Zim inflation to break records

HARARE - Zimbabwe’s annual inflation rate is expected to break records this year after it rose to 4,83 percent in August, gaining 0,54 percentage points from the July rate of 4,29 percent.

The figure is now 0,17 percent short of the December projection of 5,0 percent by the World Bank.

The Bretton Woods institution said the country’s inflation would reach that level as it expects to see the government continuing to finance the fiscal deficit through borrowings from the Reserve Bank of Zimbabwe and commercial banks, which it says should continue to push consumer prices up.

“Though the (fiscal) deficit is projected to narrow, the authorities are expected to again resort to a central bank overdraft facility and commercial bank borrowing. The former could raise average inflation rate to five percent during 2018,” said the World Bank in its April outlook of Zimbabwe’s economy.

The International Monetary Fund (IMF) projections see the country’s inflation surpassing seven percent by year end. The Reserve Bank of Zimbabwe (RBZ), however, says it expects inflation in 2018 to fall between three and seven percent by December. RBZ said it expects a reduction in food imports to subdue prices and keep inflation at bay.

The country’s inflation opened at 3,52 percent in January before easing to 2,98 percent in February. In March, the figure was 2,68 percent, April – 2,71 percent, May 2,71 percent, and June 2,91 percent.

Zimstat said prices as measured by the all items Consumer Price Index (CPI) increased by an average of 4,83 percent between August 2017 and August 2018.

Zimbabwe’s largest retailer, OK Zimbabwe last month, however, says their internal tracking of inflation was much higher than figures being announced by Zimstats, laying bare the difference between official figures and the situation on the ground.

Zimstats said year on year food and non-alcoholic beverages inflation prone to transitory shocks stood at 7,52 percent whilst the non-food inflation rate was 3,58 percent.

Since the wave of price increases that hit Zimbabwe during the first quarter of the year, ordinary Zimbabweans have been baffled by the mismatch between the official inflation rate and the level of price increases.

To many whose disposable incomes have significantly lost buying power in recent months, the official inflation rate is far from reflecting the gaping margins with which basic goods prices have gone up; there is a huge mismatch.

Trust Chikohora, an economist, said though unacknowledged, the parallel market rate was the reason behind price increases.

“The main cause of price increases is the increase in the parallel market rates for foreign currency which is caused by a shortage in the country. Most of the products are imported and local manufacturers use imported raw materials,” he told The Financial Gazette.

Month-on-month, the inflation rate in August 2018 was 0,39 percent, shedding 0,59 percentage points on the July 2018 rate of 0,98 percent, meaning prices as measured by the all items CPI increased by an average rate of 0,39 percent from July 2018 to August 2018.

The month-on-month food and non-alcoholic beverages inflation rate stood at 0,62 percent in August 2018, shedding 0,12 percentage points on the July 2018 rate of 0,74 percent, as the month on month non-food inflation rate stood at 0,28 percent, shedding 0,81 percentage points on the July 2018 rate of 1,09 percent.

Listed firms chief executives recently said they are increasingly relying on internally-generated inflation data.

In a series of presentations made during engagements with analysts for the half year ended June 30, 2018 financials, several CEOs indicated that official statistics cast the image of stability in volatile Zimbabwe, which is misleading.

Plastic products producer, Proplastics prepared financial accounts for the half year ended June 30, 2018 using an internal average inflation rate of 41 percent, according to CEO, Kuda Chigiya.

“The internal inflation figure that we used is 41 percent,” Chigiya told analysts.

ZB Holdings CEO, Ronnie Mutandagayi was not at liberty to say which rate of inflation the banking group used, but another bank placed the rate at seven percent.

ZB also reported half year results for the period ending June 30, 2018.

“Inflation was at 2,91 percent as of June,” says ZB CEO, Mutandagayi.

“Unofficial inflation is obviously much higher than this,” he says.

John Mushayavanhu, CEO at FBC Holdings Limited, says while official figures had portrayed stability, the real truth comes out once an organisation imports goods.

He says in some cases, price hikes of up to three times have been reported year on year, highlighting the crisis confronting Zimbabwe’s firms today. 

— The Financial Gazette


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