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Gono blames Zim's inflation on decline in food output

Gono blames Zim's inflation on decline in food output
By George Chellah in Harare, Zimbabwe
Monday February 04, 2008 [03:00]

RESERVE Bank of Zimbabwe (RBZ) governor Dr Gideon Gono has complained that inflation continues to be the most devastating macroeconomic imbalance in the country. And Dr Gono said the decline in food output was a major driver in Zimbabwe’s inflation, which was at 26,470.8 per cent in November 2007 up from 7, 892.1 per cent in September 2007. Dr Gono bemoaned the high levels of inflation in the country in a recently released monetary policy statement.

“At an annual rate, according to Central Statistical
Office (CSO) figure of 26,470.8 per cent, in November, 2007, inflation continues to be arguably the most devastating macroeconomic imbalance in the country, as its adverse effects are cutting across all sectors,” Dr Gono said.

“As monetary authorities, our philosophy on how to successfully destroy the inflation dragon remains that of deploying a combination of demand management policies, supported by structural reforms, as well as deliberate strategies to invigorate the supply side of the economy.”

Dr Gono said Zimbabwe needed to produce more food to fight the high inflation levels.

“We need to build more houses for the people to reduce the penal rentals that are fuelling overall inflation.

We need to produce more foreign exchange through higher exports and foreign investment inflows,” Dr Gono said. “With more foreign exchange, we will better preserve the external value of our local currency, which in turn minimises imported inflation.”

He also said Zimbabwe needed a general uplift in the availability of goods and services in the economy so as to take out the prevailing shortage-induced arbitrage opportunities.

“A policy framework that removes major pricing distortions in the area of foreign exchange, interest rates, fuel, agricultural inputs and inputs, municipal and parastatal services in the main will do the trick while at the same time the nation puts in place policies that cushion the vulnerable poor against the adverse impact of market forces,” Dr Gono said.

Dr Gono said the fall in food output was a major driver in Zimbabwe’s inflation.
“Since the food category contributes 32 per cent of the CPI basket, decline in food output is a major driver of our inflation, and as a nation, we must redouble out thrust on agricultural production.

As monetary authorities, we call upon those whose role it is to collect, compute and publish economic statistics to do so timeously so as to preserve credibility of national accounts, as well as enabling proper business planning,” Dr Gono said. “Yes, our inflation is the highest in the world, but this should not tempt us to sweep our blemishes under the carpet. Where there is no information, markets will tend to fill the gaps through distorted and imprecise wild guesses, which cause more damage than would be the case when the actual information is made known to the public on time.

“For instance, whereas others were forecasting Zimbabwe’s inflation to end 2007 at over 150,000 per cent, latest actual data indicates that inflation in November, 2007 was 26,470.8 per cent.

The work of inflated insinuations, combined with the sinister invisible hand seeking to drive Zimbabwe’s economy down the cliff, therefore, explains the vast discrepancy between the guesses and reality.”

Last September, Zimbabwe’s inflation rate rose to 7, 892.1 per cent gaining 1,389.3 percentage points from the August rate of 6,592.8 per cent.

Labels: AGRICULTURE, GIDEON GONO, INFLATION, ZIMBABWE

posted by MrK @ 4:31 AM