Inflation rises to 92%

LIVINGSTONE MARUFU

Zimbabwe’s  annual inflation  in local currency rose to 92.1% in May  as the Reserve  Bank of Zimbabwe (RBZ) appears to be losing the battle to arrest the swelling prices of goods from April’s rate of 85.7%, due to an increase in  prices of food and basic goods, Business Times can report.

Annual inflation for goods priced in United States dollars has gone down  to 13.9% in May 2025 from 14.4% in April, giving a stark contrast in the dual-currency economy.

Multiple  economists said  the trend is likely to continue until August if the authorities don’t institute concrete measures prices in ZiG will continue surging.

Economist Dr Prosper Chitambara said ZiG inflation is likely going to continue due to overreaching consequences of the volatile local currency.

“We expect the ZiG inflation to continue probably August this year in the event that the exchange rate remains relatively stable. We have been seeing some pressure on the food prices, fuel, utilities, housing and energy.This has contributed to the ZiG inflation. It was expected in my view given that last year’s exchange rate was relatively stable from April to  September then went upwards from September  going forward,” Dr Chitambara said.

‘For as long as we can ensure exchange rate stability we will achieve  price stability. This also depends on the money supply growth. These two are critical if the authorities can manage them and control them prudently, they will bring the inflation down.  They need to continue with tight monetary and fiscal policy stances, control unsustainable growth in money supply, control public spending and enhance the efficiency of public spending.”

He said the tight monetary policy should move hand in glove  with the fiscal policy stance as the lack on the other side will derail the gains made so far.

Another economist Vince Musewe said inflation is driven by expectations.

“US$ exchange rates, increased costs of doing business, and imports. These variables impact on the final prices in the shops. It is futile to try and blame any one of these. However, expectations seem to be playing a significant role driven by political uncertainties. As long as there are doubts about the future prices tend to go up,” Musewe said.

Yet another economist  Malone Gwadu said  the country is struggling to recover from September wounds.

“It’s a year on year comparison and a lot has happened since 2024 mainly exchange rate induced price change in the market following ZiG devaluation in September  2024 which necessitated price adjustments in line with the new exchange rate. Over and above this a lot of cost drivers have also contributed to inflation mainly energy alternatives such as diesel power and compliance costs which business has been crying foul over. Business has had to transfer this to the market which will be inflationary in nature,” Gwadu said.

He said the monetary authorities have done fairly well in inflation and exchange rate management and now need to move beyond this focus to capacitate growth as it is now causing unintended consequences of arresting aggregate demand and stifling economic activity thereby potentially driving the economy into a recession.

Another economist, Tonny Hawkins said: “The year-on-year numbers were distorted by the switch to a new currency  (ZWG), and devaluation in September

The USD figures are compiled on an extremely questionable basis and do not reflect real dollar prices  but  nostro dollars which are much weaker

Inflation in Zwg prices is 12.7%, so far in 2025

The PDL rate is 10.6 and producer prices are up 5.4%

All of these are well within the official target range for the year

Going forward the year-on-year rate will increase  until about August and will then slow down

However the monthly rate will rise due to higher import prices increased government spending and currency devaluation

The monetary authorities will continue to manipulate the exchange rate and build up arrears which is their understanding of monetary policy,” he said.