ZIMBABWE’S inflation rate will probably remain below 0% this year because of tight liquidity within the southern African nation and a weakening of the rand in neighbouring South Africa, the central bank said.
Company closures, which rose to 87 last year from 44 in 2013, alongside “companies in distress,” have contributed to Zimbabwe’s lack of liquidity, the Harare-based central bank said in its December 2014 quarterly report, released on Tuesday.
“A significant number of companies are also failing to pay their staff on a regular basis, accumulating salary arrears and further adversely impacting on aggregate demand,” it said.
Zimbabwe, without a currency of its own, trades mainly in U.S. dollars, though other currencies including the rand, euro and British pound are also legal tender.
The Zimbabwe dollar, abandoned in 2009 after inflation peaked at about 500 billion percent, according to the United Nations, isn’t likely to be reintroduced until the economy normalises, Finance Minister Patrick Chinamasa said in December.
Declining gold and platinum prices last year, together with falling nickel and copper prices, showed Zimbabwe’s “susceptibility to adverse international price developments,” said the bank. That reiterates the need for Zimbabwe to add value to minerals before exporting them, it said.
Low metals prices, tight liquidity and constraints in the retail industry led to the Zimbabwe Stock Exchange’s market value falling 12 percent last year to $4.3 billion, the bank said.