Zimbabwe’s annual consumer price inflation fell by 55.3% to 106.6 percent in June 2021, reaching its lowest level since May of 2019, the Zimbabwe National Statistics Agency (ZIMSTAT) has revealed in its recent Consumer Price Index (CPI) bulletin.
Last year, food inflation reached a peak of 38% but a drastic inflation fall to 8% was noticed in January.
“The year on year inflation rate (annual percentage change) for the month of June 2021 as measured by the all items Consumer Price Index (CPI) stood at 106.64 percent,” reads the bulletin.
In the Monetary Policy, the central bank said increased food production due to a favourable agriculture season are expected to subdue inflationary pressures.
Earlier this month, Zimbabwe’s apex bank also projected inflation to take a massive dip in June and July, as it continues to trend down, anchored by exchange rate and price stability since the introduction of the foreign exchange auction system last year, as well as a good farming season.
The bank further believes that a bumper harvest, following a good rainy season, will keep price inflation under check, meaning there will be no importation of key commodities like the staple maize meal, which drives inflation.
In his recent tweet, Finance Minister Mthuli Ncube has confirmed the stability of the domestic currency in the market.
“The domestic currency (Zim$) is very stable, arising from prudent fiscal and monetary policies, and auction system, and positive current account position,” reads the tweet.
Speaking to BusinessMail, economist Langton Mabhanga also, attributed the bumper harvest and the stability of the Zimbabwean dollar to the fall of inflation.
“The performance of the Zim dollar versus the major currency(USD) has been stable over the past 3 months, this means that the market is positively responding to the holding of value of the Zim dollar therefore finding it needless to increase prices,” he said.
“Part of the decrease in inflation can be attributed to decrease in demand of commodities and a reduction of prices. Most of the agro based processed food are likely to go down as a result of the bumper harvest. The country now has more food due to the government driven agricultural programs,” Mabhanga added.
Recently, the central bank has positively recorded a ZWL$176,84 million fell in reserve money to ZWL$23,85 billion during the week ending 18 June compared to last week’s position of ZWL$24,02 billion.
The decrease in reserve money largely reflected a decrease of ZWL$378,06 million in banks’ liquidity (RGTS balances) at the Reserve Bank, which was partially offset by increases of ZWL$125,35 million and ZWL$75,87 million in currency issued and required reserves respectively.
“The fall in liquidity followed an increase in revenue collection by the Government, which saw its deposit at the RBZ rising by ZWL$1,19 billion over the week under review, thus withdrawing liquidity from the market,” reads the update.
The International Monetary Fund (IMF) has a projection a 99.3% inflation rate in 2021, while the World Bank has an average of 86%.
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