Inflationary pressures edge higher

LIVINGSTONE MARUFU

 

Zimbabwe’s inflationary pressures edged higher in April, as fuel price increases and imported cost shocks began to filter through the economy, threatening the fragile price stability that has held for much of the year.

 

Annual inflation in ZiG terms rose to 4.8% in April from 4.4% in March, according to the Zimbabwe National Statistics Agency (Zimstat), underscoring a renewed uptick in the cost of living largely driven by transport and energy-related pressures.

 

On a month-on-month basis, ZiG inflation also accelerated to 1.1% in April from 0.5% in March, reflecting broad-based price increases in basic commodities and services.

 

Despite the increase, inflation has remained in single digits for four consecutive months in 2026, a rare period of stability for Zimbabwe’s local currency regime.

 

However, economists warn that the outlook is becoming increasingly vulnerable to external shocks, particularly from global fuel markets.

 

Economists say the latest uptick is closely tied to rising fuel costs, which have cascaded through transport, logistics, and retail pricing structures.

 

Economist Tony Hawkins said the inflation trajectory is increasingly being shaped by external geopolitical developments, particularly energy market disruptions.

 

“Higher inflation is expected due to the Iran war and increased import prices across the board but especially oil, gas and fertiliser as well as some foodstuffs,” Hawkins said.

“Policies may be robust now but will have to change the longer the war lasts. Output stability could be threatened by the combination of higher import prices and transport costs as well as supply shortages.”

 

Hawkins warned that monetary authorities will need to adopt more adaptive and “innovative” policy responses if global volatility persists.

 

Another economist and former Monetary Policy Committee member Eddie Cross said Zimbabwe’s inflation dynamics are increasingly being shaped by imported price pressures rather than domestic money supply expansion.

 

“I suspect that the increase in inflation is due to the energy crisis and in addition to that the US$ has continued to depreciate and since we are predominantly a dollarised economy this will affect our inflation rate overall,” Cross said.

 

He added that the ZiG currency is not currently a significant inflation driver due to its limited circulation within the broader economy.

 

“I can’t see any other reason why inflation should be increasing because I do not see any sign that they are printing additional volumes of ZiG,” he said.

“If that was the case I think we would see a substantial devaluation in the value of the local currency.”

 

Cross cautioned, however, that maintaining price stability may require tighter policy conditions that could weigh on economic activity.

 

Malone Gwadu, another economist, said Zimbabwe remains exposed to international developments that could undermine recent macroeconomic gains.

 

“I don’t think the single-digit inflation levels will change in the short run but the country remains vulnerable to the current trends that are prevailing internationally,” Gwadu said.

 

He pointed specifically to fuel market disruptions linked to geopolitical tensions in the Middle East, which have pushed up global oil prices and, in turn, domestic transport and production costs.

 

Gwadu said businesses are increasingly passing on higher input costs to consumers as a protective measure.

 

“These (global headwinds) could pose a threat to the local currency management framework, particularly inflation, with regards to the Middle East conflict that continues to push fuel prices up,” he said.

 

Despite the risks, he credited authorities for maintaining relative stability.

 

“In my view the authorities have won the war against inflation through the prudent monetary policy framework,” Gwadu said.

“They are doing well to defend the gains that have been made so far.”

 

However, he warned that continued success would depend on strict liquidity management and expenditure discipline.

 

While headline inflation remains subdued, underlying data points to persistent cost pressures in production and construction sectors.

 

The ZiG Producer Price Index excluding agriculture rose to 226.62 in March from 223.09 in February, representing a 1.6% monthly increase.

 

Construction costs have risen even faster. The Civil Engineering Material Price Index jumped 7.1% in March, while the Building Materials Price Index increased 4.1% over the quarter, signalling sustained pressure in infrastructure-related spending.

 

In US dollar terms, building material costs also rose by 3.7%, underscoring the imported nature of inflationary pressures.

 

These increases suggest that inflationary momentum is not confined to consumer goods but is also embedded in upstream production costs — a development that could eventually feed into broader price increases.

 

Zimstat data also shows the direct impact of inflation on household welfare.

 

The Food Poverty Line stood at ZiG909.72 in April, while the Total Consumption Poverty Line reached ZiG1,329.07, highlighting the growing affordability strain on low-income households.

 

Food and non-alcoholic beverages were identified as the primary contributors to the monthly inflation increase, reflecting both supply chain pressures and transport-related cost escalations.

 

RBZ maintains tight stance amid uncertainty

 

The Reserve Bank of Zimbabwe (RBZ) has maintained its Bank Policy Rate at 35%, signalling continued commitment to containing second-round inflation effects.

 

In its latest monetary policy update, the central bank said inflation is expected to rise temporarily through June 2026 before stabilising again.

 

It attributed near-term pressures largely to the global oil shock linked to geopolitical tensions, including the US-Israel-Iran conflict, which has pushed Brent crude prices sharply higher.

 

According to the World Bank’s Africa Economic Update, Brent crude surged from around US$70 per barrel to above US$110 by March, significantly increasing import costs for net oil-importing economies like Zimbabwe.

 

Despite these challenges, the RBZ said the financial system remains stable, citing foreign reserves of US$1.4 billion as of March 31, which it said are sufficient to cover approximately six times the stock of ZiG reserve money.

 

Month-on-month ZiG inflation averaged 0.2% in the first quarter of 2026, a sign, the central bank argues, of underlying monetary stability.

 

Diverging views on ZiG relevance

 

Not all economists agree on the significance of ZiG inflation in the broader economic context.

 

Yet another economist, Vince Musewe, argued that the focus on ZiG inflation may overstate its importance in a heavily dollarised economy.

 

“We have a predominantly dollarised economy,” Musewe said.

“I do not understand the incessant focus on ZiG inflation which makes up a very small portion of total economic activity.”

 

He noted that the informal sector, which dominates economic activity, largely transacts in US dollars, limiting the real-world impact of ZiG inflation figures.

 

The RBZ maintains that inflation will remain within single digits over the medium term, supported by disciplined monetary policy and liquidity management.

 

However, officials acknowledge that the balance of risks is shifting.

 

“Annual inflation is expected to temporarily increase in the near term to June 2026, before returning to its steady-state levels,” the central bank said.