ZIMBABWE has suspended calculation and publication of annual inflation rates until February next year to rebase consumer prices indices, after reintroducing local currency, to ensure that the data reflects an accurate account of price trends in the economy.
Finance and Economic Development Minister Mthuli Ncube revealed this when he presented his $10,3 billion supplementary budget and mid-term budget statement review yesterday in Parliament, which gives a new national budget figure for the year 2019 of $18,62 billion.
The suspension of calculation and publishing of annual rate of inflation data comes after Zimbabwe floated its local currency in February this year, as part of currency and economic reforms to restore proper and sustainable macroeconomic fundamentals.
The Finance Minister said, under Government’s Transitional Stabilisation Programme (TSP), has overseen far reaching economic reforms including separation of foreign currency and RTGS accounts, conversion to local currency, liberalisation of fuel importation, procurement and foreign exchange regime.
As such, Zimbabwe’s annual inflation rate has raced from 5,39 percent in September 2019 to 175,66 percent in June this year, as effects of parallel market premiums and series of reforms since then have kept piling pressure on prices.
“The change in currency regime from multi-currency to Zimbabwe Dollar has definitely impacted on the base for calculation of Consumer Price Indices (CPIs) and hence inflation.
“Given this transition Zimstat will defer publication of year on year inflation while building up data of prices in mono-currency for a period of 12 months to February 2020. This will ensure that we compare like with like in terms of currency regimes,” he said.
The Treasury chief said the decision was in line with what was done in 2009 after the change of currency regime, whereby Zimstat resorted to only gazetting month on month inflation.
“Year-on-year inflation publication will therefore resume after February 2020, alongside with month on month inflation publication.
“In the interim, stakeholders are encouraged to focus more on month on month inflation as barometer for price developments,” Minister Ncube said.
Zimbabwe’s month-on-month inflation rate rose from 12,5 percent in May to 39,3 percent in June 2019.
The rebasing of inflation indices marks the second time inside decades that Zimbabwe changed its CPIs due to inflation vagaries, the other being in 2009 when it adopted the multicurrency system largely dominated by the US dollar.
Zimbabwe’s official annual inflation data had last been published in August 2008 when the official annual inflation rate peaked at 231 million amid skyrocketing price increases and a precipitous economic meltdown.
Minister Ncube said that unrestrained Government expenditure had in the past been the major source of inflationary pressures, but said this had been put under control and public finances were now in a healthy state. For the 2019 half-year period, the minister said a budget surplus (savings) of $803,6 million was realised. The surplus clearly reflects entrenchment of fiscal discipline in line ministries and Government departments.
The fiscal prudence has witnessed dramatic increase in domestic debt, fed by fiscal deficits of above $2 billion annually primarily financed by issuance of Treasury Bills and Reserve Bank of Zimbabwe overdrafts.
The Treasury chief said the high impact measures included zero recourse to central bank financing, including the overdraft, restructuring of the central bank overdraft facility, cash advances and Treasury Bills held by RBZ into long-term marketable securities.
Further, he said Treasury had stopped issuing TBs to the Zimbabwe Asset Management Company (ZAMCO), only issued TBs for budgeted expenditures and the securities on maturity. Total Treasury Bills issued amounted to $230 million meant solely for budget support and cash-flow management.
Consequently, he said, adherence to sound fiscal and monetary policy reforms allowed containment of domestic debt stock which stood at $8,8 billion as at end June 2019 down from $9,5 billion as at 31 December 2018. The minister said while a firm base for economic stabilisation has been set, it requires further and continuous refinement, which becomes a priority during the second half of the year and beyond.