Inflation set to rise to 700 percent

As Zimbabwe emerges from a three week period of relative currency stability characterised by a drop in the prices of most goods, the Reserve Bank of Zimbabwe (RBZ) has warned that official inflation will rise to 700 percent in March this year before falling steadily for the rest of the year. Addressing a business seminar in the capital Harare late last week, RBZ governor Gideon Gono said projections by the central bank showed that inflation would rise from the current 622.8 per cent to peak at 700 per cent in March. Thereafter it would sink, until reaching a low of 200 percent in December. According to figures released by the Central Statistics Office (CSO) last week, inflation rose by 13.7 percent in January, reversing a 21 percent drop in December, the first decline in the country's rocketing cost of living in 18 months. Eric Bloch, an economist who sits on the advisory board of the RBZ, said he believed inflation would continue its steady rise well over the 700 percent mark until July, before progressively falling as a result of the government's new monetary policy to settle at around 400 percent by the end of the year. This week fuel prices rose and queues returned outside filing stations in major cities, although some analysts dismissed fears that the lines signalled the beginning of yet another round of fuel shortages. Bloch said he believed this week's fuel shortage was a temporary situation caused "mainly by the greed of service station owners" who expected a rise in importation costs in line with a fall in the value of the Zimbabwe dollar in the latest foreign currency auction. "But the government thwarted that by reducing import duties from 40 percent to 5 percent," said Bloch. Foreign currency auction rates rose from Zim $3,750 to the US dollar by the end of last week to Zim $3,973. Most service stations increased their prices from an average of Zim $2,500 to Zim $2,600 per litre of petrol last week, to Zim $2,900 to Zim $3,000 on Monday. Meanwhile, in a bid to bolster its foreign currency reserves, the RBZ has announced ambitious plans to tap the remittances of an estimated 3.4 million Zimbabweans living abroad in Europe, North America and Southern Africa. A team set up by Gono is set to tour key countries to encourage Zimbabweans to repatriate money home through official channels at competitive rates. The RBZ reportedly plans to increase its exchange rates to closer to the black market price currently averaging between Zim $4,000 and Zim $5,000 to US $1.