Prices of goods to continue falling: RBZ 

Source: Prices of goods to continue falling: RBZ -Newsday Zimbabwe

THE Reserve Bank of Zimbabwe (RBZ) yesterday predicted that inflation, which is the rate at which prices for goods and services rise, will decline to between 60% and 70% by year-end on the back of tight monetary and fiscal measures.

Zimbabwe experienced sharp exchange rate depreciation between April and June 2023 driven by both demand and supply factors, which exerted significant pass-through to inflation.

As a result, prices of goods skyrocketed in supermarkets, resulting in most people failing to meet basic needs.

“The upward trend of month-on-month inflation which sharply reversed in July 2023 to minus 15,3% is expected to continue to correct in August 2023. In the outlook, monthly inflation is expected to continue to decline with annual inflation expected to end the year between 60% and 70%,” RBZ governor John Mangudya said in his mid-term Monetary Policy Statement released yesterday.

The sharp depreciation of the local currency in the period April to June jolted government into responding with a raft of measures including further liberalisation of the exchange rate, tighter monetary policy and the introduction of gold-backed digital tokens.

Following these measures, the steep increase in month-on-month inflation from 15,7% in May to 74,5% in June 2023, significantly reversed in July 2023 to minus 15,3%.

Similarly, the annual inflation which had risen from 865%, in May 2023 to 175,8% in June 2023, fell to 101,3% in July 2023.

Mangudya said the economy had responded favourably to the measures put in place by the government and the bank to address the volatility on the foreign exchange market.

“To ensure the full benefits of these measures and to sustainably anchor the inflation expectations, the bank’s current monetary policy stance will be maintained during the six months to December 2023, with appropriate revisions being done in line with inflation developments,” he said.

Meanwhile, the RBZ boss said as of June 30, 2023, total international remittances through official channels amounted to US$1,4 billion, an increase of 4% from US$1,3 billion during the same period in 2022.

Of the total remittances, diaspora remittances amounted to US$919 million, a 15% increase from US$797 million received during the same period in the year 2022.

International remittances received through the normal banking system on behalf of international organisations amounted to US$514 million, an 11% decrease from US$574 million for the previous year.

Of the total diaspora remittances, 29% came from South Africa followed by the United Kingdom (22%).

The total foreign inflows of US$5,6 billion for the first six months of 2023 were against total foreign payments of US$4,4 billion, resulting in net foreign currency inflows of US$1,2 billion.

“This, coupled with restrictive monetary policy further testifies to the soundness of the economy’s external and monetary fundamentals that are envisaged to sustain favourable exchange rate and inflation dynamics in the short to medium term,” Mangudya said.