THE World Bank says Zimbabwe’s measurement of blended inflation should be more transparent amid concerns that the current computation has created distortions on the key macro-economic indicator.
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 would 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.
Blended inflation peaked upwards of 500% in June 2020 before the government came up with several interventionist measures to restore macro-economic stability.
Victor Steenbergen (pictured), a senior economist at the World Bank local office, told delegates attending the launch of the Zimbabwe Economic Update that tightening of monetary policy will allow inflationary pressures to subside.
“It has been more difficult to measure inflation in the country and we wanna be open about that,” Victor Steenburgen said.
“This is partly because of the way inflation measures are published by the Government of Zimbabwe . . . We should mention when we talk about monetary policy that inflation measurement has become much more complicated in Zimbabwe and this is partly because the publication of statistics of ZWL stopped in January of 2023 and instead we moved to the blended inflation rate. While this reflects on some of the economic realities, we do also think that it is important going forward that you publish the statistics for both the USD and the ZWL. We do hope that we will have access to the underlying data going forward which will help inflation measurement.”
Early this year the Confederation of Zimbabwe Industries (CZI) said one of the most accurate ways of estimating 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.
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.
“Transferring of external debt from the RBZ to the Government’s budget will enable the RBZ to constrain reserve money growth within acceptable limits and this in turn will enable the RBZ to better stabilise inflation, Steenbergen said.
“The transfer may stop RBZ from printing money to service debt payments on these foreign currency liabilities. Nevertheless, global volatility is expected to continue, keeping commodity prices (especially fuel) elevated.”