Zim inflation psychological

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The Minister of Finance, Tendai Biti said the first six months of the year were depressing and saw a reversal of last year’s gains when the country managed to contain inflation mostly within negative levels averaging -7,7% by end of December 2009.
“Inflation is not a product of supply and demand but it is a psychological thing,” said Biti. “We need to accompany the new stabilisation.”
He said inflation had slowed down government and private consumption during the first half of the year, with the country expected to register a decline of 2,4% of aggregate consumption in 2010 from 4,3% in 2009.
The country is experiencing price increases with the last inflation figures released by Zimstats showing the resurgence of the scourge at 6,1% for May.
Presenting his Mid-Term Fiscal Policy Biti said the country needed to have a front-loaded growth which should be supported by three Rs: regeneration, revival and refocus.
“The tragedy of the Zimbabwean economy is that many of our corporates are finding it hard to live with normal legitimate returns of a stabilised economy. They are refusing to wean themselves from the hyper-inflation drug, a state of intoxication with drunken consequences,” said Biti.
Biti said to contain inflation, there is need to remove the supply-side bottlenecks that constrain higher capacity utilisation levels in industries currently at between 30-50%, removing inefficiencies within public enterprises particularly power and water, and exercising wage restraint across all sectors.
“In the public sector, this will require that we maintain the Cabinet commitment to contain the public service wage bill at current levels with any future reviews guided by economic performance and improved revenue inflows,” said Biti.
Biti is however optimistic that inflation will decline in 2011.