Mounting inflationary pressures haunt economy as year-on-year inflation paces to 38,8 pc

Zimbabwe’s year-on-year inflation surged to 34,8 percent in January, data by ZIMSTAT reveals.

This marks an increase from 26,5 percent in December 2023, raising concerns about rising living costs and eroding household incomes.

The surge was driven by rising prices across all categories of goods and services tracked by the Consumer Price Index.

The month-on-month inflation rate also jumped, reaching 6,6 percent in January compared to 4,7 percent in December.

This indicates prices are accelerating at a faster pace, further squeezing household budgets.

“The sharp rise in both year-on-year and month-on-month inflation is a worrying trend,” said economist Carlos Tadya.

“It reflects underlying imbalances in the economy, including currency depreciation and ongoing supply chain disruptions.”

When a currency weakens, the cost of imported goods increases as it takes more of the depreciated currency to buy the same amount of foreign currency.

This can translate to higher prices for consumers.

Prices of most goods and services in formal retail shops and wholesale have doubled in the past two weeks after the Zimbabwean dollar plunged against major currencies.

The relentless surge in prices has eroded the purchasing power of the Zimbabwean dollar, with workers bracing for a showdown with employers over shrinking incomes.

Companies have also suffered as aggregate demand has been dropping responding to shrinking disposable incomes for workers.

The exchange rate, which stood at $5 903:US$1 on December 12, 2023, now sits at close to $10 000.

The current exchange rate on the parallel market stands at an average of $15 000 Zimbabwean dollar to US$1, reflecting a continued depreciation of the local currency.

Currently, businesses apply an exchange rate of the auction rate plus 10 percent when trading.

This has seen a massive loss of US dollar sales in the formal sector everytime there is a wide parallel market premium.

A recent survey by Business Weekly found that prices of most goods and services have more than doubled over the past three weeks, further exacerbating the economic hardship faced by ordinary citizens.-ebusinessweekly