Natalie Nyathi,
Business Reporter
Economists have urged the Ministry of Finance and Economic Development to implement policies that can narrow the gap between the official foreign currency exchange rate and that of the parallel market.
Speaking to Zim GBC News the economic commentators said something has to be done to topple Zimbabwe from the inflation rate pole position that it is officially sitting with 244%. Zimbabwe’ s triple digit inflation rate is followed closely by Latin American oil producer Venezuela and the troubled Middle Eastern nation of Lebanon.
Reginald Shoko a consultant with the Cold Storage Company told our reporter that the elephant in the room which needs to be attended to is the exchange rate, as the gap between official and parallel markets drives speculative pricing on the parallel market which cause inflation.
“If we address the issue of the exchange rate, we may easily slide down the inflation table. The current arbitrage opportunities created by the forex auction systems are inflationary”, said Shoko.
Morris Mpala another economist’s take is that government needs to cut its expenditure.
“With Agriculture not looking good it could be a big task given that most of inflation is food inflation.We need to reduce quasi government operations and have a mechanism that allows less money supply for instance infrastructure development actors payments amongst them”, said Mpala.
“large dollarization or re- dollarisation will arrest inflation to single digits but in the grand scheme, it’s not a recommended move to re-dollarise due to territorial integrity, currency sovereignty , exports competitiveness , financial inconsistencies/inconveniences et al.
“Suffice to say the streets seem to have re dollarised given research is saying 80% of the transactions are not done in local currency , production , production , import substitution , no money printing , careful
use of TBs instrument , use of gold coins , paying done government infrastructure developers in hard currency , curtail quasi Govt expenditure , let Dutch auction system to free float.
“Meaning to say the system has to track the going rate as determined by the demand and supply so that there is no arbitrage between auction rate and parallel market”
An equilibrium rate is preferred as at current it’s an avenue to distort the the actual price of U.S Dollar for the exporting business”, Mpala added.
Meanwhile, China is one of the five nations with inflation that is below 2%. This two percent figures the inflation target from many developed countries but the vast majority are well above that.
United States of America (USA) has an inflation rate of 7.1% that is actually lower than most of Europe. Germany gets into the top 100 with 8.6%. UK ranking number sixty eight, just below the average inflation rate in the EU as one of the seventy seven countries with double digits inflation.
Into the top fifty, percentages are quickly rising up to 26.5% where Ukraine is number twenty.
The statistics show that many there are many developed countries towards the top but after that world cup winning last December Argentina ranks position six.