Zimbabwe: IMF blames currency reform for the high inflation!

Let’s bring some data to the International Monetary Funds (IMF) statement on its consultation with the Republic of Zimbabwe. What its stating is dire. As the situation has been escalating, even if the state has made imaginary tale of where they will fix it and get the inflation in balance. However, there is no proof it.

Finance Minister Prof. Mthuli Ncube and Reserve Bank of Zimbabwe Governor J.P. Mangudya after this consultation must scratch their heads. Because, they will not know how to make statements and propaganda countering this.

Just like they cannot explain this rates of inflations:

Date: Inflation Rate:
April 2019 75,86 %
May 2019 97,85 %
June 2019 175,66 %
July 2019 230,54 %
August 2019 288,5 %

We can see the idea and the feeling of the annual inflation, just as the IMF states this today:

““Economic difficulties have continued throughout 2019, exacerbated by severe weather shocks. GDP growth in 2019 is expected to be steeply negative as the effects of drought on agricultural production and electricity generation, impact of cyclone Idai, and the significant fiscal consolidation to correct past excesses serve to drag on growth. Social conditions have deteriorated sharply, with more than half of Zimbabwe’s population (8.5 million people) estimated by the UN to be food insecure in 2019/2020. Weakening confidence, policy uncertainty, a continuation of FX market distortions, and a recent expansionary monetary stance has increased pressure on the exchange rate. Since the February currency reform, the exchange rate has depreciated from USD 1:1 ZWL to USD 1:16.5 ZWL (as of September 23), fostering high inflation, which reached almost 300 percent (year-over-year) in August” (IMF, 27.09.2019).

This is not shocking news, but something that has been seen on the horizon for so long. Even if the Zimbabwe African National Union – Patriotic Front (ZANU-PF) and its closest associates are blaming sanctions, the IMF isn’t seeing that, but instead looking at their own activities. Just like today, looking back just a few days ago, RBZ had their view on this.

Even as the state said this just 14 days ago:

The country is moving towards bringing inflation under control and lowering it over time after the initial burst of high inflation that followed from the liberalisation of the exchange rate” (Reserve Bank of Zimbabwe – ‘2019 MID TERM MONETARY POLICY STATEMENT’ 13.09.2019).

Either Governor Mangudya was deliberately lying to the public or his deliberately stupid. Secondly, he might even be very naive and hoping the public is endearing as elves in Disney movies. Because, the changes between today and 14 days ago. Cannot be that big of shift, as well, as there are no direct or correcting policy to really make a difference to the hyper-inflation in the Republic.

The Finance Minister Ncube is working in tandem with Mangudya and they know this. The world knows this and that’s why the IMF is downplaying the actions made by these fellow gentlemen:

Policy actions are urgently needed to tackle the root causes of economic instability and enable private-sector led growth. The key challenge is to contain fiscal spending consistent with non-inflationary financing and tighten monetary policy to stabilize the exchange rate and start rebuilding confidence in the national currency. Risks to budget execution are high as demands for further public sector wage increases, quasi-fiscal activities of the RBZ that will need to be absorbed by the central government, and pressure to finance agriculture could push the deficit back into an unsustainable stance. There is also a need to strengthen FX market operations and improve transparency on monetary statistics. These adjustment challenges are magnified by slow progress on international reengagement. Efforts will need to be intensified on both economic and political fronts to drive Zimbabwe forward” (IMF, 27.09.2019).

Surely, that is an assault on the actions made by the RBZ and Ministry of Finance, whose have acted wrongly and not done what the IMF see fit to fix the issues. Clearly, what the government need to do is generate trust and also look into the pin-pointed objectives, than they might have a shot of fixing this. But that is if they swallow some pride, and continue on their path. Which is reviving the hyper-inflation of 2008 and destroying the economy. Something that are close at doing and in-capacitate everyone working in the republic, making their wages worthless. Peace.

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