By A Correspondent- The recent 50 percent salary hike for civil servants will increase purchasing power but will not result in price increases as the auctions govern the cost of foreign currency used for productive purposes and other inflationary pressures are receding, Finance and Economic Development Minister Professor Mthuli Ncube said.

Retailers agreed, saying the only effect they saw from the increase was better business as a very large block of consumers now had more money to spend. 

The Consumer Protection Commission cannot see the increase triggering price rises and agrees with the retailers that the measure will be totally positive in increasing business.

Responding to speculation that prices were north-bound following a 50 percent salary increment for Government workers, Prof Ncube disagreed. 

The exchange rate is a major factor governing inflation but he said the official market constituting around 95 percent of foreign currency trading in the country is stable. 

The far smaller black market was therefore not a worrying factor when looking at inflationary pressures.

“We as Government follow the official exchange rate. This is the exchange rate that is coming out of the auction process, which is a free market. That easily accounts for 95 percent of all the foreign currency trading in the economy. So we cannot base our analysis on the alternative markets.

“When we make decisions about supporting our hard-working civil servants, we follow inflation. You have seen that inflation is dropping on both a year-on-year and month-on-month basis and we expect that by year-end it will be anywhere between 25 to 35 percent year-on-year with month-on-month below three percent.

“Wages and salaries anywhere in the world are set on the back of inflationary expectations, which are headed downwards in Zimbabwe. Inflation is what erodes salaries. That is what you are confronted with in the shops. So it is about inflation.

“Inflation is going down. It is going the right way. It shows that our policies are working. The exchange rate is stable, and the companies will tell you that they are now planning better because there is less price instability and business is booming and we are also positive about economic recovery this year.”-Statemedia