Pepukai Chivore, an economic analyst has opined that the recent salary increment by the government has the potential of increasing inflation.
Chivore indicated that the increase in public workers salaries was a good move that needed to be reinforced by efforts to deal with inflation. The analyst cautioned that:
If we increase salaries without dealing with inflation we run the risk of having a wage-price-spiral. Salaries can be raised, but then prices will rise again then you raise salaries again we end up with a wage-price spiral.
Chivore added that organisations which use government pay grade as standard will imitate the government. Consequently, as Chivore notes, aggregate demand will be strengthened as consumer spending is expected to increase. The analyst suggested the use of non-monetary gratuities.
Some observers, however, think the increased salaries are still below the average poverty datum line that stood at $ 580 per month in 2018. This figure might not be still representative of reality in the ground following major shifts in the economy lately.
Zimbabweans are still haunted by the 2008 inflation that rose to a 231 million per centum high as per the government’s official statement.
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