Inflation fires first warning shot

For the first time in six months, inflation for the month of July has risen up, in what could be a warning shot to the new government to practice fiscal prudence.

Inflation fell by a cumulative 1.73% over the past six months, from 2.98% in February to its lowest so far this year, of 1.25%, in July. However the month of August saw inflation back on the rise at 1.28%, pushed by non-food items.

The rise in inflation comes amidst government plans to increase salaries of civil servants by year’s end. Although the source of funds is not yet clear, given the looming budget deficit the country is facing.

President Robert Mugabe, in his speech to officially open the eighth parliament, said, ‘’Government is fully cognisant that our civil servants continue to discharge duties under difficult working conditions and low remuneration. Steps will therefore be taken to review their wages and salaries, as well as revive the provision of other non-monetary benefits.’’

Increasing the civil service wage bill will increase the domestic spending power against low and unchanged productivity, and will therefore fuel inflation.

Given the 85% unemployment rate in the country, many believe government should rather use wage increase money to revive productive sectors and increase capacity for new employment.

Many would also prefer for government to prioritise the revision of the current inflexible labour laws, to promote new employment in the private sector.

Inflation has fired the first economic warning shot. For the next few months, the government’s economic errors will be clearly monitored by the inflation rate. At the moment it is the lowest in the region, and is also ranked amongst the lowest in the world.

Post published in: Business
  1. Muzambiringa
  2. Macon Pane

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