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Tempers flare as inflation charges

Zimbabwe National Statistics Agency (ZimStat) director-general Taguma Mahonde sought to debunk Steve Hanke, an American economics professor’s argument that his office was cooking data to gloss over a blazing crisis.

BY TATIRA ZWINOIRA TEMPERS flared over Zimbabwe’s rioting inflation yesterday, with the country’s chief statistician hitting out at an American economist and the media for querying the validity of data produced by his office.

Zimbabwe National Statistics Agency (ZimStat) director-general Taguma Mahonde sought to debunk Steve Hanke, an American economics professor’s argument that his office was cooking data to gloss over a blazing crisis.

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The latest fallout came through two weeks ago after ZimStat said Zimbabwe’s annual inflation rate reached 256% in July, a 65 percentage point rise from 191% in June.

Hanke, who claims he has been “measuring Zimbabwe’s inflation accurately everyday”, rejected the figure and said inflation was trudging towards 600%.

In his scathing six-page paper, Mahonde claimed that after giving positive views over Zimbabwe’s inflation trends following the coup in 2017, Hanke turned against President Emmerson Mnangagwa’s government from 2018 after failing to land lucrative advisory roles.

“The coming in of a new government in Zimbabwe in 2017 saw professor Steve Hanke resorting to use of positive language,” Mahonde claimed.

“He would proffer his proposals on monetary sector reforms in a positive way. It would appear professor Hanke was looking for a few million-dollar contracts in exchange of consultancy work to stabilise the monetary side of the Zimbabwe economy. His tweets were telling in 2017, as he was not aggressive, but showed interest.”

Mahonde added: “The professor was doing a combination of public relations and scouting for a consultancy contract. He pursued this mirage for over 12 months. By the last quarter of 2018, it then dawned on the professor that no contract was coming his way. This is when the animal in the professor took charge. Up to now he talks negatively of authorities in Zimbabwe with most being labelled incompetent. He pushed the agenda that wrong calculation of consumer price indices or suppression of inflation rates is synonymous with ZimStat.

“A person outside any country cannot go through a systematic process of price data collection in retail outlets in a determined sample and apply the requisite processing techniques to come up with an inflation index. Professor Steve Hanke uses exchange rates and stock market indices to calculate inflation rates. He bases his argument on the purchasing power parity theorem. In Zimbabwe, he used the Old Mutual Implied Rate for a long time. This is besides the fact that stock market prices are driven by fundamental factors and these have much to do with performance of firms.”

The ZimStat boss also argued that equity prices were also determined by technical factors like stock price history and speculation.

“Some media houses, activists and politicians, without checking validity and intentions of the source, jumped onto the bandwagon of condemning what is right and propelling unscientific calculations,” he said.

“As usual, the loser is the general public who end up with the dilemma of whether to believe or not to believe. This problem necessitated this attempt to enlighten the public and take everyone back to where it all started.”

Hanke’s annual inflation rate put Zimbabwe as having the highest inflation in the world followed by Turkey with 129%, Sri Lanka (116%), Cuba (91%) and Argentina (89%), based on the American economist’s calculations.

However, apart from Hanke, chief executive officers (CEOs) in Zimbabwe’s listed firms have increasingly been relying on internally-generated inflation data.

In a series of presentations made during engagements with analysts, some CEOs have indicated that official statistics cast the image of stability in volatile Zimbabwe, which has been misleading, and not representative of the state of affairs in the country.

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