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To publish or not to?

by Persistence Gwanyanya
11 August 2019 | 972 Views
It’s common cause that if you choose not to tell your own story, someone will do it for you and sell to the whole world that which he wants it to believe about you, which leaves you at high risk of losing your relevance and   incurring serious economic damage.

In the same vain, if you suddenly suspend the publication of annual  inflation statistics, like what Treasury recently did, at a time the dragon is spiralling out of control, you will only invite suspicion and lend credence to Economists like Professor Hanke, who have always believed they are experts on Zimbabwe inflation despite, their highly suspicious methodology to calculating the same, which has always been giving us mad inflation figures.

The void that Treasury  left by its decision to suspend publication of annual inflation will result in a lot of complications to the whole economy as a number of business decisions are based on annual, not monthly inflation, which Treasury shall only be releasing.

Typical examples include wage negotiations, investment decisions and court determinations. Most organisations like Zimbabwe Bank and Allied Workers Union (ZIBAWU) have standing agreements to base salary increments on annual inflation. Even decisions to contract or roll over the Treasury Bills (TBs) and government  bonds as well as savings bonds and other investments are largely based on annual inflation projections.

It’s quite disturbing that even before the suspension of annual inflation, both Treasury and RBZ had no proper published inflation projections save to the argument that it decline in October 2019 due to base year effect and then close the year at around 10 percent as efforts to contract monetary expansion yield fruit.

This has left a big void in the economy, resulting in reliance on highly suspicious inflation figures from the likes of Professor Hanke. It’s important to highlight that Professor Hanke’s methodology of calculating inflation in Zimbabwe is highly challenged. Basing inflation calculation on Old Mutual Share prices is defective as Old Mutual is not Zimbabwe and Zimbabwe is not Old Mutual.

Old Mutual is only a company existing in Zimbabwe whose share prices reflect a number of fundamentals including its own circumstances, like  management and therefore cannot be used as a proxy for real prices movements in Zimbabwe.

It’s common cause that employees will prefer to use elevated statistics from the likes of Professor Hanke to base their salary increments, which have been lagging behind for a long time now. Even required returns on investment will tend to be exaggerated by the choice of annual inflation projections. All this is inflationary, which is disturbing.

The argument by our learned and esteemed Professor of Economics/Mathematical Finance, Minister Mthuli Ncube that it’s impossible to calculate annual inflation because of the change of currency regime from multiple to mono currency is highly challenged. Firstly, our unit of account is the RTGS dollar, which, essentially, has always been there since dollarisation in 2009.

The fact that the bond notes/RTGS were pegged to the US$ (1:1) amply demonstrate this. That's why Zimstats didn’t have a problem with calculation of inflation post SI133/2019, which established the RTGS$ as a unit of account in February 2019, when the interbank market was also introduced.

The decision by Treasury to suspend annual inflation makes the work of our Public Accounting Board (PAAB) very difficult as they have to guide the market in respect of reporting standards.

According to International Accounting Standards, if an economy gets into hyperinflation we are required to comply with reporting under hyperinflation. Now the decision by Treasury to suspend annual inflation comes at a time when official data was highly challenged by the market and the Professional body is looking to getting alternative inflation statistics to come up with a balanced decision on reporting standards.

Importantly, reference to 2009 as justification of the suspension doesn't hold water as in that year we didn't have comparative statistics as Zim dollar was demonised after it had become useless. Clearly, we cant give that as an excuse so we just need to roll out our sleeves, stretch our minds and importantly, engage others professionals in the field of economics and finance to find ways to do it.  I know Zimbabwe Economics Society (ZES) is more than ready to assist in this regard. In fact they actually feel they have been belittled by the decision to suspend inflation calculation on a technical basis before being consulted.

As such, I strongly urge Treasury to revisit its position sooner rather than later before the market is poisoned by some suspicious inflation statistics some of which are from pseudo economists. Suspending annual inflation publication do us more harm than good. We should not empower others to distort our own story. Let’s do it, its possible!!

Persistence Gwanyanya is a bankers, Economist and Trade Finance Specialist who also founded the Bullion Group. For feedback e-mail or or WhatsApp +263773030691.

Inflation Publish Mthuli Ncube

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Source: zimpapers


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