By A Correspondent- The recent 50 percent salary hike for civil servants by the government is likely to see prices of basic commodities go up.
Responding to speculation that prices were north-bound following a 50 percent salary increment for Government workers, Economic Development Minister Professor Mthuli Ncube said this was not likely to happen.
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.”
In an earlier interview, Prof Ncube talked about the newly introduced $50 note, assuring that it will not have any negative impact on the economy.
He said it has no impact, explaining that when the authorities introduce notes on the market, they cancel the equivalent held in the RTGS system at the Reserve Bank so any notes entering the market do not increase money supply.
“It has no impact. The way we introduce the note is you swap your RTGS for cash, and the RTGS once we take it at the Reserve Bank we then cancel it. We actually remove it and then substitute it.
“So there is a zero net effect on the value of the currency, and the currency remains stable and protected. It has zero impact on inflation,” said Prof Ncube.