Inflation soars to 85.7%

LIVINGSTONE MARUFU

Zimbabwe is once again caught in the throes of inflationary turbulence, with the annual inflation rate for the Zimbabwe Gold (ZiG) currency surging to 85.7% in April —up from 57.5% in April 2024.

 This sharp rise, driven by growing pressure on prices for goods and services, underscores the country’s persistent struggle to anchor its fledgling currency and contain economic instability.

Economists say this reflects an unchecked surge in the general price level of goods and services, pointing to the erosion of purchasing power and the challenges in restoring economic stability.

Authorities are under increasing pressure to craft a coherent policy mix that mitigates inflation’s impact, particularly on vulnerable groups. Experts warn that without alignment between monetary and fiscal policies, inflation will persist.

CEO Africa Roundtable chief executive Kipson Gundani said the inflation shock could be short-lived, provided contractionary monetary policy is complemented by restrained fiscal spending.

“Obviously, an 85% inflation rate is not good for any economy as prices have increased by more than 85% annually. It makes the environment volatile and planning very difficult. It also kills the credit market in the sense that for any lender, especially banks, to lend they should factor in 85.7% value loss. This discourages productive borrowing and shows that these inflation levels are not healthy for the economy,” Gundani said.

He added: “The Zimbabwean economy has a lot of priori expectations among economic agents. It is very difficult to come up with the right policy matrix that can contain this inflation for good. However, if contractionary monetary policy is supported by contractionary fiscal policy, there could be progress. But we have seen that Treasury seems to spend over 20% above its budget, which is not healthy. The monetary policy is affected by Treasury’s big appetite to spend—there is no congruence between the two.”

Gundani attributed the current inflationary pressures to heightened business expectations and adjustments related to money supply changes.

“I would like to think that these are short-term inflation shocks. They will stabilise if there is no significant and commensurate increase in money supply. Sometimes these are inflationary adjustment legs whereby in the short to medium term we still experience a rise in inflation. If you recall, we used to have inflation at over 600%, so it has adjusted downwards with time,” he said.

Economist and Monetary Policy Committee member Persistence Gwanyanya acknowledged the inflation spike but attributed it to the base effect stemming from the one-off depreciation of the ZiG in September 2024.

“As already hinted by the monetary authorities, the spike in annual inflation for April 2025 is a reflection of the base effect… which itself is a result of the increase in inflation to 37% in October 2024 following the one-off depreciation of the ZiG on September 27, 2024,” Gwanyanya said.

He maintained that the macroeconomic environment has since stabilised.

“Prices and exchange rates have remained stable post-October 2024 as the effects of the one-off depreciation are not expected to recur. Economists define hyperinflation as monthly inflation exceeding 50%, and it is very clear from this definition that Zimbabwe is not under hyperinflation. In fact, the economy has been on a consistent de-inflation trajectory while exchange rates were generally stable since the last quarter of 2024. We expect this trajectory to continue throughout 2025 and beyond,” he said.