Zimbabwe heading towards deflation, fresh capital required to revive economy

via Zimbabwe heading towards deflation, fresh capital required to revive economy | The Source  January 13, 2014

Zimbabwe is sliding into deflation due to shrinking economic activity and urgently needs fresh foreign capital to stimulate growth, a senior banking official told Parliamentarians on Monday.

Inflation is expected to end the year at 1.5 percent but the rate is seen much lower after it fell to 0.54 percent in November against projections of five percent this year due to falling economic activity and tight liquidity which has seen industrial capacity utilisation drop to just over a third from 55 percent a year ago.

“We face quite some prolonged depression going forward in the economy and it can deepen,” Agribank director, Joseph Mverecha told Members of Parliament attending a post-budget seminar at a Harare hotel.

Over the past year, month on month inflation averaged zero and slipped into the negative in the last five months, he said.

“If you extrapolate going forward by February or March at the latest, the year on year inflation should be negative,” he said, adding that it would then be difficult for the country to come out of deflation, citing Japan which has been in depression for over 15 years despite advantages such as trade and current account surpluses which Zimbabwe does not have.

Mverecha said the country needed to deal with its external debt overhang to enable it to access fresh international capital.

“The first step we need to take is to address key challenges against the background of sanctions. We need a lot of fresh capital,” he said.

“We need to make a commitment to address the core structural challenges and not to deal with symptoms.”

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4 comments on “Zimbabwe heading towards deflation, fresh capital required to revive economy
  1. John Thomas says:

    Zimbabwe prices are very high compared to the region. A downward correction is long overdue. This not classical deflation. Reduction in economic activity is due first and foremost to lack of confidence in the government. Fresh capital will only come when ZANU goes.

  2. Zvichapera says:

    Zimbabweans will need to sacrifice, there is not going to an Arab Spring, for ZPF to go, Zimbabwe must collapse completely, ungovernable, the UN and the world must supervise elections and the real will of the people respected, only will legitmacy be restored. It is the only way as long as ZPF does not budge!

  3. Nyoni says:

    This government must start to play ball. Think of Zimbabwe first and foremost. The rule of thumb is this. Try to create a creative dialogue with all Zimbabweans in the diaspora and make them welcome in their own country. So far the government has alienated them. One is sure they love their country and would be willing to invest in the country. Why is the government playing hardball at this time. Can they imagine the möney power the diaspora have. Come Zanu whats your game? Own up .

  4. Rumbie Mhere says:

    Too much of these discussions. We have had enough of these. All we need is someone who can stir us into action.We are tired of the corruption in parastatals, tired of old leadership who take no action on corruption.We have discussed enough. All we want now is ACTION !

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