Inflation races to 131,7%

ZIMBABWE’S year-on-year inflation is back to three figures for the first time since June last year, after a sharp spike to 131,7% in May, from 96,4% in April as prices continue to soar.

“The year-on-year inflation rate (annual percentage change) for the month of May 2022 as measured by the all items consumer price index stood at 131,7%,” the Zimbabwe National Statistics Agency (ZimStat) said yesterday.

“The CPI [consumer price index] for the month ending May 2022 stood at $6 662,17, compared to $5 507,11 in April 2022 and $2 874,85 in May 2021.”

The latest figures evoke memories of the hyperinflation era of 2007-8 when inflation topped at 500 billion percent, leading to the scrapping of the Zimbabwe dollar the following year.

Last week, the Consumer Council of Zimbabwe announced that a family of five required
$120 000 a month to survive, up from $98 000 in April as the local currency tumbles and prices of basics and services skyrocket.

President Emmerson Mnangagwa, who re-introduced the Zimbabwe dollar in 2019, has been struggling to steady the local currency and has accused business of sabotaging him.

Early this month, he introduced a raft of economic measures to control the exchange rate and arrest the economic challenges afflicting the country.

Some of the measures included a freeze on lending by banks to stop freefall of the local currency, allegedly at the hands of illegal forex dealers aided by banks, according to the Reserve Bank of Zimbabwe (RBZ)’s Financial Intelligence Unit.

Government was forced to reverse the measures following an outcry by businesses.

Zimbabwe has at least five exchange rates — the RBZ’s official auction rate now at $290; the interbank rate at $297; the parallel rate at $470, Zimbabwe dollar cash rate at $400, and the mobile money rate, which is also tracking the cash rate.

Economist Gift Mugano projected an inflation of about 250% by December influenced by the scarcity of the United States dollar, saying citizens were buying the foreign currency instead of spending it.

“Even before we get to the hyperinflationary era, economic agents will begin to apply the rule of hyperinflation,” Mugano said.

“People are busy buying foreign currency to preserve value. The demand for foreign currency will go high. This will compound the demand for foreign currency for imports. It is a vicious cycle.”-newsday