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‘Zim likely to miss inflation targets as currency turmoil rears ugly head’



ZIMBABWE is likely to miss its inflation target due to currency volatility and other macro-economic factors, the Confederation of Zimbabwe Industries (CZI) has said. Zimbabwe is battling rising inflation which, according to some independent researchers, is now the highest in the world.


 The authorities blame the weakening currency on the parallel market and supply chain disruptions of critical commodities triggered by Russia’s invasion of Ukraine for the soaring prices of goods and services in the southern African nation.

The central bank sees annual inflation hovering between 50% and 70% by year-end. But experts and some captains of industry say this may not be achievable under current circumstances.

Official statistics show that Zimbabwe’s year-on-year inflation for April stood at 96.4% up from 72.7% in March mainly driven by price increases in fuel, electricity and gas.

Rising inflation and the volatility of the Zimbabwe dollar have stood out as some of the key issues confronting the economy.

The CZI in its monthly economic update said rising inflation made the country’s manufacturing sector less competitive compared to regional peers.

“Inflation changes are more magnified in Zimbabwe relative to neighbouring countries,” reads the latest inflation and currency update released this month.

“Zimbabwe did not only have the highest annual inflation rate in March 2022 compared to its Sadc counterparts, but it also has the highest increase in annual inflation between February 2022 and March 2022 . This means that while there are external factors at play, Zimbabwe has internal factors that magnify any external factors. This compromises the competitiveness of the economy and its attractiveness to investment, hence the need to devise new disinflation policies.

“In the outlook, inflation will likely continue on an upward trend, mainly fueled by exchange rate premium and global price increases. The end-of-year targets for inflation are no longer attainable unless there are new measures which reverse the impact of the shocks. However, such measures would need to encompass market-oriented reforms, of the scope and scale that match the challenge at hand.”

 Experts say double-digit month-on-month inflation generally signals that the economy is in distress and urgent intervention must be carried out as this means that the erosion of real wages is rapid while interest rates have to be higher to give a positive return, which would have further implications on the cost of borrowing for productive purposes.

The increase in inflation between March and April was the most pronounced since the deceleration pattern emerged in July 2020.

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