DESPITE announcing a cocktail of measures to tame stratospherically high levels of inflation, Zimbabwe’s triple-digit annualised inflation remains the highest in the region, surpassing the sum total of its neighbours, a new report done by the country’s manufacturing sector lobby group has shown.
BERNARD MPOFU
Official figures show that year-on-year inflation rate for July 2022 increased to 256.9% from 191.6% in June 2022, gaining 65.3 percentage points.
The month-on-month inflation rate in July 2022 was 25.6% shedding 5.1 percentage points on the June 2022 rate of 30.7%. After months of persistent increase in month-on-month inflation, in July 2022 month-on-month inflation declined to 25.6% shedding 5.1 percentage points on the June 2022 rate of 30.7%.
Experts say a reduction in inflation does not necessary mean that prices have gone down, but it highlights that the rate of price increase has slowed down. In July 2022, the electricity inflation rate shed 198 percentage points, compared to the June 2022 inflation.
The soaring prices have pushed the cost of living beyond the reach of many. The ZimStat food poverty line (FPL) as at July 2022 stood at ZW$17 909.32. This means that for a person not to be deemed food poor he or she must at least spend that much on food in July 2022. This represents an increase of 29.1% over the June 2022 figure of ZW$13 875.12. A typical family of five would thus require ZW$89 547 just to stay out of food poverty, hence there will be pressure on wage adjustments going forward.
According to a Confederation of Zimbabwe Industries macro-economic research note, the country’s annual inflation for June is miles ahead of other Southern African Development Community countries. The paper shows that regional powerhouse South Africa had an inflation rate of 7.4% during the period under review while Angola at 22.96% had the second highest figure after Zimbabwe. Tanzania and Botswana had the lowest at 4.4% and 6% respectively.
“The increase in annual inflation underlines that inflation remains a challenge in Zimbabwe and the ability of the measures contained in the Mid-Term Monetary Policy to reverse this trend will be key,” the Confederation of Zimbabwe Industries (CZI) says.
“Among Sadc countries Zimbabwe is the only country in triple-digit year-on-year inflation for June 2022. If we add up inflation figures of the countries surrounding Zimbabwe, the sum of the inflation figures will still be lower than Zimbabwe’s annual inflation of 191%. This illustrates how the country is in dire need of inflation
stabilisation. Zimbabwean companies are handicapped with a high inflation environment compared to their regional counterparts, as they have to forward price at higher levels that factor in replacement costs. This makes the prices generally higher than their competitors in the region. The opening of borders of selected basic goods through Statutory Instrument 98 of 2022 will do more harm than good to Zimbabwean business if inflation continues on this trajectory.”
The CZI says while higher lending rates have slowed down borrowing for parallel market activities, the tight liquidity situation is hurting business.
“The general policy thrust, which is also reflected in the 2022 mid-term budget review, is that the growth in broad money is driven by increases in lending, including both to the private sector and government,” reads the report.
“Interest rates were increased to 200% in a bid to curb speculative borrowing in the economy. However, while lending is indeed one of the main drivers of M3 growth, it is also the lifeblood of industrial development. The interest rate of 200% is already having negative effects on industry, as they are struggling to profitably borrow. This also underlines the difficulties that policymakers have in trying to strike a balance between the need to control money supply without curtailing growth.”
