CZI flags inflation upside risks

LIVINGSTONE MARUFU

Zimbabwe’s largest business lobby group, the Confederation of Zimbabwe Industries (CZI), has warned companies to urgently tighten cost-management strategies as escalating tensions in the Middle East threaten to unleash fresh inflationary shocks on the country’s already fragile economy.

The industry body said businesses must move swiftly to improve energy efficiency, optimise supply chains and explore alternative sourcing channels as the Israel-US-Iran conflict continues to fuel uncertainty in global oil and commodity markets.

Although Zimbabwe has recently enjoyed relative price stability, CZI warned that inflationary pressures remain firmly tilted to the upside.

In its latest economic outlook, CZI said the war in the Middle East was far from over and could trigger another wave of price increases across the economy.

“Businesses’ priority should be to strengthen cost-management strategies, including improving energy efficiency, optimizing supply chains, and exploring alternative sources where feasible,” CZI said.

The organisation added that policymakers must remain focused on preserving macroeconomic stability amid mounting external risks.

“In addition, addressing cost drivers, particularly fuel pricing, will be critical in containing inflationary pressures and supporting business sustainability.”

The warning comes as prices of goods and services continue to rise across several sectors despite official data showing relatively stable inflation.

Peace efforts in the Middle East remain under severe strain after the United States recently launched strikes on Iranian territory, with Iran threatening retaliatory action — developments that have heightened fears of renewed global supply disruptions and rising energy costs.

CZI warned that further increases in fuel prices, combined with persistent supply-side constraints, could sustain upward pressure on inflation in the coming months.

“Any further adjustments in fuel prices, alongside persistent supply side constraints, could sustain upward pressure on prices in the coming months. As a result, inflationary pressures are expected to remain in place, as the war and its effects are expected to spill into June 2026,” CZI said.

The business group warned that this could trigger a renewed build-up of short-term price pressures across the economy.

According to CZI, the anticipated inflation spike, driven largely by the Israel-US-Iran conflict, poses direct threats to business viability and profitability.

“Rising month-on-month inflation increases operating costs, particularly through fuel, transport, and input prices, while also creating uncertainty in pricing strategies and profit margins,” CZI said.

“For firms operating in price-sensitive markets, the ability to pass on these costs remains constrained, leading to margin compression. Additionally, increased inflation volatility may continue to weaken consumer purchasing power, dampening demand.”

Several items in the consumer basket recorded sharp price increases between March and April 2026, worsening inflationary pressures in key sectors of the economy.

Among the steepest increases were gas prices, which surged by 12.4%, fuels and lubricants for personal transport equipment at 9.5%, photographic equipment at 9.5%, transport services at 7.5%, and recording media at 5%.

“These trends underscore the strong sensitivity of certain sectors to fuel price movements, and its contribution to short-term inflationary pressures,” CZI noted.

The business group said the rise in ZiG year-on-year inflation was being driven largely by increases in selected products and essential services.

Prices for fuels and lubricants for personal transport equipment jumped 21.2%, while sewage collection rose 20.7%, operation of personal transport equipment climbed 20.2%, and transport costs increased 17.8%.

“These specific pressures suggest that while general annual inflation remains under 5%, essential service and energy costs are rising at a concerning rate,” CZI said.

CZI also highlighted growing pressure on the foreign currency market.

Between March and April 2026, the ZiG appreciated marginally by about 0.9% on the official market while depreciating by approximately 4.2% on the parallel market.

This widened the exchange rate premium from below 20% in March to nearly 25% in April 2026.

According to CZI, the widening gap reflects growing demand for foreign currency as businesses increasingly turn to the parallel market to meet urgent payment obligations.

“This is particularly evident in the context of rising operational costs, especially fuel, where official foreign exchange channels may be insufficient to accommodate sudden spikes in demand,” the organisation said.