Given that we are moving into the 2022 salary increase cycle, several of our payroll clients with operations in Zimbabwe, have asked that we gaze into our inflation crystal ball, to provide a forecast of average inflation for 2022.
We anticipate that the Central Bank will continue to employ tight monetary policy to temper inflation. In October 2021, the Bank increased the bank policy rate from 40% to 60% and the medium-term bank accommodation facility interest rate from 30% to 40%.
Governor John Mangudya recently stated that “If we see inflation going up in February and in March, brace up for very high-interest rates… There is a trade-off between inflation and high-interest rates, all central banks are tightening monetary policies so that we can get out of high inflation,”
The weekly forex auction has been pronounced a failure because it only satisfies 30% of the formal currency transaction requirement. Nevertheless, it is a transparent auction which does set a “market” exchange rate; albeit at a rate of ZWS$ 124 versus the parallel market rate of ZWS$ 220 to 250. We are hoping that the auction amount is increased over the course of 2022 and perhaps more importantly, that the parallel market premium stabilises.
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