FINANCE and National Planning Minister Dr Situmbeko Musokotwane says people lack understanding of how the inflation rate is measured and that is why they question why prices of goods are still high after a drop in inflation.
In an interview, Thursday, Dr Musokotwane said there were so many factors which were considered when calculating inflation.
“Our target is that there’s change in these prices otherwise the inflation rate must be small and this is what we are seeing declining. Which price are we talking about? Statisticians don’t use only one price. You can’t say because the price of fuel has gone up therefore inflation has gone up because you are only looking at one item, fuel. The way inflation is measured is done by looking at a basket of a number of commodities combined all together because after all, livelihood is affected by inflation, it is not affected by the pricing of only one item but many items some way important than others like food items because people spend much of the money on the food items. It is possible that the price of fuel can go up significantly for example but during the same period when you are checking the prices, certain other commodities may have their prices go down. So when you combine all these items with those whose prices are going up with those whose prices are going down, you will arrive at the rate of inflation. So people should not confuse things before they understand the process of how this is done,” he said.
He said some people were confusing things.
“There have been some people who are confusing things, they will say ‘you say inflation is coming down but prices are still going up’, they need to understand this on how economists and statisticians measure inflation. Inflation is the measure of changes in the prices of commodities from one period to another period. So it is a right of change, in other words it is a scheme by which prices are changing. It is not about whether prices are changing or not, it is about a scheme,” he said
“So the issue is well accepted on the international norm. It’s not about for example if you see the price of beer rise or not. The price of beer may rise but the question we are interested in is to what extent has that price risen. The inflation at that extent is the percentage exchange. Did it increase by one percent, two percent by five percent or did it double by 100 percent. So that’s what it means by measuring inflation. So when you hear it is 24 percent it means prices have increased by 24 percent from last year. When it is two percent it means from last year prices will only increase by two percent. So in both cases prices are increasing but where inflation rate is lower, prices are increasing just a little bit.”
Meanwhile, Dr Musokotwane expressed confidence in the country hitting single digit inflation by the end of 2022.
“At the time we took over the office, I think inflation rate was about 23, 24 or thereabout and so it came down at one point. I think it was 16. But if you look at how it was from last time and as it is now, there is better stability now compared to before. So inflation is coming down and hopefully by the end of this year, we will be single digit meaning below 10 percent. I am quite confident that we will get there by the end of the year,” said Dr Musokotwane.