THE Confederation of Zimbabwe Industries (CZI) says the government’s decision to publish only blended inflation figures is causing accounting headaches for business in tracking key macro-economic indicators.
BERNARD MPOFU
As the economy shifted back to dollarisation after a mono-currency system anchored on the Zimbabwe dollar collapsed, Finance minister Mthuli Ncube announced that the publication of Zimdollar inflation will cease through Statutory Instrument 27 of 2023.
The statutory instrument defines the “rate of inflation” as the general increase in price levels of goods and services measured as a weighted average based on the use of Zimbabwean dollars and United States dollars over a given period of time.
The weighted average inflation is the rate of inflation, which was previously referred to as the blended inflation rate. The only change to the way inflation figures were published, the CZI says is that the ‘difficult to control’’ Zimdollar inflation rate will no longer be published.
According to a new CZI research note on inflation and currency developments suspending the publication of Zimbabwe dollar inflation will affect key business decisions.
The CZI says the country’s statistical agency, Zimstat, does not make public key variables in computing blended inflation such as change in United States dollar inflation, change in Zimbabwe dollar inflation, changes in the weights being applied for US dollar and Zimdollar inflation in blending and a combination of these three.
“With the parallel market rate increasing significantly in March, it is likely that the increase was caused by an increase in ZWL$ inflation. Since blended inflation is a composite number whose components are difficult to figure out, it is also difficult for business to make any use of the blended inflation,” the organised manufacturing sector lobby group says.
“Business is desperately looking for some estimates about inflation rates of the currency in use (that is US dollars and Zimdollars), which they have been currently denied by the authorities. This is largely because there are some key decisions that are calling for the use of inflation for which the blended rate is proving to be inadequate.”
The CZI says one of the most accurate ways of estimating the Zimdollar inflation is to use the changes in the Total Consumption Line (TCL) for Zimbabwe, which is measured in Zimdollars.
Experts say the business sector uses inflation statistics as a tool for collective bargaining, as salaries need to be adjusted to ensure that workers can at least be able to afford a decent lifestyle which is free from poverty.
The key economic indicators are also for households and consumers to be able to tell whether the value of their incomes is increasing or decreasing they need to know the inflation rate of each currency in isolation.
“For accounting purposes, IAS 29 requires that all businesses with the Zimbabwe dollar as their functional currency publish inflation-adjusted accounts and this will require an official Zimbabwe dollar inflation rate. If such is not available, how will businesses with the Zimbabwe dollar as their functional currency comply with the requirements of the standard?” the CZI says.
Official figures show that the annual blended inflation rate for the month of March 2023 was 87.6% shedding 4.7 percentage points from the February inflation rate of 92.3%.
