Zim inflation rises to 4.83%, tests dollar-era high

Zimbabwe’s official inflation rate has risen to 4.83% year-on-year, pushing towards its highest level since dollarisation.

August annual inflation quickened by 0.54 percentage points from 4.29 percent in July, according to the latest data released on Monday by Zimstat. Month-on-month food and non-alcoholic beverages inflation rate was 0.62 percent in August, down just 0.12 percentage points on July’s rate of 0.74 percent.

The highest rate of inflation recorded since Zimbabwe switched to the US dollar in 2009 was 5.3 percent recorded in June of 2010. The August figure is the highest in seven years.

Critics believe Zimstat figures are understated. Eddie Cross, an economist and former opposition economic advisor and MP, puts inflation at between 30 and 40 percent. “It is extremely dangerous when we cannot believe our own figures,” Cross says.

For clues as to where the “real” inflation rate is, observers watch the Old Mutual Implied Rate, which measures the difference between Old Mutual shares listed on the Zimbabwe Stock Exchange and those listed on the Johannesburg Stock Exchange or in London. As at Monday, Old Mutual shares in Zimbabwe were trading 149 percent higher than on the JSE, lower than 180 percent around the same time last week.

On the foreign currency black market, the US dollar was trading at a premium of up to $1.90.

Inflation fears have grown over recent months as Government continues on a borrowing and spending spree, fueled by Treasury Bills. The Mnangagwa administration says it is targeting a $672 million budget deficit this year, after overspending by $2.5 billion in 2017, the equivalent of 14 percent of gross domestic product. However, the deficit had already hit $1.3 billion by June, double the target and on course to easily eclipse the 2017 deficit.

 

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