Finance and Economic Development Minister Mthuli Ncube yesterday revised upward the year-end inflation target to 52 percent to 58 percent, citing recent inflationary pressures.
The Treasury chief had previously forecast that inflation would end the year between 25% and 35% after the rate fell sharply this year to a two-year low of 50.2% in August 2021.
Notably, the projection of the 25 to 35 percent range was itself a revised target of the original forecasts that the authorities had established during the year; that inflation would fall below 10% by December 2021.
The pressures of volatile parallel market exchange rates caused by unscrupulous open market traders and some unruly traders and businesses have been blamed for storing the embers of inflation.
Yesterday, Minister Ncube revealed the new inflation target during the presentation of his 2022 national budget, which forecasts that economic growth will continue as previously expected at 7.8% this year and 5.5% in 2022.
Tax authorities have also said they will work with gloves to achieve an end-of-year 2022 inflation level of between 15% and 20%, Minister Ncube told lawmakers.
“The government is, however, implementing the necessary policy measures to ensure that inflation is back on the desired single-digit path, which includes a review of the current currency auction system, further tightening of monetary policy and the fight against bad practices in the financial sector, ”he added. said the minister.
Annual inflation continued to decline through most of 2021 to reach 54.5% in October 2021, from 471.3% recorded in the same period last year.
Zimbabwe’s inflation rose rapidly last year after Zimbabwe was reintroduced in 2019 from a multi-currency regime dominated by the US dollar.
The annual rate hit a post-dollarization high of 837.5 percent before collapsing due to a cocktail of monetary and fiscal measures adopted by the government.
This year’s disinflationary trajectory has been supported by restrictive fiscal and monetary policies. Conservative targeting of the reserve currency and the introduction of the currency auction system for key imports brought stability to the foreign exchange market and therefore forced inflation down.
Minister Ncube said widening parallel market premiums to over 50% from August 2021 threatened to reverse gains made on the inflation front.
Maintaining price and exchange rate stability in the medium and long term, said the minister, was essential to foster medium-term planning and investment by enterprises for the achievement of the objectives of the National Development Strategy ( NDS1).
“In this regard, fiscal and monetary measures aim to achieve an average inflation target of 32.6% and a range of 15-20% at the end of the period in 2022, in accordance with the macro-budgetary framework that anchors the budget” , did he declare.
Globally, the finance minister said, inflation was on the rise, mainly due to supply chain disruptions linked to the Covid-19 pandemic and firming energy prices.