Economist Trevor Hambayi says reduction in inflation rate is due to liquidity challenge in the economy.
Mr. Hambayi said the absence of spending is driving the current decreasing inflation.
He said there is nothing uneconomical with having a decreasing inflation with increasing prices.
“Economic definition of inflation is the rate at which prices increase. All it’s saying is that the rate at which the prices are increasing has reduced from 23% to 9.7% but still an increase in prices,” Mr. Hambayi said.
“The one key question should be what is driving the decrease in inflation. They are a number of factors that drive inflation but the single largest factor driving our current decrease in inflation is the liquidity challenge in the economy,” he said.
He said Government payments have always been key ingredients in driving our economy and the suspension of payment of arrears and the continued govt domestic borrowing of over K5 billion monthly from the domestic capital market has constrained availability of cash in the economy.
“This absence of spending is driving our current decreasing inflation. A sound and solid economy needs an underlying asset to sustain macro stability and thus important that we build a solid private sector led growth that will reduce inflation on the strength of productivity,” he said.