Accountants engage govt over blended inflation
LIVINGSTONE MARUFU
Professional accountants have engaged the government over its decision to enforce a weighted blended inflation based on the use of Zimbabwe dollar and the greenback, a move, which they say has severe consequences when reporting financials.
The Treasury recently enacted Statutory Instrument 27 of 2023 which takes into account the weighted average inflation of both US$ and ZWL$.
Zimbabwe’s blended annual inflation rate stood at 87.6% in March from 92.3% in February.
The Institute of Chartered Accountants of Zimbabwe CEO, William Mandisodza told Business Times that the current discussions would give directions on reporting.
“For now what I can say is that we are lobbying for some alignment with the policy makers. Commenting outside those discussions will not create the right environment for ongoing discussions,” he said.
The engagement between the government and accountants comes at a time when there are growing concerns over blended inflation amid claims by analysts that it was a “rigged methodology”.
“The major danger here is confidence as the government is not taking responsibility by putting the right measures. It’s like it has run out of ideas.
“Government wants to rein -in inflation from a rigged methodology and say our inflation is now below 100%,” economist Gift Mugano told Business Times.
“They are not putting the right measures to deal with inflation and they are now going for rigging and I want to repeat this is pure rigging. It sends the wrong message in showing that we have failed to deal with inflation.”
He said when dealing with inflation, one has to work with the respective currency either in ZWL$ or US$ but on a separate basis and the way the prices are increasing in ZWL$ is different from the way the prices are increasing in US$.
“A worker that is paid in ZWL$ is facing a steep price regime whereas the one earning in US$ is enjoying price stability.
“It’s not correct to say that the prices in the US have an annual inflation of 92%. That is not correct because prices in hard currency have single-digit inflation.
This is totally misleading and uncalled for,” Mugano said, adding the use of blended inflation misleads investors.
“As we know the country was using IAS 29 which talks of hyperinflationary reporting and with the blended inflation this could mislead investors as the country will dump the aforementioned reporting at a time when the ZWL$ is in a hyperinflation zone.
“Now we are accounting our numbers like we are in a normal environment yet it is not normal as the budgets are off especially the ZWL$ as they cannot stand in one place,” he said.
The country’s largest business lobby group, Confederation of Zimbabwe Industries (CZI) said the blended inflation was “totally unanticipated and has serious negative implications for the economy”.
In general, all statistics, including inflation rate, are published so that they are used in different areas by stakeholders,” CZI said in its February inflation publication.
CZI said inflation could be used 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 that is free from poverty.
The industry said households and consumers are not 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.
CZI said the recent move by the government would complicate the situation for listed companies when reporting on their financials.
“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,” CZI said.
