Elections Threaten Stability Of Markets - Economists

Captains of industry have warned that the upcoming 2023 general elections and the summer cropping season may rekindle runaway inflation if the government abandons its tight policy stance.

In its submission to the 2023 National Budget, the Confederation of Zimbabwe Industries (CZI) warned that funding the agricultural season and elections has the potential to create excess liquidity which can feed the growth of money supply which will upset markets. CZI said:

The current agriculture season, for example, will require the government to support farmers through the various schemes in existence.

There is potential for the creation of excess liquidity which can feed the growth of money supply if payments are not carefully calibrated.

The ability to crowd in the private sector as well as the general ability to fund agriculture in a non-inflationary manner will determine the inflation trajectory in the coming months.

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The upcoming 2023 harmonised elections also have the potential to be a source of money supply growth unless elections are funded from the budget and payments are also carefully calibrated so as not to upset the market.

Economist Gift Mugano said the government may be tempted to indulge in unrestrained printing of money in order to retain power. He said:

We are getting into an election period, naturally, the government tends to become weaker as far as these principles of value for money are concerned.

For how long should they keep the liquidity tight as the people who have the tenders for everything in the country are the main sponsors of the campaigns hence they will be given time to make money to support the ruling party’s events.

Zimbabwe’s annual consumer price inflation eased for the second straight month to 268.8% in October of 2022, from 280.4% in September.

Economic commentators have attributed the fall in the rate of inflation to tight monetary measures implemented by the government and monetary authorities. | Business Times