate pressures ease.
Yet, with year-on-year (YoY) inflation already exceeding projections and MoM inflation climbing, critics argue that the RBZ’s stance may underestimate the lasting impact of the currency devaluation.
According to Dr Reuben Mutsaura, an economist, the policy measures the RBZ introduced on September 27, 2024 including a liquidity cap to counter exchange rate volatility might not be enough to contain inflation in a high-pressure environment.
“The currency adjustment was bound to have a prolonged effect on prices,” Dr Mutsaura said, adding that the RBZ’s stabilisation efforts in the exchange market might provide only temporary relief.
“Without significant policy adjustments, we may see inflation expectations begin to anchor at higher levels.”
Dr Mutsaura’s concerns are also shared by other observers.
“Zimbabwe’s economic situation is precarious, and ignoring inflation’s root causes won’t help,” noted Enoch Rukarwa, an economist.
“The inflationary pressures seen in Zimbabwe are partly structural and currency volatility is merely amplifying them. Tightening liquidity might curb inflation temporarily, but the underlying factors will likely reassert themselves.”
Dr Mushayavanhu, however, maintains that the narrowing of the exchange rate premiums between the parallel and interbank markets signals a shift towards market stability.
According to the RBZ governor, the new measures have already mitigated exchange rate volatility, which he says will, in turn, help to subdue inflation in the coming months.
“As you have, however, realised since the announcement of the monetary policy measures of September 27, 2024, the transitory pressures on the exchange rate have dissipated,” the Governor stated.
“Exchange rate premiums between the parallel and interbank markets have narrowed significantly. In this regard, inflation and exchange rates are expected to be stable in the outlook period to December 2024. As such, the Reserve Bank expects month-on-month inflation to self-correct to the original path.”
Dr Mushayavanhu’s optimism, however, has met with skepticism among both local economists and business leaders who warn of deeper structural issues.
Priscilla Nhara, an independent economist argues that the bank’s focus on short-term corrections could overlook the root causes of inflation.
“While the immediate inflation spike may appear to stabilise, it’s essential to recognise that inflation in Zimbabwe is not purely driven by currency volatility,” Nhara observed.
“A combination of supply chain constraints, import dependency, and weak manufacturing output all play a role in keeping prices elevated. Without addressing these, the relief we see in inflation could be fleeting.”
Beyond domestic criticism, Zimbabwe’s situation has also drawn international focus. As part of the Southern African Development Community (SADC), Zimbabwe’s economic instability has regional implications.
Meanwhile, Zimbabwean consumers are feeling the pinch of rising prices, as wages struggle to keep up with inflation. Advocacy groups warn that households face a difficult holiday season unless prices stabilize swiftly.
Consumer activist Mildred Gwenga stated; “We are seeing the cost of basic goods soaring, yet wage increases are barely on the table. If inflation doesn’t slow down, ordinary citizens will continue to struggle.”
As debates swirl around the RBZ’s response to the inflation surge, the bank’s next moves will be closely watched by economists, policymakers, and the public alike.
The Governor’s insistence that it will achieve its inflation targets amid mounting pressures has placed the bank’s credibility on the line, while the risk of prolonged inflation threatens the economy’s fragile recovery.
The coming months will reveal whether the RBZ’s steadfastness in its inflation projections will help to stabilise the economy or prove insufficient in the face of complex inflationary pressures.
Source: Business Weekly