Anchor wage talks on 10pc inflation: RBZ

Reserve Bank of Zimbabwe (RBZ)

The Reserve Bank of Zimbabwe (RBZ) says employers and labour unions should anchor any wage negotiations for next year on the projected 10 percent year-on-year inflation.

This emerged during the 6th annual collective bargaining summit held in Nyanga last week organised by the Employers Confederation of Zimbabwe (EMCOZ).

RBZ Deputy Director for Economic Research Division, Dr Nebson Mupunga, told delegates that while inflation shot up to 20,85 percent as at October this year, it is expected to significantly recede to below 10 percent by December 2019 on falling prices of goods and services.

“We have seen inflation increasingly to 20,85 percent and we expect to live with that high inflation up to October next year unless there is a reduction in prices — and it’s expected because we measure as an annual figure, that is year-on-year,” said Dr Mupunga.

“ . . . but the good thing is we are expecting inflation to be below 10 percent by December next year. So what is important actually when you are negotiating salaries (is that) normally, the nominal wages are based on the projected inflation not on the historical inflation. So it means what is going to guide the (salary and wage increment) negotiations, is the medium-term inflation forecast which we are expecting to be below 10 percent.”

Dr Mupunga said it is not just the RBZ that projects inflation to fall to below 10 percent by end of next year, as global lender, the International Monetary Fund (IMF), also shares the same perspective. In fact, the IMF, which recently met RBZ officials, said the year-on-year inflation by December next year would be around 5 percent.

The 2019 National Budget Statement presented by Finance and Economic Development Minister Mthuli Ncube also projects 2019 end period inflation of 5 percent.

“IMF is actually projecting annual inflation of 5 percent by December next year and for us; we are projecting it to be less than 10 percent.

“We hope that is going to anchor (salary increment) negotiations. I know some people are questioning; why less than 10 percent?

“We believe as the central bank that the current level of inflation we are seeing is not consistent with the levels of income (obtaining in the country),” said Dr Mupunga.

There was a wave of price increases at the start of October, in response to monetary and fiscal pronouncements that include the opening up of foreign currency accounts (FCAs) for exporters and those that have access to it, and the 2 percent intermediate money transfer tax.

Retailers and producers panicked and quadrupled prices of most basic goods, while salaries remain constant. With most companies facing operational challenges, Dr Mupunga expects prices for a number of goods to be reviewed downwards to stimulate demand.

“We are going to see most retailers reducing the prices because they are beyond the reach of most people. So in such a case, we expect inflation to significantly go down next year, and in this case it will be less than 10 percent,” said Dr Mupunga.