The Deputy Finance Minister Clemence Chiduwa has said that he and the government expect prices of basic commodities to come down in 2020. He is basing this from the fact that the month on month inflation has been slowing down over the past few months.
The possibility of prices coming down in 2020 is very high on account of recent trends in inflation dynamics, where month-on-month inflation has been trending downwards from 38,75 per cent in October, 17,46 per cent in November and 16,55 per cent in December 2019.
The high inflationary environment of 2019 was mainly due to adjustments in relative prices, in line with exchange rate movements, following measures taken on currency reforms.Deputy Finance Minister’s remarks on the issue
Here is why he is mistaken
We don’t even have to look at the fundamentals to disprove this line of thinking. We just have to look at the same number he is looking at. Although month on month inflation looks like it has been slowing down here are key facts to bear in mind:
- The fact that the past few months inflation has been slowing down does not mean that prices are going down
- It simply means that over those months the rate at which prices have been rising has slowed down
- Make no mistake, prices are still rising, often faster than incomes are rising
- Prices will continue to rise so long as the inflation rate is positive
- For prices to fall the inflation rate has to be negative
- Not one person including officials in government or from the Ministry of Finance itself expects the inflation rate to be negative in 2020
Ergo, the prices of basics are unlikely to come down in 2020. The best we can hope for is economic stability with prices stabilising at a given level and an end to shortages. Maybe the death of the black market?
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