Zimbabwe’s food inflation a worrying case
The World Bank’s latest Food Security Update placed Zimbabwe second among 10 countries with the highest food price inflation, both in nominal and real terms.
Information from the latest month between April and July 2022 for which food price inflation data is available shows high inflation in almost all low and middle-income countries.
According to the report, 92,9 percent of low-income countries, 92,7 percent of lower-middle-income countries, and 89 percent of upper-middle-income countries have seen inflation levels above 5 percent, with many experiencing double-digit inflation.
“The share of high-income countries with high inflation has also increased sharply, with about 83.3 percent experiencing high food price inflation. The most affected countries are in Africa, North America, Latin America, South Asia, Europe, and Central Asia,” reads the report.
The inflation conundrum continues to trigger profit taking in the market, causing equities to remain in the red territory at the close of transactions. The price of food and services in the country has been on the high side for months.
This comes after the annual rate of inflation for July 2022 surged to 256,9 percent from 191,6 percent amid exchange rate volatility, becoming the highest reading in a year.
“The year on year inflation rate (annual percentage change) for the month of July 2022 as measured by the all Items Consumer Price Index (CPI) stood at 256,9 percent,” according to ZIMSTAT.
Imported inflation contributed significantly to domestic inflation through cost push factors, whilst domestically, adverse inflationary pressures and sharp decline in the exchange rate were the main drivers of inflation.
However, month on month inflation cooled off in July as government made frantic efforts to reduce the impact of geopolitical tensions and one of the factors, fuel, has come down significantly in recent days.
Figures from the Zimbabwe National Statistics Agency (ZIMSTAT) shows that month on month, inflation rate in July 2022 was 25,6 percent, shedding 5,1 percentage points on the June rate of 30,7 percent.
Industry has already warned inflationary pressures would derail growth prospects, in the face of exchange rate volatility and global shocks.
Treasury has reviewed downwards growth projections to 4,6 percent from the 5,5 percent initially projected on reduced output from the 2021/22 agricultural season, while the economy is expected to grow by 5 percent in 2023.
Finance and Economic Development Minister, Professor Mthuli Ncube, however, indicated Government would continue with measures to stabilise the economy and restore confidence through among other things, monitoring prices.
“Going forward, Government will continue to monitor price and exchange rate developments with a view to introducing additional response measures aimed at restoring stability,” said Mthuli.
Government has been accused of pumping billions of local dollars into the market through payment of contractors. However, Mthuli has admitted the payment mechanism had had a serious knock on the economy as the contractors offloaded the billions into the black market.
To counter this, Government has since resolved to pay the contractors partly in foreign currency and in local dollars. The introduction of gold coins, bought mainly using local dollars, has also seen less money chasing the US dollars on the black market.-ebusinessweekly
