From TheHerald.

The modest fall in the cost of living over the last 12 months is welcomed by all Zimbabweans, since everyone gets the equivalent of a 2.7-percent pay rise without any changes to the numbers of their payslips, and because of the circumstances of the Zimbabwean economy there is no danger of deflation.

The fall in prices is largely driven by the decline of the rand and other major trading currencies against the U.S. dollar and the increased efficiency of a growing number of Zimbabwean industries in an era of increased competition. Importers and manufacturers, in this very competitive environment, are passing on their savings to consumers.

The fall is only temporary. South Africa has a modest but positive rate of inflation, so prices in rand terms will rise. But other benefits, and principally the transformation of our industry, are permanent.

Some economists, who were complaining about high Zimbabwean prices compared to the region a couple of years ago, now worry about deflation in Zimbabwe.

However, because internal debt levels are so low in Zimbabwe, and household debt is very low indeed, there are negligible adverse effects of a fall in prices.

Demand is not falling and cash is not being hoarded; Zimbabweans immediately spend the little extra in their pockets as soon as they have it, in effect pushing up demand, and the amount of cash in circulation is rising, not falling.

Read more at TheHerald.