INTERNATIONAL - Zimbabwe's inflation rate rose to a 10-year high of 175.66 percent in June, and economists warned that it would remain elevated after fuel prices rose nearly 30 percent last week.
Data from Zimstats yesterday showed that basic goods, from sugar to cooking oil and building materials, soared as much as 200 percent during the month. Finance Minister Mthuli Ncube blamed parallel currency exchange rates for the runaway inflation. However, economists pointed to the worsening fuel prices, which Ncube last week said should gradually rise to match the value of 1 US dollar.
On Friday, the Zimbabwe Energy Regulatory Authority hiked petrol prices from ZWL5.26 to ZWL6.10. US-based economics professor Steve Hanke said Zimbabwe’s inflation rate has soared since authorities banned the use of foreign currencies to settle local transactions. “Today, by my measure, the annual inflation is 546 percent per year,” said Hanke.
“Zimbabwe will raise civil servant wages, which already eat up most of the budget, in an attempt to maintain living standards.” Zimstats said inflation rose massively from the May rate of nearly 100 percent. Local economist Prosper Chitambara said Zimbabwe has now “officially transitioned from chronic high inflation to hyperinflation” after the month-on-month inflation rate rose from 12.5 percent in May to 39.3 percent in June.
Zimstats said in its latest Consumer Price Index data that year-on-year food and non-alcoholic beverages inflation stood at 251.94 percent, while the nonfood inflation rate was 143.94 percent.
“The month-on-month food and non-alcoholic beverages inflation rate stood at 55.07 percent in June 2019, gaining 37.44 percentage points on the May 2019 rate of 17.63 percent,” Zimstats said.
“The month-on-month non-food inflation rate stood at 31.23 percent, gaining 21.11 percentage points on the May 2019 rate of 10.12 percent.” Officials said inflation would fall after monetary policy was tightened via the introduction of the Zimbabwe dollar as the only legal tender for local payment settlements. The Reserve Bank has taken over legacy debts and has hiked interest rates to as much as 50 percent to discourage borrowing for speculative purposes, which are believed to be one of the factors fuelling parallel market exchange rates.
President Emmerson Mnangagwa promised to revitalise the economy when he came to power in 2017 after veteran leader Robert Mugabe was ousted in a coup. But Zimbabweans have continued to suffer shortages of hard currency, fuel and bread. Zimbabwe abandoned its own dollar in 2009 after runaway money-printing catapulted inflation to 500 billion percent.
Mnangagwa’s government surprised the market last month when it brought back a national currency, making the interim unit the sole legal tender, renaming it the Zimbabwe dollar and banning the use of foreign currencies for local transactions.