ZIMBABWE’S annual inflation spiked to 175,8% this month, up from 86,5% in May, new data released by the statistics agency has shown, laying bare the price crisis gripping the country.
Monthly inflation also rose sharply by 58,8 percentage points in June to 74,5% showing the effects of the sharp depreciation of the Zimdollar.
The Zimbabwe National Statistics (ZimStat) measures inflation using a “blended” average of both United States dollars and Zimdollar prices, which critics say distorts the true picture of inflation in the economy.
“The issue is I don’t want to read much on the meaning of inflation when it is blended inflation. To start with, it's a rigged inflation figure but when the rigged inflation figure becomes spiral you have to worry,” said Gift Mugano, executive director at Africa Economic Development Strategies.
“What is very clear is that the Zimbabwean dollar inflation is increasing at a faster rate. It tells you the Zimdollar inflation is quite high because naturally you don't expect a component of the small weight driving up inflation because US dollar inflation is not going up.
“The moment month-on-month inflation goes above 50%, we are in hyperinflation because what I can tell you without any shadow of doubt is that ZimStat has got two inflation figures. They have the Zimdollar inflation and US dollar inflation that they are not publishing.”
Steve Hanke, a professor of applied economics at Johns Hopkins University in the US yesterday countered ZimStat’s figures, claiming that Zimbabwe’s inflation was actually at 1 298%, a figure Mugano said was more realistic.
Hanke also accused President Emmerson Mnangagwa of plunging the economy into a third episode of hyperinflation in 15 years.
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Mugano said the cost of campaigning would also accelerate inflation.
“The government is already giving signals that it is going to increase civil servants’ salaries in US dollars and Zimdollars. That is going to drive more inflation, push the rates upwards,” he said.
“I am also aware that the government is going to be having a supplementary budget, the current budget has been eroded already.
“There is going to be liquidity on the market. Inasmuch as the blended is not the correct figure for inflation, it tells you there is hell on earth. It tells you the current measures being put by government are not working.”
Another economist, Prosper Chitambara, said ZimStat’s latest figures were a confirmation that Zimbabwe is now technically in hyperinflation.
“This is probably the third hyperinflation that we have experienced in our history. It is a big challenge in the sense that it puts us in very bad light in terms of even trying to unlock capital and investments because obviously inflation is a key variable that is considered,” he said.
“Obviously it also affects even the standard of living for the people when prices are increasing rapidly, there is a rapid erosion of people’s incomes whether it’s household, families or individuals and even corporates.
“I think we need to implement monetary, fiscal and institutional reforms to try to resolve the hyperinflation crisis that we find ourselves in.”