The Minister of Finance, Mthuli Ncube said that the country’s inflation is set to fall in October 2019 after a surge to 42 per cent in December 2018. He blamed the surge to speculative behaviour as well as the public’s failure to grasp the significance of the separation of foreign currency accounts.
Ncube said this while delivering a lecture to students of the National Defence Course-Intake 7 of 2018 at the Zimbabwe National Defence University in Mazowe on Thursday last week. He said:
Our challenge remains inflation and here we have a technical phenomenon. You see, what happened in October last year, because of the separation of the FCA accounts, the market understood that to mean there are different valuations, that there is movement from 1 to 1; but we have maintained that conversion (exchange) rate at 1 to 1.
And what has redeveloped is a premium in the alternative market. Our position or policy as a Government, because we want to preserve value, we have maintained the 1 to 1 conversion rate to make sure we preserve value for the nation, for everyone.
But nevertheless inflation took off because of speculative action in the market and the last figure that we saw was 42 per cent (December 2018), but there is a technical phenomenon to this.
When the CPI index shifts to a higher level, compared to last year, that already puts you at a higher land and you run with that right through the year. So you find that for a good part of this year inflation remain high at double-digit.
And then come October, when inflation moved up in 2018, the base shifts, then you find that inflation drops sharply in October 2019, that is our expectation that it remains high technically and then shrinks in October.